The last time Australia went into a recession, Emma Dawson was finishing university. Three decades on, and with the country once again in recession, she is executive director at Per Capita, an independent think tank.
Does she think the Federal Budget has done enough to help lower to middle income earners?
“No, is the short answer,” she said.
As for the long answer, the disproportionate tax cuts fail to properly support working people and will likely lead to higher rates in unemployment and even homelessness.
“There’s not a lot of directly targeted support for workers or for people out of work,” she said.
Short term gain, long term loss for the majority of Aussies
The Budget will grant those earning between $48,000-$90,000 – a cut of $1080 off their fortnightly tax, which could be implemented before Christmas.
There is also a one-off tax break of $1080 for next year, but that is where the support ends.
“Once we get beyond that offset at the end of next financial year, low- and middle-income earners will end up paying more, proportionately, in tax and higher income earners will pay less,” Dawson said.
Those who make $120,000 or more will receive a permanent tax cut of $2430 for every year under the current government.
“I think we can expect to see an increasing amount of wealth inequality.”
The top 20 per cent, who earn around $102,000 a year, receive approximately 41 per cent of the tax plan for the 2020/21 year, which then increases to 88 per cent for 2021/22.
Meanwhile, the bottom 20 per cent of taxpayers will get only 4 per cent of the tax plan for 2020/21, and 0 per cent for 2021/22.
“I do see this Budget as something that will exacerbate the problems that we had even before the recession, in terms of high levels of insecure work”, she said.
Those problems will only increase – it will become harder and harder for younger people to buy a home, to have a job with sick leave or annual leave, and will continue to see a widening of the income gap between low and middle income earners and those at the very top.
Grattan Institute associate Tom Crowley said the Budget was a quick fix, which did little to help members of lower socio-economic backgrounds.
“Those who earn less than $37,000 a year won’t get any new tax cut until next July, and even then they only get a once-off tax cut. The biggest tax cuts go to the top 10 per cent of income earners,” he said.
“It was also a very short-term strategy – most of the stimulus is in the next two years, and then it tapers off very sharply.”
Falling through the cracks?
Despite a $50-a-fortnight tax cut, the JobKeeper program has been cut by $300 a fortnight, which will disadvantage up to two million workers.
Federal Shadow Treasurer Jim Chalmers was critical of the decision.
“Further premature cuts to JobKeeper and other economic supports risks more job losses, more business closures, push more people into poverty, and jeopardise the recovery,” he said.
“The most recent ABS jobs figures show that in the fortnight that Scott Morrison cut JobKeeper, jobs were lost in every state and territory.”
In the fortnight since the cut to JobKeeper on October 17, 30,000 jobs have been lost. The program is set to end by March 2021.
Dawson said that eliminating the important safety net for those out of work threatened to increase financial hardship.
“In a jobs market like this, where there is something like 19 people applying for every job, that’s not a temporary payment anymore,” she said.
“There could be significant growing and entrenched poverty as a result of that.”
Dawson said the fiscal disadvantage could have a significant impact for life.
“That can set you back for a lifetime. It can mean you’re ten years later getting into the housing market, you’re ten years later having your kids, you never pay off that mortgage before retirement”.
It’s just business
The Budget, which is preferencing a private sector-led recovery, puts too much emphasis on business and not enough on the individual, Dawson said.
“There is an assumption built into the plan that the money provided to business will allow the private sector to do the heavy lifting – which in a period of extreme economic uncertainty like this is a big gamble,” she said.
Chalmers said this pathway did not do enough to ensure a financial revival.
“The Budget will rack up trillions of dollars of debt but still doesn’t do enough to create jobs, fails to build for the future and leaves too many Australians behind,” he said.
Crowley said the lack of balance in investment meant some industries would suffer.
“The stimulus is very geared towards the private sector, with minimal direct investment in creating jobs in the public sector, he said.
“The support wasn’t distributed evenly across the different industries people work in and didn’t go to the industries (and workers) that were hardest hit.”
An ideological Budget
Dawson said the Government was making a deliberate choice against modernising and upgrading features of the economy.
“They heard those voices say, ‘Well we could build back better from this; we could address a lot of the long-standing issues that have faced our economy and our society’ – and they very clearly said no to all that,” she said.
“They’ve very deliberately crafted a package that fits with an ideological position, of the market and the private sector delivering.”
Aside from actively engaging climate change, creating new manufacturing industries and investing in female participation in the workforce, one of the biggest letdowns of the Budget was the housing market.
“We could address the shortfall in social housing and housing affordability,” Dawson said.
“In a wealthy country like this, it’s completely unsupportable that we have 10 per cent of people living in poverty and unable to access secure housing.”
She also said a lack of action and combative measures were the biggest threat to the recovery.
“The real worry is that we don’t rebuild the economy quickly or robustly enough that young people can get good jobs and secure jobs and start building a life”.
But not all is lost.
“That doesn’t have to be the case if we act swiftly,” she said. “It’s not the last chance.”