Abbott’s Budget class war

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By Leith van Onselen

Fairfax’s Peter Martin has produced some nice analysis today showing how the Coalition’s proposed Budget cuts are targeting areas of low spending growth – that is where spending is growing far more slowly than other government spending:

…spending on the disability support pension is projected to grow only 2.8 per cent, spending on unemployment benefits only 1.1 per cent, and spending on family tax benefits is expected to slide in real terms even before any budget cutbacks…

Newstart, family tax benefits and the disability support pension between them account for less than 3 per cent of the expected expenditure growth in the next 10 years.

These views were supported earlier in the year by The Guardian’s Greg Jericho, who argued that the Government’s crack-down on welfare recipients scapegoats the unemployed and disabled, whose growth has actually been contracting in real terms:
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…the percentage of the population on welfare has fallen significantly over the past decade. In 2002 it wasn’t one in five on welfare, it was one in four. Since 2008, rather than an unsustainable growth, the percentage of those on welfare has risen from 21.6% to 22.1%.

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And if we look at the “dramatic” increase since 2007, a rather different picture emerges than one Andrews would suggest wherein the major problem is the growth of people on disability support pensions (DSP) and Newstart:

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Seventy-one percent of the increase in welfare payments from 2007 to 2012 was in age pension payments. Rather oddly, this is the one payment area which Andrews is ruling out being considered in the review chaired by Patrick McClure…

Twenty years ago there were almost six people in the labour force for every person on the age pension. Now it is down to 5.3 people per pensioner and the trend is heading further down.

The welfare problem is by and large an ageing population problem. And it is a problem that will be much better served with a bit more context and a lot less of political parties blaming each other, the unemployed or those on disability pensions.

Reading the above gives the strong impression that this Budget will be more of a display of class warfare rather than a genuine attempt to place the Budget on a more sustainable footing. Indeed, it is interesting to also read from Martin that Tony Abbott’s paid parental leave (PPL) scheme, if implemented as planned, will also become one of the fastest growing areas of federal government expenditure. So in effect, the Government is seeking to cut back support to the unemployed and the disabled, while on the other hand it intends to lavish up to $50,000 for high income earners to have a child at a whopping cost of $5 billion a year. Surely, if there is a Budget emergency, then cutting back this inequitable monstrosity of a scheme is a good start, along with other lurks like superannuation concessions to high income earners and negative gearing.

In Opposition, wasn’t it the Coalition that always complained about Labor engaging in class warfare?

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.