Things to Think About as the Federal Budget Approaches

above:  Joe Hockey and Tony Abbott will claim Australia 'is living beyond its means' - but behind this rhetoric there is simply an Ideology of small government - regardless of the human cost.

 

Tristan Ewins

As the Federal Budget approaches for 2014-2015 there has been speculation to the effect that the Government may resort to PAYE income tax bracket creep or a GST hike in order to fund its spending.   The ALP is rightly critical of any GST option that is not part of a broader progressive package. (perhaps Shorten may not even support a GST increase in any form or context) Increasing the GST base - either generally, or by ‘broadening its base’ to apply to food and health -  could be highly regressive.  But the bracket creep option is also potentially regressive – as low income earners could see themselves pushed upward into higher brackets without any real increase in their disposable income. (Again: it depends on the ‘overall package’ of the tax/welfare mix)

Further, the Government is considering raising the age of retirement, or cutting back Aged Pension eligibility.  Some are also agitating for a cut back in the Disability Support Pension rate – and possibly also eligibility.  That includes the Treasurer himself, Joe Hockey.

The ‘pension option’ is deemed by some to be ‘inescapable’ because of the ageing population, and the ‘incentive’ for people to claim the DSP as opposed to NewStart. 

We are living longer, it is true – but it is not true for all of us.  And indeed – while some are living longer – they are also living with loneliness, frailty, and sometimes indignity.   This begs the question why higher Aged Care expenditure is not on the agenda – as opposed to pension austerity.  

There is also the question of what matters most in life: the chronic capitalist commitment to endless economic growth regardless of the social cost – or the opportunity for older Australians to enjoy a retirement in comfort and dignity; enjoying opportunities for personal development not possible beforehand during their working life.

Finally – we need to maintain perspective. 

‘Deloitte Access Economics’ claimed the Government could save $2.4 billion over four years by limiting increases in the disability pension to inflation.  But when placed into perspective this is pittance to the Government when compared to the effects on the comfort, dignity and relative independence of the disabled.   And even if this amount would grow as the aged population increases,  according to ‘Wikipedia’: “the economy of Australia is one of the largest capitalist economies in the world with a GDP of US$1.57 trillion.”  Despite an ageing population – caring for those people will still be ‘well within our means’.

So while the Disability Support Pension costs “$15 billion a year” and the Aged Pension currently costs $38 billion  – probably rising to $55 billion in 2050  – that needs to be considered in the context of a (current) GDP of approximately $1.6 TRILLION. (Aus dollars; and a much larger GDP by 2050 also!) 

And while the Government claims it will not attack existing disability pensioners – the cost over the years might be high in the form of attrition against new disability pensioners.

Indeed, there is even the danger that the National Disability Insurance Scheme itself may come under threat; or that only those with the most profound physical disabilities will be considered worthy of support by a government trying to ‘wriggle out’ of previous (pre-election) disability commitments.

So while the Government could save some money through attacks on the living standards, dignity and relative independence on the disabled (linking the pension to inflation rather than wages growth), it should be honest that its real motive is not some ‘budget emergency’ – but an Ideological commitment to small government no matter the human cost.

‘Pension austerity’ needs to be considered in the context where all Australian families should benefit from the social insurance paid collectively by all of us – for the sake of our peace of mind – both for ourselves and our loved ones.  And also hopefully because we care about each other as a society.This must include a robust disability pension alongside robust disability insurance.

For those who care about distributive justice, and compassion for the poor and vulnerable, surely there must be better solutions than what is apparently being considered by Hockey and the Liberal Cabinet. 

And indeed there ARE better solutions.  Superannuation Concessions could be wound back – and income tax increased on the basis of a progressive restructuring. Tens of billions could be saved here alone.

To elaborate: It is true that tax cuts delivered overwhelmingly to upper and middle income Australians during the Howard years were recently estimated as costing the Budget around $40 billion a year alone.  And as Richard Denniss has argued on several occasions – superannuation concessions have been of benefit largely to the top 5 per cent income demographic (millionaires basically), a well as the ‘upper middle class’; and more broadly are estimated by the Treasury as costing “$45 billion a year by 2015.”

To summarise: The Government has several potential alternatives on the table they could consider – and the Shorten Opposition should be pursuing these progressive options also.

First: Wind back superannuation concessions for the wealthy and the upper middle class, saving tens of billions.

Second:  Restructure personal income tax.  Perhaps allow bracket creep in the higher brackets – but INDEX the lower two brackets. And perhaps add a bracket for the highest income earners.

Third:  Increase the GST – but only as part of a ‘total package’ which includes increased welfare, tax credits or other tax cuts for lower income Australians, maintenance of exemptions on food and health, and extension of GST exemptions to funerals as well.  Calibrate the overall ‘tax mix’, here, to deliver more progressive outcomes.

Fourth:  Embrace the necessity of ‘larger government’ if ‘the Australian way of life’ is to be preserved – including a fair age of retirement and protection of the most vulnerable from grinding poverty. In this acknowledge that ‘the size of government’ in Australia is already low by international standards.

Fifth:  If the Government is concerned there is an ‘incentive’ for pensioners to apply for the Disability Pension because of the extraordinarily low Newstart unemployment benefit – then INCREASE NEWSTART to respectable and socially sustainable levels – and acknowledge that while the Disability and Aged Pensions are higher – disability and aged pensioners are still living in poverty!

Sixth:  Reconsider spending priorities with ‘upper middle class welfare’. Specifically, reconsider the structure of ‘Paid Parental Leave’, and impose tighter means tests of Private Health Insurance Rebate payments.

Budget pressures also need to be considered in the context of a growing infrastructure crisis.

Federal and State Liberal Governments are at odds with construction unions – not only because of  alleged criminality – but more crucially because there IS an infrastructure deficit – which when combined with robust conditions for workers in the Construction industry make it harder to maintain ‘small government’ alongside basic transport, communications and education infrastructure demands.  And construction workers should not have to pay the price for a right-wing Ideological fixation on reducing the size of government.

Regrettably, there is also an Ideological opposition to public housing at the same time as the dream of home ownership has drifted out of the reach of so many young Australian families since the Howard-era housing boom.

Some Liberals had  considered the GST option perhaps because they realise the infrastructure deficit will have consequences that ‘flow on’ to the private sector. (though in Victoria Napthine now rejects the GST option)   

We need to consider both the impact upon our competitiveness from the ‘infrastructure deficit’– but also the social cost to poorer families in emerging suburbs which lack transport infrastructure and schools.

Finally, today's Conservatives could do worse than to consider the example of the German Christian Democrats from the 1950s – who embraced a "social market" model. As Eric Aarons has explained,this approach suggested "a social vision couched in moral as well as economic terms…", and "recognition of the fundamentally social nature of organised production". Further, it implied a "moral community" "required to legitimate the social order…" , and the"[prevention] of the emergence of a 'two-tier' society" including a layer of permanently poor. (Aarons pp 33-34)

Christian, 'compassionate conservatives' in the Liberal Party do not have to follow the austere, heartless path of economic neo-liberalism. While this writer is a proud liberal democratic socialist as well as a Christian, sometimes it is necessary to promote lines of communication when so much is at stake. We cannot support this kind of 'neo-liberal class war' against the vulnerable and disadvantaged: a budget which hits the poor and the vulnerable in order to redistribute wealth towards the wealthy and the upper middle class.

 

Aarons, Eric; Hayek versus Marx And Today’s Challenges; Routledge. New York, 2009

 

 

 

Abbott a threat both to fairness and prosperity

above: Australia's Federal Parliament House

In this article Tristan Ewins considers the coming Australian Federal election, incuding what the consequences of an Abbott conservative government would be in terms of social justice and economic prosperity.

As the 2010 Australian Federal election nears the future of our nation hangs in the balance. A few months back many would have thought the prospect of an Abbott Coalition government unlikely at best. Labor was riding high in the polls: credited with navigating our way from the dangerous shoals of recession. And the government had done this with an eye to social justice, not only reforming pensions, but also buoying consumer confidence with direct payments to those on welfare and low incomes.

As opposed to the conservatives, Labor looked to the future; with a promise to build the National Broadband Network, laying the foundations for the future knowledge economy. By comparison, in this regard the conservatives have been short-sighted and opportunistic.

Further: the Abbott ascension to Opposition leadership initially underscored divisions amongst the conservative parties, and their lack of substance and credibility on climate change.

But since then – and for some months – it has been mainly downhill for Labor.

There were issues that had weakened the government for some time, but Labor's re-election chances remained strong.

The home insulation and school infrastructure programs are now widely believed to have been poorly managed. In reality, though, the school infrastructure program added to the stimulus when it was needed most; and for many schools the product of the expenditure has been of real value: its benefit long-lasting. Genuine shortcomings in regulatory oversight were partly the fault of public servants who should have advised the government, but the government could not avoid responsibility for flaws in policy implementation.

As a consequence, the conservatives have been able to make up ground on the theme of “competency” outside any values context.

More recent developments, however, have threatened the survival of the Federal Labor government.

The mining industry fear campaign over resource rent taxation had saturated the media, marking a turning point with Labor put decisively onto the defensive. Suddenly Rudd’s leadership was seen as a liability, with a ‘fresh start’ perceived as the only way to stem the haemorrhaging of the government’s support.

With Julia Gillard now catapulted into the office of Prime Minister, Federal Labor’s support in the polls appeared to firm. Gillard thus resolved to take advantage, and seek for herself a mandate, calling an election for August 21.

But since then Gillard’s proposal for a ‘Citizens Assembly’ to work for consensus on climate change has been interpreted as indecision. Further, Abbott has whipped up groundless fear over debt (Australia’s government debt is amongst the lowest in the world), and has outflanked Labor in trumping the government with commitments to aged care and mental health funding.

Finally: Sensational leaks from within the government have overshadowed policy debate, and for many the removal of Rudd has left a bitter aftertaste.

Importantly, here, areas of the media are to blame for focusing on this drama of leaks from within the government, and even an intervention from Mark Latham: when in the public interest they should have been focusing on substantial policy debate. (across the spectrum, and including the Greens)

The ‘bigger picture’ – what’s really at stake

But there are broader concerns at stake in this election: and neither the government nor the Opposition seem to be planning ahead more than maybe a term or two. Labor’s commitment to the National Broadband Network, school infrastructure and increased employer superannuation contributions are very notable exceptions. (although the problem of a two-tiered Aged Pension remains with regard to superannuation – as always) And as we will see, Labor’s policies are more sustainable in a social sense over the long term.

To begin, there are structural fiscal challenges associated with the ageing of Australia’s population, and what this means for health, aged care and welfare: with flow-on effects elsewhere, including transport infrastructure and education.

At the outset, therefore, it is important to note Abbott’s commitment to cutting the tax base beyond what is sustainable, including effective cuts in overall Company Tax beyond what has been promised by Labor, and the scrapping of the Resource-Rent (ie: mining) tax that rightly gives taxpayers a share of the benefit from exploitation of minerals and other resources that belong to all of us. As a consequence, increases in employer superannuation contributions would also be dropped under an Abbott government. http://www.theage.com.au/national/abbott-says-libs-wont-increase-super-levy-20100504-u7a3.html

Further, Abbott’s parental leave plan promises to direct what sparse budget funds remain away from where they are needed most: welfare, health, education; in a move that will effectively see those on lower incomes subsidising those on higher incomes. Specifically, the program would “cost more than $8 billion during its first two years”, and a mother on an income as high as $75,000 would receive six months leave at full pay. http://www.abc.net.au/pm/content/2010/s2972436.htm

Australia needs progressive tax reform, with the aim being to support an expanded social wage to ensure certain ‘baseline’ needs are met for all of us. This must encompass health (including aged care), welfare, education and other areas such as communications and information, social housing, social recreation facilities and transport.

Without reform, as the proportion of our population outside the taxable labour market increases, shortfalls in social services will become increasingly critical. Here also a ‘two-tiered’ and polarised system comprising the market and a residual public social wage will deepen: what John Kenneth Galbraith encapsulated with the term “private affluence, public squalor’.

The crisis is further compounded by a rising cost of living: especially in areas such as water and energy – where the public are now paying the price for privatisation. And with high property prices the impact of interest rates when they rise is magnified as a legacy of the Howard-era housing bubble, with home ownership now out of reach for many.

To put none too fine a point on it, without progressive tax reform there just won’t be enough public money.

So public hospital waiting lists will worsen; dental care will remain inaccessible for many, and there won’t be enough money to include crucial medicines on the Pharmaceutical Benefits Scheme. Public education will continue to be chronically under-resourced as compared to privileged private establishments.

Insufficient public funds, here, will undermine even the meagre liberal principle of ‘equal opportunity’; disadvantaging less-privileged citizens, and failing to provide for the demands of an ever-evolving economy.

And again: whatever short-term commitments Abbott makes on mental health; a dwindling pool of public funds under the Liberals will translate into savage austerity elsewhere. An example of this is Abbott’s dumping of plans for ‘Super Clinics’ which would take pressure from desperately over-stretched public hospitals. Or else mental health commitments will themselves be fudged on over the longer term.

Other consequences could include insufficient public funds for infrastructure such as roads and public transport.

In keeping with this logic, we may see a further deepening of the ‘user pays’ principle. Where access to such infrastructure and services takes this form, and is levied at a flat rate, those on lower incomes are again disadvantaged or even excluded entirely.

Tendencies towards labour market polarisation also mean that there are many who are adversely affected by this deepening of ‘user pays’, especially in the absence of a sufficient social wage.

What we certainly don’t want in this country is a slippery slide towards an American-style polarised labour market, with the material needs and rights of citizens undercut further as a consequence of only-threadbare social services and protections.

And again: a strong social wage is necessary to provide a fair baseline with regards access to services and amenities; and to make up for distributive injustices that arise as a consequence of unequal bargaining power amongst workers in the labour market.

Abbott in strategic play regarding some of our most vulnerable

Abbott has provided strategic policy announcements in areas of special concern to the public. Although the overall picture under Abbott would be one of savage austerity, the would-be Prime Minister has attempted to trump Labor with announcements of funding for mental health and aged care.

In aged care the Opposition has pledged a “$935 million package” including “21 days of convalescence care for around 20,000 eligible patients at a cost of $300 million”, “$14 million for pet therapy programs”, and “$12 million to promote wellbeing and funding for companionship programs.” http://www.abc.net.au/news/stories/2010/08/01/2970226.htm

And in mental health Abbott has promised a $1.5 billion package including “800 new hospital beds”, “$440 million for the creation of 20 Early Psychosis Prevention and Intervention Centres” and “$225m would be allocated to build 60 Headspace services - treatment centres for young people.” http://www.perthnow.com.au/news/top-stories/tony-abbotts-mental-health-strike/story-e6frg12l-1225886499800

Importantly, though, experts remain critical. Australian Nursing Federation (ANF) spokesperson Yvonne Chaperon has highlighted insufficient wages for qualified aged care nurses, with the consequence of many skilled professionals leaving the system. In turn, this leaves aged care facilities with an insufficient skills mix. http://www.abc.net.au/news/stories/2010/08/01/2970226.htm

And Australian Medical Association (AMA) president Dr Andrew Pesce has slammed Abbott’s proposal to cut Labor’s $98.4 million in incentive payments for GPs to provide services in aged care homes.
http://www.abc.net.au/news/stories/2010/08/01/2970226.htm

This is an area of desperate need for those in aged care.

In the bigger picture it is well worth noting that the Australian economy is valued well over AUS $1 Trillion.

The commitments of the major parties seem paltry in this context. Quality of services in aged care and mental health fall way short of the real human need, and that needed to uphold human dignity for our most vulnerable. Across the political spectrum parties are ‘scraping the bottom of the barrel’ for desperately needed funds in these and other critical areas: but few confront the need for progressive tax reform to turn the situation around.

Nevertheless and again:, despite shortcomings Abbott appears so far to have ‘trumped’ Labor in these sensitive areas. In effect he is challenging Labor on its own traditional terrain of Health services. Labor cannot afford to cede this terrain: the consequence of doing so would be to lose crucial credibility and support.

Perhaps the best response would be for Labor to announce a National Disability Insurance Scheme (NDIS). Such a scheme would need to be implemented in a fashion which valued and promoted the human worth and social participation of recipients. And in freeing up crucial additional funds, further action would become possible: reform of pensions and disability services: as well as commitments to mental health and aged care.

Conclusion

There are many reasons to vote against Abbott in the coming election: and not only those already alluded to in this essay.

Abbott has no credibility on the environment, having famously proclaimed that “climate change is crap.” And despite the conservatives’ emphasis on internal ALP division, the Liberal Party itself remains divided – as Malcolm Turnbull and others remain philosophically committed to a price on carbon. http://www.smh.com.au/opinion/politics/abbotts-climate-change-policy-is-bullshit-20091207-kdmb.html

Further, Abbott remains committed to the spirit of WorkChoices, despite proclaiming the policy “dead”. http://www.theage.com.au/opinion/politics/shades-of-latham-in-abbotts-ir-stunt-20100720-10i4t.html

As Abbott himself stated “the word WorkChoices is dead”. But even if a Liberal government did not change the existing legislation, it could legislate outside that framework, effectively circumventing it regardless. http://www.abc.net.au/news/stories/2010/07/17/2956429.htm

Crucially, Abbott is ‘running scared’ from a debate with Julia Gillard on the economy. Wanting to rely on pre-existing prejudices in the electorate, the last thing he wants is to provide Labor a platform from whch to spruik the ‘good news’: recession avoided as a consequence of Labor stimulus, interest rates low, and investment in education in infrastructure essential to the future of our economy. And then there’s Labor’s National Broadband Network (NBN), and its crucial role in paving the way for the future knowledge economy.

Abbott’s claim to greater ‘competency’ in managing the economy doesn’t stand up to scrutiny. And anyway: politics concerns values: matters such as distributive justice and compassion for the poor and oppressed that run deeper than “technocratic management.”

Finally: as we have considered in depth here already, Abbott is attempting to deceive us with a “sleight of hand” on austerity. He wants us to focus on conservative initiatives on mental health and aged care: but in doing so he wants to distract us from savage austerity elsewhere – health, education, infrastructure, welfare – cuts that could spiral into the tens of billions.

Labor is not yet committed to tax and social wage reform of the scale that this author is fighting for. But the difference between Labor and the Conservatives is tens of billions in austerity, the abandonment of crucial infrastructure such as the NBN, an uncertain future on industrial relations, and an outdated neo-liberal economic outlook that would have seen Australia into recession if Abbott had had his way.

Vote 1 for Labor; or for the Greens: but for Australia’s sake put the Liberals and Nationals last.

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Also this article will be re-appearing in On Line Opinion on August 10 - pls feel welcome to comment and discuss these issues there and then as well! :))

Pension reform cause still urgent

above: Australian PM and Deputy PM - Kevin Rudd and Julia Gillard - important progress on pension justice - but still some way to go...

Recently Mark Davis reported in The Age (August 13, 2009) on plans canvassed by the Henry tax review to reform superannuation and aged pensions.

According to Davis, the plan suggests that: “… lower income earners retiring with low superannuation lump sums would be given the opportunity of handing the money to the government in return for guaranteed income payments indexed to the age pension.” http://business.theage.com.au/business/topup-plan-for-low-super-20090812-eib1.html

To clarify: “For a retiree with $100,000, the top-ups could be worth 20 per cent of the age pension and would come in addition to the means-tested entitlement to the pension.” http://business.theage.com.au/business/topup-plan-for-low-super-20090812-eib1.html

Finally, according to Fiona Reynolds, the chief executive officer of The Australian Institute of Superannuation Trustees: “There are not a lot of lifetime annuity products, and the ones around are pretty highly priced, especially for retirees with small amounts of savings. If someone with a lump sum of $60,000 could buy a top-up to the age pension from the government, it might provide an extra $2000 a year.” http://business.theage.com.au/business/topup-plan-for-low-super-20090812-eib1.html

The demand for such lifetime annuity “products” reflects what some call “longevity risk” - the prospect that retirees will live longer, and that their superannuation and savings will not last them.

Importantly though, for those profiting from private provision of “lifetime annuity” products, and even private superannuation funds, there is a motive to undermine a universal aged pension system.

While it is desirable to improve retirement incomes and national savings, there are dangers in the possible marginalisation of the aged pension and those dependant on it.

A single public “life-time annuity” product might play a potentially legitimate role in supplementing pensions for some. But aged pensioners must have the flexibility to reclaim this from the government when there is a real and immediate need. Meanwhile there are many for whom even a modest $60,000-$100,000 in lifetime savings is “out of reach”. What will become of these people with the stratification of retirement schemes and incomes?

Private self-funded retirement products, specifically superannuation, are also exposed to risk - as evident in the current financial crisis.

Retirees ought to enjoy financial security regardless of financial market trends. The element of “risk” could - and should - be “hedged” against collectively by citizens and tax payers through a public pension fund (with returns supplemented by tax as a last resort - and hence secure).

Earlier this year, in the Left Focus blog, http://leftfocus.blogspot.com/2009/05/mixed-bag-budget-but-still-better-than.html I considered the need for sweeping reform of public pensions.

While the 2009 Australian Budget provided for a degree of distributive justice, further change is desirable. Pension reform is necessary as a matter of social justice - in addition to any public “lifetime annuity” scheme.

Already, reform has provided for a future increase of $32.49 per week to full rate single pensioners and $10.14 per week combined to couple pensioners. http://www.budget.gov.au/2009-10/content/overview/html/overview_22.htm

As of September 20, 2009 pension reform will see a new legislated benchmark for singles of 27.7 per cent of Male Total Average Weekly Earnings, up from 25 per cent”. http://www.budget.gov.au/2009-10/content/overview/html/overview_22.htm

Importantly, though, the value of such reform is undermined and (in part) “swallowed up” by the impact of a rising cost of living, including rent, food, water and energy. http://www.independentweekly.com.au/news/local/news/general/real-living-costs-rising-sacoss/1564636.aspx

Earlier this year - and as the Federal Budget approached - I noted, http://leftfocus.blogspot.com/2009/05/one-last-plea-for-justice-and.html

“Given cost-of-living pressures, it is reasonable to suppose that [the Singled Aged Pension] ought to be lifted to at least 30 per cent of Male Average Total Weekly Earnings (MATWE). … This would lift such pensions (at the full single rate) to about $17,537 a year: a significant improvement.”

Such reforms should be the absolute minimum provided by the Federal Government to be implemented at the very next opportunity; and should be provided to all receiving full single pensions (including the aged, the disabled, job-seekers, and carers).

Proportionate improvements to pensioner couples is also important – of course.

And yet there is a case for more robust reform for the most vulnerable pensioners. The Council on the Ageing (COTA) has argued for a full single pension formula of 35 per cent of Male Average Total Weekly Earnings.

As I noted in March this year in the “Left Focus” blog: “A “Cost of Living in Retirement” benchmark http://www.cotansw.com.au/a-fair-go-for-pensioners.aspx could translate to $750.60 a fortnight for singles, and $1125.90 a fortnight for couples. For singles, this would amount to $19,515 a year for those living purely on the pension.”

Such reform has been promoted by the Combined Pensioners’ and Superannuants’ Association with the aim of targeting those pensioners with little or no additional income. http://leftfocus.blogspot.com/2009_03_01_archive.html

A stronger single aged pension needs to be consolidated as part of a bulwark against the stratification in the pension system in Australia: and against the marginalisation of those dependent upon it. A public pension fund provided through progressive taxation - and spreading fairly and evenly the cost of “hedging” risk - needs to be established as a matter of top priority by the Federal Government.

Importantly, though, while means testing can play a central and progressive role, it should not be too onerous for those of relatively modest means. There must also be incentives for those on lower and middle incomes to save.

And again if there is a place for any “lifetime annuity” programs, then this should be in the form of a public and not-for-profit scheme.

Finally, the Federal Government needs to reconsider its commitment to raise the retirement age in Australia to 67. http://www.theaustralian.news.com.au/story/0,25197,25471039-5017014,00.html

Federal Opposition frontbencher Tony Abbott has canvassed the possibility of raising that age even further - to 70. http://www.abc.net.au/news/stories/2009/07/27/2638060.htm

Such plans as these, from both the Federal Labor government and the Opposition, are discriminatory and unfair for a number of reasons.

To begin with, manual workers can experience strain - and sometimes disability - as a consequence of years of physical labour. Furthermore, older workers regularly face negative discrimination by employers. And the prospect of necessary and radical re-skilling late in one’s career does not seem fair or productive. That such people can be left dependant upon an inferior “Newstart” job-seekers pension under such circumstances is also plainly unjust. http://www.olderworkers.com.au/index.php?news_id=347

The kind of society we ought to be encouraging is one where we “work to live” and not just “live to work” even where work is alienating and unrewarding. Retaining the retirement age of 65 may cost the “budget bottom line” into the future. But what younger tax payers forsake in the short term, they may reap for themselves in the long term.

We need aim for a scenario where, as Karl Marx once put it, “[rewarding] labor [becomes] not only a means of life but life's prime want”. http://en.wikipedia.org/wiki/From_each_according_to_his_ability,_to_each_according_to_his_need

Whereas Marx’s aim, here, of “exploding” the division of labour is not an immediately realisable prospect, what is reasonable and immediately achieveable is the preservation of a more generous retirement age. Here, the goal is for citizens to enjoy an earlier and more sustained retirement - with freedom and opportunity to commit to family, friends, community, self-development and/or civic activism. Indeed, to provide such opportunities to all citizens there is even a reasonable argument to shorten the working week.

A decent, fair and equitable pension system is core to the goal of social justice. Labor governments are elected - for many - in the hope they might implement real social reform.

Let us hope this Federal Labor government makes the most of this opportunity entrusted to them by the people.

‘Mixed Bag’ Budget – but still better than Conservative hypocrisy and myopia

The Swan Budget of 2009 is a mixed bag: including some welcome measures: and some certainly unwelcome.  Now is the right time to look at the Budget more closely – and your comments at ‘Left Focus’ are also welcome.

 

To begin with, Treasury estimates the Federal Budget will remain in deficit until 2016.    Furthermore, the 2009 Federal Budget deficit has come in at $56.7 billion.   http://www.theaustralian.news.com.au/business/story/0,28124,25470703-643,00.html

Swan, however, has been eager to place these figures in the context of a global recession of proportions unseen since the Great Depression over 75 years ago. 

The government has rightly argued that a strategy of austerity would simply feed into a vicious recessionary spiral. 

 

That being the case, the short term stimulatory measures – cash payments from late 2008 to early 2009  – provided relative economic buoyancy while infrastructure measures were being 'brought into reality’. 

According to the 2009 Budget statement, the government is now poised to invest $22 billion in infrastructure projects – including ports, roads and rail. http://www.smartcompany.com.au/construction-and-engineering/20090512-22-billion-for-infrastructure-in-budget.html

Further investment is to include $5.3  billion for Tertiary research and innovation.    http://news.theage.com.au/breaking-news-national/universities-thrilled-with-budget-boost-20090512-b1rs.html

Meanwhile, rollout of ‘Fibre-to-the-Home’ broadband is set to gather pace this year.   If anything, the schedule could be more ambitious.

Now is certainly the time to take action.  Some of these initiatives will benefit the nation for decades to come.

But there are those who argue Labor’s stimulatory measures do not go far enough. 

 

Ken Davidson, writing for ‘The Age’, argues that this is a “deflationary Budget”.  

While Swan’s rhetoric in support of stimulus ‘makes the grade’, and there is genuine stimulus, the predicted 8.5% unemployment rate is still unacceptable – especially while the unemployed suffer austerity.  

Davidson predicts that,

“The economy needs to grow by 3 to 3.5 per cent a year in order to stabilise unemployment at the present level of just over 6 per cent.”

http://business.theage.com.au/business/spending-tap-is-turned-too-low-20090512-b21v.html

Drawing on the budget papers, the veteran economic commentator further estimates that:

“ net debt will move…to a deficit of $54 billion in 2009-10 and $188 billion in 2012” – but under such circumstances “interest on the debt will be only 0.6 per cent of GDP.”  http://business.theage.com.au/business/spending-tap-is-turned-too-low-20090512-b21v.html

Under such circumstances – and with hundreds of thousands of jobs at stake - there is definitely room for further measures.  Such stimulus ought involve extra strategic expenditure on infrastructure - as part of a plan for future prosperity.  The key is to pick projects of real and lasting economic and social value.

Bob Brown, speaking on behalf of the Australian Greens, condemned Labor policy, arguing that: “ A single coal project in the Hunter Valley will receive almost the same amount of money as the entire $1.5 billion Solar Flagship program over the next six years." http://bob-brown.greensmps.org.au/content/media-release/green-opportunity-missed-budget-2009

Certainly here would be a good place to start in ramping out research, development and construction of renewable energy projects.  Such initiatives could include more ambitious targets for micro-renewable energy.  

Further - The National Broadband Network could be prioritised as a fully-public project: fast-tracking construction, and avoiding the long-term pitfalls of private monopoly, inaccessibility for the disadvantaged, and profit-gouging.

And Karen Churchill – commenting at the Crikey! website - argued that public housing projects could be taken much further.   According to Churchill, “low income people have to wait up to six years for public housing and two or three for “crisis” housing.”   http://www.crikey.com.au/2009/05/13/eva-cox-2009-budget-is-oversold-and-unfair/   

Strong investment in public housing, here, could also produce a long-term correction to Costello’s disastrous ‘housing bubble’ – which placed home ownership and even rental affordability - out of the reach of so many Australians.

Pension reform – for the most vulenrable 

On the ‘pensions front’ there is relatively good news for some.

For Disability, Carers and Aged Pensions, payments will be

“pegged to CPI with  a new pensioner cost of living index or 27.7 per cent of male average weekly earnings”  (MATWE),  “whichever is the highest.”  http://www.news.com.au/heraldsun/story/0,21985,25470871-662,00.html

Peremenant Carers will also receive “an [additional]...supplement of $600 a year”  with “an extra $600 a year for carer allowance recipients for each person in their care.”   http://business.smh.com.au/business/federal-budget/budget-winners-and-losers-20090512-b1ql.html

These figures mark a genuine improvement – comprising a lift in the formula for determining pensions.  Previously, for instance, the Single Aged Pension was locked in at 25% of MATWE.

The increase of $10.14 a week for Aged Pension couples, however, was probably at least $5/week too little, given the combined cost of living for these people.

Also on the bad side: there are many groups who have had their needs ignored for the sake of ‘meeting the budget bottom line’. 

Sating the prejudices of some of the more cynical layers of the community might also be a factor in this equation.

To be specific, the Budget provided nothing for sole parents and the unemployed. 

Eva Cox has condemned this move to exclude “less marketable” groups, and to forego more muscular measures aimed to redistribute wealth between the genuinely privileged, and those struggling on lower incomes.

http://www.crikey.com.au/2009/05/13/eva-cox-2009-budget-is-oversold-and-unfair/

The ever-multiplying ranks of jobseekers, here, are expected to survive on $454/fortnight: with a “a $147 per week gap between the these and the top income support payments.”       http://www.acoss.org.au/News.aspx?displayID=99&articleID=5893

To compare: the full Single Aged Pension, in contrast, will rise to $673.36 per fortnight. http://www.superguide.com.au/2009/05/32-per-week-increase-in-single-age-pension/

And while the $32.50/week is a welcome improvement, Charmaine Crowe - the Policy-Coordinator of the Combined Pensioners and Superannuants Association (CPSA) - has suggested that the most vulnerable “will be under-whelmed.” 

 

She argues that:

 

 “The 1.5 million pensioners on the maximum rate of the pension are, and always have been, the group desperate for a boost.” http://www.cpsa.org.au/MAIN/srelease.php?id=114

In summary, the Budget fell short of this writer’s aim of a formula of 30% Male Average Total Weekly Earnings (MATWE) base rate for all pensions – including ‘Newstart’ (ie: unemployment) benefits. 

This could provide a realistic goal around which interested groups could mobilise for the future – although even 30% MATWE is itself a compromise.  (the Council on the Ageing had previously argued for a rate of 35% MATWE.)

Further, the Combined Pensioners and Superannuants Association’s plea for a supplement of $80/week deserves greater attention.  This would now need to be adjusted to comprise a supplement of an additional $45/week for the most vulnerable: those subsisting on full pensions without other supplementary income, 

These figures will need to be adjusted as lobby groups begin to reorganise and reorient towards the Budget for 2010. 

This writer, however, is hoping that there may be some ‘last minute’ surprises.  

 

While unlikely, it is not beyond the possible that the Greens and independent Senators may ‘do a deal’ which could see parity in base pension rates: bringing Newstart in line with other pensions.  

While the Parenting Payment for sole parents could be reformed so as to be paid until the youngest child reaches the age of 16; so too could there be an additional ‘stimulatory’ supplement for the most vulnerable – as suggested by Charmaine Crowe.

The question, here, is just what kind of ‘deal’ the Greens and independent Senators could do to secure such reform, and ensure Labor’s support.  Certainly, Labor could do with a ‘smooth path’ for its legislation for the remainder of its first term.    

Yes - Labor should have provided for the most vulnerable without it coming to a 'last minute deal' - but for the unemployed especially - their needs are desperate.   Those with leverage need do whatever they can...

 

For the vulnerable – and the forgotten – let us hope the ‘last word’ has not been heard on the issue of pension justice.

 by Tristan Ewins - May 2009

One last plea for justice and compassion

As the 2009 Federal Budget approaches, the fate of millions of pensioners hangs in the balance. The plight of aged pensioners in particular has captured the attention of the nation’s media. But in fact there is a broader crisis also affecting the disabled, carers, students, sole parents and the unemployed.

This paper is one last call to the Federal Government to enact comprehensive reform in the provision of pensions.

With only a few days to go, however, the findings of the government’s Pension Review have not even been made public. Indeed, upon calling the relevant help line, I was informed that the release of the Review’s report would only be released “at the Minister’s discretion” and indeed that it may not be released at all.

Meanwhile the circumstances I considered a few months ago in the Left Focus blog are still pressing and urgent.

The ranks of the unemployed are set to swell. The ABC has reported that the unemployment rate could rise to more than 1 million, or 8.5 per cent, in 2010. If the plight of aged pensioners is already an urgent matter of public interest, so too are the straits of the unemployed.

Nevertheless, while the Newstart payment for unemployed singles is $453.30 a fortnight, the single aged pension is $569.80. That’s a difference of more than $100 per fortnight. The National Welfare Rights Network has projected that a $30 increase to the Newstart and Youth Allowances would cost $800 million.

Assuming that these payments were brought “in line” with other pensions, after these had been raised by $30 a week, the cost would be in the vicinity of $3.2 billion.

This sounds daunting - but again - such figures must be taken in the context of an economy of over $1 trillion.

Wayne Swan is avoiding being “pinned down” emphasising the need for “responsible” financial management. There have been rumours suggesting that there will be a “scaled back” payment of an additional $20 a week for aged pensioners to pay for an increase to Newstart.

The Greens, in particular, have been concerned that pensioners of all types should not be divided against each other. Regarding aged pensioners and the unemployed, Bob Brown has suggested that it is a false dichotomy that we must choose “one or the other”.

In the context of a rising cost of living, though, there is a strong case for a significant increase in the base rate for aged pensioners, disability pensioners, carers, sole parents and also the unemployed.

Students, meanwhile, should also receive additional support so they are financially able to devote their full attention to study.

The argument for an increase in the base rate of all pensions: and an easing of means tests for those on meagre incomes is strong. Critically here there also needs to be additional assistance for the most vulnerable of all.

The Combined Pensioners and Superannuants Association (CPSA) has argued for a tightly focused assistance package for the 1.5 million pensioners surviving on full rate pensions. The CPSA’s proposal covers aged, disability and carers' pensioners. Such a measure, according to CPSA, would cost about $3.2 billion: minimal in the “big picture” of the Federal Budget.

The CPSA has also suggested the needs of sole parents be seen to - and has criticised the absence of their needs from the Pension Review.

Prime Minsiter Kevin Rudd, however, is proving to have insufficient flexibility in the face of the financial crisis. Still he is insisting that taxes remain steady - not increasing as a proportion of GDP. Furthermore his suggestion that $2 billion for aged pension reform is “a truckload of money” is deceptive when that amount is considered in the context of an economy in excess of $1 trillion.

When the Greens suggested a $30 a week increase to pensions my immediate reaction was that surely such reform is insufficient to lift vulnerable Australians out of poverty, and keep pace with a cost-of-living “spiraling out of control”.

This remains the case - even if the Greens have taken a less equivocal position than Labor.

It is most important that we have formulae for calculating all pensions, which automatically adjust according to the cost-of-living; and which lift all Australians out of poverty.

The current formula for aged, disability and carers' pensions is 25 per cent of Male Average Total Weekly Earnings (MATWE). Given cost-of-living pressures, it is reasonable to suppose that this ought to be lifted to at least 30 per cent of MATWE.

It is critical that such adjustment includes the unemployed - who cannot be blamed for the world recession, and the resulting fall in employment levels.

This would lift such pensions (at the full single rate) to about $17,537 a year: a significant improvement - but still short of the CPSA’s figure of $19,399 (which they calculate as being “low income”).

The Rudd Labor Government’s pension reform agenda must begin by addressing the needs of the most vulnerable: those struggling on the full pension rate with no other source of income.

The CPSA’s proposal for an $80 a week supplement for these people should be implemented by the Rudd Labor Government if it is serious about fairness. Thereafter, the government needs to provide a fair means-testing formula that provides enough for all pensioners - that they are raised out of poverty.

To lift most pensioners out of poverty, the full single rate of $19,399 is desirable - but a formula of 30 per cent MATWE, with an immediate figure of about$17,537 would still be a significant and welcome improvement. Less than this simply does not do enough to address the cost-of-living pressures Australian pensioners face.

And as Charmaine Crowe of the CPSA has argued, further reform in other areas is also needed (for instance: abolition of the Pharmaceutical Benefits Scheme co-payment).

Pension reform has real consequences for the quality of life of millions of Australians.

Among other factors it determines whether or not these people can afford proper nutrition; enjoy heating and air-conditioning; have adequate shelter and access to water and energy; and also have access to information and communications technology others take for granted. It also influences access to transport and opportunities for social connectedness: as well as ability to deal with unexpected contingencies (for example, a broken-down car, fridge or TV).

Importantly, the formula for sole parents needs to be adjusted to accommodate the additional costs associated with raising a family.

It says something about the kind of society we live in that Bob Hawke’s statement in 1987 that “no child live in poverty” is looked upon as ludicrous.

It is within our means now, though, that the PPS (“Parenting Payment Single”) be raised according to a “basket of goods” necessary for sole parents and their children. It is within our means to provide for vulnerable sole parent families: the sole parent pension should be provided until the youngest child reaches the age of 16 not the threshold of 8-years-old introduced by the Howard government.

The domestic labour of sole parents in raising young families is just as important as labour market participation.

According to a May 2009 ACOSS (Australian Council of Social Services) factsheet, “there are about 360,000 sole parent families with around 600,000 children between them on this payment”.

The Federal Labor Government ignores this demographic at their own peril.

As the Federal Budget approaches, we cannot allow different pensioner groups to be divided against each other. With organisation and solidarity we can achieve change. Those concerned need to hold Rudd Labor accountable.

And the Opposition needs to be exposed for its hypocrisy in favouring the aged pension ahead of other pensions - for purposes of political opportunism.

The rights of the vulnerable and disadvantage must be prioritised. This includes the unemployed, the disabled, sole parents, the aged, carers, and students.

As I have written elsewhere: in a fair society “none ought to be left behind”.

Tristan Ewins, May 2009

Avoiding austerity - caring for our aged

(part one of a two-part series on the rights of the aged) Considering the rights of aged pensioners All too often, the rights of aged pensioners are overlooked in what is sometimes a callous and cynical political game. For the residential care system - high and low intensity care, there is already an urgent need for reform. This paper, however, will survey the plight of those aged Australians not yet in residential care, but struggling to “make do” in the broader community. Whether dependant upon the Aged Pension, or otherwise supplementing this with continued paid work even beyond the official retirement age, these Australians deserve security, comfort, dignity, social engagement and purpose. Many services and allowances should be made available for elderly Australians after application of a generous and fair means test. We will consider some of these - one at a time - leading towards the conclusion of this paper. Choice in work and retirement To begin, Australia should not respond to the ageing of our population by raising the minimum retirement age beyond 65. Indeed, it would be preferable to set this threshold to 60 years for both men and women. After 40 years - or more - in the workforce, it is reasonable that elderly Australians be free to pursue their passions. This is especially important in cases where that work has involved drudgery. That said, many elderly Australians, given the choice - and the incentive - would continue work. For some, work does provide social engagement and connectedness; as well as opportunities for self-expression, purpose and personal development. Providing tax and welfare incentives for continued work can provide an element of choice. The existing Pension Bonus Scheme is an important move in this direction, but ought to be more generous at the time of its inception. However, Combined Pensioners and Superannuant’s Association Policy Co-ordinator, Charmaine Crowe, has identified a number of problems with the program. At first payments are minimal: $1,373.80 for the first year. Thereafter payments increase more steeply: $5,495.10 for the second year; $12,364 for the third year; and $21,980.40 for the fourth year. After five years payments reach is $34,344.30. (These calculations apply only in the case of singles. Rates for couples can also be found here.) Such provisions may provide reason for pensioners to continue work long beyond the official retirement age. But there is an argument to be made that the process is discriminatory. Perhaps the payments should be more evenly spread, providing a more immediate incentive. In correspondence, Ms Crowe also raised concerns about the severity of the income test for working aged pensioners. To begin with, the current fortnightly income test for aged pensioners “kicks in” at “$134 a fortnight” after which 40c in every dollar is taken from the pension. As Crowe argued, “they take two steps forward and one step back”. Most elderly people have difficulties in finding work. And with a means test so severe as to provide a crushing deterrent - even the prospect of casual work is substantially less appealing. Compared to the preferential treatment of superannuation, treatment of earned income via the Pension Bonus Scheme - is not generous enough over the first couple of years. And for those attempting to supplement their pensions with earned income, the regime is punitive. Superannuation also, more generally, reproduces class stratification in retirement - yet does not provide security for retirees in the event a financial crisis such as the one we are facing now. There is an unreasonable element of risk. A fully public pension fund scheme could address these issues. Quality of life for every pensioner There are many other essential issues regarding the rights of aged pensioners - and the support they deserve - so that each may enjoy true quality of life. As noted earlier, support should be provided for all pensioners - in particular aged pensioners with generous but fair income and assets tests. To begin with, quality heating units and air-conditioning should be provided for aged pensioners, and installed free-of-charge. These units need to be safe and energy efficient. During winter, in particular, elderly Australians are at risk of contracting pneumonia and similarly, air conditioning can be of critical importance - especially in light of the extreme weather seen in Melbourne and Adelaide at the time of writing. Failure to provide essential heating and cooling has the potential (quite literally) to be a matter of life and death. Mobility is also a core contributor to quality of life, including the vital area of social engagement. Free public transport for these men and women must be provided while taxi vouchers ought to be provided where public transport is not a reasonable option. Imposts upon those least able to afford … With the increased costs of living, aged pensions should also be raised to ensure that none of these citizens live in poverty. In some states, construction of private infrastructure will see an explosion of costs into the future. In Victoria, private tollways already provide a significant imposition.; while there is an increasing cost for water - supposedly to “send market signals” - in the context of drought and scarcity. Such measures, though, could hurt those most vulnerable. The proposed desalination plant in Victoria is one such example. Peter Ker, writing in The Age reported that Victoria’s water retailers were set to double the price of water by 2013: with a decision being made in 2009. Yarra Valley Water, for instance, will charge its customers - on average - “about $585 per year”. Such factors as this make plain the need for reform not only of aged pensions, but of all pensions. Reform of pensions There are a number of streams of thought on the reform of the aged pension. The Greens have for some time been arguing for “an increase of $30 a week” for the unemployed and for carers - and also for aged pensioners. Drawing on last year’s figures, such a move would bring single aged pensions up from $562.10 a fortnight to $592. However, there needs to be a specific and persistent formula to make sure pensions keep up with the cost of living. The Council On The Ageing (NSW), for instance, is calling for single aged pension payments of 35 per cent of male average total weekly earnings (MATWE). Specifically, the citizen’s representative group has developed a new “Cost of Living in Retirement” benchmark, which would translate to $750.60 a fortnight for singles, and $1125.90 a fortnight for couples. Alternatively, the Combined Pensioners and Superannuants Assocation, has made the case for a more tightly targeted regime of assistance “to be paid to around 1.5 milllion pensioners with little or no additional income”. More specifically, the CPSA has argued in favour of an extra $80 a week for single pensioners who do not have additional income. These pensioners are those who would otherwise have insufficient income “to purchase essential goods and services”. Finally - in the past, the author has made a personal call for a rate of 30 per cent of the male average total weekly earnings for single recipients. Today, this would amount to $674.52 a fortnight. Rates for couples could be set at 90 per cent of the full single rate for each recipient. (for a total of $607.86 a fortnight each). This proposal is a more modest compromise for the time being. Importantly, such reform could be implemented alongside the CPSA’s proposal for targeted supplements. Even here, though, such redistributive measures could well necessitate tax reform. In the context of a devastated revenue base, and a ballooning deficit, there is little option. Many part self-funded retirees have lost an enormous portion of their income with the crash of the share market, and the rapid decrease in interest rates. In addition to targeted supplements, reform in this field needs also to be accompanied by an easing of means tests at the lower end of the scale. All such demands are achievable given the political will and decency of our politicians. Importantly, by redistributing wealth within the economy, there would be no resultant drop in aggregate demand. If anything, those on lower incomes spend a greater proportion of their wealth. As a consequence, such measures could even increase demand. Labor holds primary responsibility as it is in government. But Malcolm Turnbull, also, has sought to make political capital from the plight of aged pensioners. Instead of calling for tax cuts, perhaps instead he should “put his money where his mouth is”. Other factors in achieving dignity, comfort, purpose and social engagement Support for carers needs to be increased substantially so as to provide - where appropriate - a viable alternative to admission to nursing homes. Such support should be especially generous: given that it would ultimately save money which otherwise would be devoted to more intensive and costly professional care. These reforms should be sufficient to ensure that pensioners not in care do not suffer malnutrition. But for those - for whatever reason - who are unable to shop for their own groceries - continuing support is necessary for “meals on wheels” programs. And here, there is need for thorough-going quality control. To further ameliorate the stress faced by pensioners simply trying to survive and maintain some basic quality of life, more generous subsidies could also be provided for water and energy. Health care, meanwhile, should be made available to pensioners with genuine need with no effective discrimination on the basis of wealth and class. As such, the Pharmaceutical Benefits scheme should be strengthened such as to improve affordability for aged and disability pensioners. Housing stress and social engagement According to Charmaine Crowe, more than 500,000 age and disability support pensioners “rent in the private market”. Many of these are suffering “housing stress”. In some cases, Ms Crowe has “spoken to pensioners paying 70 per cent of their income on rent”. Furthermore, according to the Department of Health and Ageing, in 2008 “close to 6,000 people aged 65 years or more are homeless.” With Prime Minister Kevin Rudd promising $6.6 billion on 20,000 units of “social housing”, surely much of this should go to the most vulnerable in our community. Then there are other - generally under-appreciated issues - that are also central in maintaining quality of life. For some, educational grants could be provided. This could include anything from Higher Education, to “Neighbourhood House” programs. For some this could provide a means of re-entering the labour market. But the aspect of social engagement, or even simply the motive of human development, is more than enough to justify such measures. In a similar vein, “community circles” should be fostered to help prevent elderly citizens “withdrawing” from social life. And a modern program to eliminate poverty must also consider the need for social activity, and inclusion in a digital age - in pace with ever advancing standards and means of communication. Fast internet access is today a central need for most Australians, pensioners included. Calculation of such costs needs to be factored into any attempt at setting a benchmark against poverty. Finally, for those who are capable or interested, gentle fitness activities should be encouraged - and provided free-of-charge, for example, water aerobics. A broader crisis - not only the aged pension Of course, there is a crisis faced by all manner of pensioners - not only aged pension recipients. Areas of concern include: the aged pension, disability support pension, single parents pension, carer’s allowance, Newstart and Austudy. As Australia is drawn into the global fiscal crisis, and the resultant recession, the most vulnerable should not be made to pay the price through austerity. Formulae need to be developed to provide for the needs of pensioners “across the board”. If need be, taxes should be raised: to provide decent and just pension rates, tax rebates and supplements for low income earners, and the construction of major infrastructure projects that will drive quality of life and productivity into the future. During the Great Depression of the 1930s many had to line up at soup kitchens. Desperate battles were fought against evictions, and unemployed workers were exploited for a miserable and threadbare sustenance. But now, in 2009, we need not make the most vulnerable pay for a crisis brought on by greed, systemic failure and the ill-informed ideology of neo-liberalism. Austerity for vulnerable pensioners must not be an option. Yes, there will be need for sacrifice. But assuming real social solidarity, despite the depth of the crisis, the kind of human misery of the 1930s need not be repeated.