ACOSS: Stage 3 tax cuts will worsen inequality

A new report from the Australian Council of Social Service (ACOSS) and UNSW argues that higher welfare payments should be maintained rather than handing higher income earners tax cuts. Its modelling shows that 58% of the tax savings will go to the top 20% of income earners, which would increase inequality:

“Even before the COVID recession, the highest 20% of households, with average after-tax incomes of $4,166 per week, had almost 6 times the income of the lowest 20%, with $753 per week. When it comes to wealth, inequality is even more stark: the highest 20%, with average wealth of $3.3 million, have 90 times the wealth of the lowest 20%, with just $36,000 on average.

“While we like to think of Australia as the land of a fair go, the reality is that Australia has significant levels of inequality, especially wealth inequality. The latest evidence from other research indicates that the Jobkeeper and Jobseeker Payments actually reduced overall income inequality despite the recession, but as these payments are wound back, the harsh effects of high unemployment and low income support payments for those affected and reductions in paid working hours will be revealed…

Australian Council of Social Service CEO Dr Cassandra Goldie said:

“The report shows inequality was stark in Australia even before this year, when we have experienced the deepest recession since the 1930s. While the Government did increase income support at the beginning of the crisis, which greatly reduced poverty for a time, it is now threatening to cut income support back to the brutal old Newstart rate.

“People on JobSeeker, including single parents, are now being seriously left behind in the economic recovery, especially with the Government cutting back income support at Christmas time to just $50 a day and threatening to go back to the old, brutal Newstart rate of $40 a day in March…

‘’The prospect that high levels of wealth inequality may become entrenched after the pandemic is also concerning, as high income-earners save more of their income and investment returns and house prices pick up again, ahead of growth in wages,” Dr Goldie said.

The report found:

  • The highest 10% of households by wealth owns almost half (46%) of all household wealth, followed by the “middle wealth group” (those in the 60th – 90th wealth percentile) with 38%, leaving the lowest 60% – who are younger and poorer – with just 16% of all wealth. Wealth in the form of shares and other financial investments and investment property is especially skewed towards the highest 10%, who hold two thirds of these assets, including investment property averaging $802,000 in value and shares, business & financial investments worth an average of $1,441,000.












  • The Retirement Income Review revealed that the average value of inheritances received by people in the highest 20% by wealth was around $180,000 – twice that of the middle 20% and four times the lowest 20%. Overall superannuation death benefits are projected to rise from $17 billion in 2019 to $130 billion in 2059, in large part due to lax draw-down requirements and excessively generous exemption from tax of the earnings of super funds after a member retires.

Cassandra Goldie has gone even harder at The ABC:

“We’ve now got people in the top 20 per cent of income brackets earning six times those on lower incomes, and have 90 times the wealth of the bottom 20 per cent,” said ACOSS chief executive Cassandra Goldie.

“The last thing we should be doing is cutting the incomes of people who have the least, and encouraging people who are struggling to get into more debt,” she said.

“That’s the disaster that we potentially face if we don’t deliver a different set of policies going into 2021.”

ACOSS makes a fair point. If JobSeeker is returned to its former level of around $40 a day, it will once again fall well below the poverty line and push many Australians back into destitution:

Not only would boosting the social safety net make the tax-transfer system more progressive and reduce inequality, it would also create an important automatic stabiliser for the Australian economy.

The unemployed are among Australia’s poorest residents and virtually every dollar of addition income would be spent, thus providing stimulus to the economy during times of high unemployment.

Rather than spending tens-of-billion of dollars billion on poorly targeted tax cuts, the Morrison Government should instead provide a generous permanent lift to the Jobseeker Allowance.

Unconventional Economist

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