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Tuesday, 27 May 2003
Page: 15082

Mr SWAN (6:21 PM) —The Appropriation Bill (No. 1) 2003-2004 is the first in a series that gives effect to the Howard government's 2003-04 budget. It provides for administered expenses in the order of $40.5 billion for the financial year 2003-04. Of this total, some $3.5 billion is being appropriated for family and community services, mainly for department outputs rather than for expenses on income support that make up the bulk of the $60 billion social security and welfare budget. These items will be contained in subsequent appropriation.

Much of the detail is yet to be seen, although it is clear how the budget should be characterised. Put simply, it is a budget that is tough on battling and sinking middle families. It is a budget that does nothing to provide opportunity and incentive to mainstream Australia. This budget exposes the Howard government's real third-term agenda: to put the squeeze on Australian families through higher taxes, higher medical costs and higher education costs—something that the member for Parramatta just pleaded guilty to.

The budget's centrepiece is a tax cut that will deliver just $4 a week to an average income earner—not enough to buy a sandwich and a milkshake, according to my opponent in the Senate, let alone to meet the higher costs in this budget for visiting a doctor or educating your kids. This budget seeks to entrench a three-tier health, education and welfare system. What do I mean by a three-tier system? I will explain it to the minister opposite. At the bottom is a safety net for people, many of whom are being left way behind. It is a safety net which is full of holes. In the middle there are those who are struggling—those people being squeezed, paying more tax than ever before and getting fewer services in return. At the top are those who have done very well indeed and can afford to buy the best.

This is not the Australian way; bit by bit we are losing the fair go. Under this government there is one rule for the top end of town and another for everybody else. How else can you explain the plans to expand upfront fee paying places in our universities so the privileged can get in through the back door while the talented jostle for HECS funded places that will leave them with debts running into the tens of thousands of dollars? More debt is hardly what young Australians need—they are drowning in debt, and this government is not averse to burying them even further in that debt. The government ought to consider the long-term consequences of this policy and others that saddle young Australians with debt. It is no wonder that home ownership rates and our birth rate are falling as young couples struggle under the dead weight of debt.

You can see that particularly when you look at the construction of the government's fiscally irresponsible family payment system. It is a very sad fact that the family payment system is burdening too many Australian families in debt. Here is a system that is designed to intimidate struggling families from claiming their proper entitlement to support their kids. If they do try and access their entitlement, they are being whacked with massive debts—600,000 families, or one in three, are having their family tax benefits clawed back. The budget papers reveal the price families are paying as a result of this family tax benefit clawback.

Families will receive less help from family tax benefit payments this year compared to last year. Family tax benefit payments to families in 2002-03 will decline, even in nominal terms, compared to 2001-02. This is the first such decline in mainstream family benefits in at least the last decade. Compared to the projected estimates in last year's budget, families will receive $723 million less in family tax benefits in 2002-03. That adds up to a whopping $400 per family less in family tax benefits during 2002-03 than the government had anticipated in the last budget.

This leads me to the appalling policy that this government is pursuing to claw back family tax benefits. What the government is now saying is that it wants people who are saddled with a family tax benefit debt, which they have been given through no fault of their own, to pay it off on their credit card. This comes on top of other unique approaches that the government has adopted of stripping the tax returns of those with a family payment debt, and on top of what is supposed to be the official policy where the debts are taken from future family payments. We all know the history of the minister going out there and intimidating families by saying, `Don't claim what you think you are entitled to; in fact, don't claim at all—take it at the end of the year.' But, as we know, families who are struggling to feed, educate and clothe their children cannot afford not to take their family payments on a fortnightly basis. When they do, one third of them are saddled with these horrendous debts.

Now we find, when we go to Centrelink's web site, that they are now saying to people who have a family payment debt that their very first option is to pay it off on their credit card. That is the first option this government advertises. It does not say the first option is that you can take fewer payments in the future to pay off your debt. It is encouraging families to pay off their family payment debt, which the government has given them, on their credit cards. For a family with an average $800 debt who chooses to pay that debt by credit card with an interest rate of 17 per cent, that would cost them an additional $136 per annum. All of a sudden the $800 debt becomes $930 if they pay it off within 12 months.

Then the trouble starts for a family with a higher debt. A debt of $2,800 will attract almost $500 in interest, at a rate of 17 per cent interest on their credit card. So the $2,800 debt becomes $3,300. If it is not paid off within 12 months, the family will be liable for another $560 in interest. This is incredible. These are families that have not chosen to receive a family debt; they have got it through the grand incompetence of the government and its shambolic family payment system which is financially irresponsible. Then Amanda Vanstone has the hide to go and say to them that they can pay off this debt, which they did not ask for, with their credit card.

That is the approach of this government. It shows you how out of touch this government is with the financial pressures on Australian families, who are being squeezed all the time by the policies of the Howard government. As I said before, one in three families have fallen into this debt trap. Every one of them is at risk of going deeper into debt with this credit card repayment policy. Families are now expected not only to bear the risk of a system that cannot get their payments right but also to bear the interest on the debts that result.

The policy contradicts claims made by Amanda Vanstone last week in the Senate that debts would be treated as a prepayment of future benefits. It simply puts a lie to that statement made by Amanda Vanstone in the Senate last week. The Howard government's policies are placing families deeper and deeper into debt. Not only do they need a credit card when they visit the doctor, now they need it when they have a family payment debt. No government that understood the financial pressures that families are under would push this credit card repayment policy.

That brings us to the other pressure on families. Apart from the financial pressure, there is also the pressure of time. The government's indifference to average families can be seen in what is absent from this budget. Despite John Howard's constant claims of being family friendly, it is clear that Australian families will not get any relief from the pressures they are under while this government is in office. All those Australian families that have worked so hard to make our economy strong are simply not receiving the dividend from it—take the government's refusal to introduce paid maternity leave, for example, and take its public opposition to reasonable working hours cases. How can a government that claims to be family friendly, and says that parents should spend more time with their children, oppose paid maternity leave or reasonable working hour cases? This government talks the talk of being family friendly, but they never, ever walk the walk.

That brings us to the government's baby bonus flop. At every step this government has proven that it is incapable of delivering meaningful assistance to families. Its last attempt—the baby bonus—was revealed in this budget to be a complete flop. We knew when it was introduced that this bonus would deliver something like only $10 per week to an average family for a parent to stay at home. But what the budget papers now reveal is a somewhat grimmer position, with expenditure on the baby bonus falling way behind the initial projections. The baby bonus was, of course, the centrepiece of John Howard's family policy in the 2001 election. When it was introduced last year, the baby bonus was expected to provide $335 million in assistance to families in the first two years, but the budget papers show that the estimated benefit from the baby bonus in its first two years has slumped to $230 million—one-third less than anticipated. This should not be surprising to those who know how the bonus works, because the entitlement is complex for a family to work out and is designed in such a way as to give least assistance to those who need it, particularly when they need it the most.

On top of these financial pressures which are placed directly on families, particularly those with young children, we then have the government jacking up the price families are paying for essential goods, health and education. Increasingly, opportunity will be determined by the quality of a child's experiences during their first five years—family life, child care and health—and the quality of their education. But in each of these areas Australia is now badly placed. It is time we stopped putting bandaids over our ballooning welfare programs and it is time that we started to develop comprehensive early assistance programs for families with children, because the foundation of fairness is in doing better in the care of our children. Out of a Commonwealth welfare budget of $60 billion and state child protection spending of something like $796 million, there is very little directed to preventing abuse and neglect of our children.

When the Prime Minister comes in here and says, `We don't have to have any inquiry into child abuse,' and that he would rather spend the $60 million to $70 million on prevention programs, you would assume that he was spending something on prevention now. The truth is that he is not. In fact, in the budget before this one he cut $10 million from the stronger families program. When you look at the expenditure on the prevention of child abuse, you see that it is virtually negligible. In fact, this government spends something like 0.006 per cent of the family and community services budget on preventative programs. That shows that this government might want to talk the talk of being family friendly but that it never, ever walks the walk. All of this has happened in spite of the evidence that clearly shows that, for every dollar spent early, you save seven down the track in lower child protection, crime, social security and other costs. Instead of this approach, we have a government that has wound programs back. It simply continues to cut in this area. That exposes the double standards of this government.

Also in this budget the government has indicated it will cut back assistance to pensioners who are trying to improve their education and skills. The pensioner education supplement will leave sole parents, disability pensioners and carers who study up to $350 per year worse off by denying the benefit in the break between academic years. For many pensioners, particularly those with disabilities, study costs already outweigh the $31 per week PES benefit. The savings, which amount to $36.2 million over four years, are simply mean-spirited and will almost certainly lead to many pensioners abandoning study completely. So much for welfare reform. Having only just managed to get the modest Australians Working Together reforms through the parliament, the government is now turning its back and walking backwards even on those.

As we know, the Howard government is now the highest taxing government in our history. We all know where the burden has been shifted. Hardworking Australians know all too well the diminishing financial returns that come from working a few extra hours of overtime or from getting a long overdue pay rise. The combined effect of tax and the clawback of social security or family benefits mean there is little or no incentive to work harder or earn extra. Rather than addressing this problem, the budget adds to the problem.

The Medicare package will effectively limit bulk-billing to health care card holders. That means the end of bulk-billing for families on incomes of over $33,000 a year and for single people on incomes of just $27,000 a year. They will have to wear the immediate out-of-pocket costs of up to $50 and gap payments of around $15. The truth is that this is just another poverty trap to go on top of all of the poverty traps that were built into the family payments system in the package over 2½ years ago. The latest research shows there are something like 860,000 Australians who are in this boat and losing more than 60c in each additional dollar earned in tax and through the clawback of other benefits—that is, an effective marginal tax rate of 60c in the dollar is applying to many families in this community who are earning between $30,000 and $60,000 a year.

We constantly hear calls for the lowering of the top marginal rate, when in fact struggling Australians—Australians in the sinking middle—are paying well in excess of that at the moment. That is a result of the traps that this government has built into the system, has put in place, which are designed to claw back the supposed benefits that were supposed to be in the original package. What does it do? It reduces incentives for hardworking, low-income earning Australians and their families to get ahead. That is what it does.

That has been demonstrated by, of all people, the Minister for Employment and Workplace Relations, Mr Abbott, who, at a Young Liberals conference in January told the truth about the government's tax package—that it was punishing low-income, working Australians, and others who were on benefits trying to move from welfare to work, to the extent of effective marginal tax rates rising from 60c to 110c in every additional dollar they earned. This was put on the record by us in this parliament over six months ago and has now been confirmed by the Minister for Employment and Workplace Relations, and the government has the hide to talk about believing in reward for effort. It does not believe in reward for effort. It believes in punishment for anyone on a low income. It believes in incentive for anyone on a high income—but that does not extend right down the scale.

The worst-affected are families with older dependent children receiving the Howard government's youth allowance. An estimated 40,000 people lose up to $1.10 for each additional dollar earned. In other words, they go backwards when they work harder. The group I spoke about before—the 860,000 who lose between 60c and $1.10 of each dollar earned—numbers as many as those who face the top marginal rate and lose 40c of each additional dollar earned. That is, there are as many people on low incomes paying higher than the top marginal rate as there are on high incomes paying the top marginal rate. That is a stunning figure.

Is it any wonder that in this community the rich are getting richer, the middle is getting squeezed and the poor are falling further behind. Through the policies of this government, there is a redistribution of wealth occurring that is turning into an American style chasm. Few people are aware of just how much the gap between the very rich and the rest of the community has widened over a relatively short period of time. In some circles, even making this point exposes you to charges of inciting class warfare or the politics of envy. But listen to the following figures. The top five per cent of income earners—some 430,000 of nine million earners nationally—are doing very well. In the last five years, the combined annual income of the top five per cent has grown dramatically. The total earnings of this group—that is, $62 billion—now outstrips what the entire nation spends on all social security benefits and family payments. That is more than a third of our national budget of over $160 billion.

But what has happened at the very top is even more startling. In the last five years, the combined annual taxable income of our nation's millionaires has grown by more than 300 per cent, from $1.1 billion to $4.6 billion. These people in a week make roughly $43,000, which is what the average income earner makes in a year. So there is an explosion of wealth at the top end. We have had strong economic growth, but it has not been shared fairly. The great bulk of the benefits are going to those at the very top, and those in the middle and at the bottom are being squeezed. So the annual income of the top five per cent is now roughly equivalent to that of the entire bottom 40 per cent in the community. Think about that: the annual income of the top five per cent in the community is now equal to that of the bottom 40 per cent. The wealthiest five per cent of Australians enjoyed a 28 per cent jump in their earnings in the five years since 1994-95, an increase of over $31,000 to $143,843 a year. One should compare that situation to what has happened to those on modest incomes, where the increase has been much smaller.

Clearly, many average Australians who have worked hard to make our economy strong are not sharing fairly in the wealth that has been created, and the gap is continuing to grow. On top of that, we have about 2.5 million Australians living below the poverty line—and a very modest poverty line it is. The poverty line is $415 a week for a family of four. In recent years, there has been a massive increase in those living below the poverty line, which is one of the reasons why the poverty inquiry that is being conducted by the Senate Community Affairs References Committee as it moves around this country is so very important. It is important because this increase in inequality is rapidly accelerating. It is rapidly accelerating because of the features that are contained in the budget: a shift in the tax burden to those on low and middle incomes and a substantial increase in the cost of access to health and education.

Education is the first rung on the ladder to opportunity, and this government is going to make it increasingly harder for people from modest backgrounds to access it. In 15 or 20 years, if these trends are not changed substantially in national policy, there will be a further widening in the gap that I talked about before. The latest budget should be more than enough to convince battling Australians that their aspirations are not being met by this government. This government is throwing out the tradition of a fair go. Australians do believe in equality of opportunity. People are angry that in this very wealthy country they are being denied access to opportunities: quality health, education and a good start for their kids. We have been growing apart. The task in this country is to give people hope—hope that as a nation we can start growing together again. We need to remember that we are all in this together. We need a safe, secure society and a fair go for all, not just for the fortunate few.