How will the carbon tax affect disadvantaged Australians?

Mission Australia recognises the reality of climate change and supports the Australian Government’s efforts to tackle the problem and prepare for the challenges ahead.

In terms of its carbon tax proposals released on Sunday, Mission Australia has a range of perspectives.

Firstly, Mission Australia is strongly supportive of the package’s suggested changes to the tax system.

Lifting the tax-free threshold from $6,001 to $18,201 in 2012 and then $19,401 in 2015, and lifting the marginal tax rates at the lowest level from 15% to 19% and at the next level from 30% to 32% are very significant.

For many years, one of the greatest barriers to people contemplating entering or re-entering the workforce has been a lack of incentive. What’s the incentive in getting off income support when you’re financially worse off simply by working an extra few days?

These changes go a long way to addressing that perversity in how Australia’s taxation and income support systems interact.

For example, under the package, a single mum wanting to return to work part-time would not have to pay tax until she earned more than $20,000 – a result of both the lifting of the tax-free threshold and a further low-income tax offset.

Similarly, a person on a low-income working two days a week could work an extra day without paying any tax on the extra day’s effort.

It’s about improving people’s passage from income support into work and we congratulate the government on these aspects of its proposals.

We also welcome the government's measures regarding compensation, including payments to help low-income individuals and families adjust to the carbon tax.

However, we are concerned that a 1.7% increase in the various pensions and income support will not be sufficient to insulate these vulnerable groups from the impact of the tax as well as the rise in prices expected from the enormous infrastructure maintenance and upgrades that are due for Australia’s power network.

We’re particularly concerned given that those on lower benefits receive the least amount of compensation.

As a result we intend to keep a close eye on its impact among our clients and will report to government if we find that vulnerable groups are worse off.

Similarly, we will also be assessing the impact of the tax on our capacity to deliver our services to those most in need.

For example, as one of the nation’s leading providers of services to job seekers, we’ll be monitoring the impact of the carbon tax on employers – both in terms of jobs lost or created.

Media Release: MA welcomes budget focus on disadvantaged areas

Mission Australia has welcomed the Gillard Government’s budget focus on addressing disadvantage in particular areas around the country and helping people in those locations find jobs and better participate in the community.

Mission Australia’s CEO, Toby Hall, said the organisation also supported the budget’s aim of helping more long-term unemployed people back into work.

“We think it strikes the right balance between incentives and increased resources for jobseekers and Disability Support Pension (DSP) recipients who have a reasonable capacity to work with measures that emphasise people’s reciprocal obligations – obligations we think are in line with community expectations,” said Mr Hall.

“There’s nothing in the government’s welfare-to-work changes that we think are particularly onerous. Our experience is that disadvantaged job seekers can respond positively to more rigorously applied compliance measures – if applied consistently and fairly. They provide a measure of order that may be lacking in their lives.

“In terms of DSP recipients who have a reasonable capacity to work, we think the budget changes are sensible and balanced.

“We have to get over the idea that reforming the DSP is an attack on disabled people – it’s not.

“There is no question that the majority of people in receipt of DSP are genuinely disabled and require significant levels of support.

“However, successive governments and a failing welfare system have allowed thousands of people without serious disabilities to move from the dole to receiving DSP where they are not engaged in looking for work. This is despite the fact they might have a capacity for employment and their issues could be overcome with intensive support.

“This group has genuine barriers to employment that they need support in overcoming. But they can be overcome – so let’s do it.

“One observation about the welfare package is that the government is placing a significant emphasis on Centrelink and its ability to help the sometimes vulnerable people the government is seeking to return to the workforce.

“We hope that buried in the detail is more funding to build Centrelink’s capacity to understand the often complex issues around these people.

“And while recognising the very substantial investment in mental health we think $201m over five years to help states/territories better coordinate and provide mental health services related to accommodation and admission/discharge from hospital isn’t enough. We also need more than just co-ordination – we need real housing.

“But overall a fair budget – a positive budget – for the people we help,” said Mr Hall.

Toby Hall is available for comment

Media inquiries: Paul Andrews 0409 665 495

Opinion: Welfare reform 10 years on - from our CEO, Toby Hall

A significant milestone in our recent political history passed without fanfare this week. It’s been 10 years since the Howard Government launched Australia on the path of welfare reform.

A decade down the track we might consider whether it’s an anniversary worth celebrating.

The independent committee charged by the government to make recommendations for change – a series of proposals known as the McClure Report – came back with three objectives for welfare reform: significant reductions in the number of jobless families and households; significant reductions in the proportion of the working age population on income support; and stronger communities with improved social and economic participation.

Perhaps uniquely for a major report on such a contentious issue it was greeted positively, not only by both sides of politics, but also by the business and community sectors.

It offered government a comprehensive road map for reform – a systematic approach to what is a highly complex problem. At the time there was real optimism for change.

But the Howard Government’s failure to embrace the McClure Report as a whole – including some of its toughest reforms – has left many of its targets either unmet or compromised.

In terms of jobless families, there’s no doubt the number has fallen since the late 90s. Increasing employment and welfare to work measures have had an impact but numbers are still too high.

Australia has the second-highest percentage of children living in jobless families in the developed world.

There are an estimated 543,000 Australian children currently in this position.

Around one in seven Australian children lives in a jobless family – one in two for single parent households – with all the associated implications that carries for future social and economic development.

These are hardly significant reductions.

And remember these numbers have remained stubbornly high through some of the best economic times Australia has experienced.

It’s further evidence that the problems of jobless families and job poor communities won’t be overcome by economic growth alone.
In terms of working age people heavily reliant on income support – again, while numbers have declined overall – there remain major challenges in supporting key groups into work.

Between 1996 and 2007 the number of people receiving the Disability Support Pension actually increased from 500,000 to more than 700,000 – greater growth than in any other pension category.

It’s estimated that 20 per cent of this total – 140,000 people – are thought to be capable of work, but we’ve failed to reach them.

And as for those vulnerable communities that stood to benefit most from the roll-out of the McClure Report’s recommendations, it’s Mission Australia’s experience that we’re a still a long way off from achieving its lofty goals of social and economic transformation.

Despite a strong start, the previous government’s approach to welfare reform was unbalanced and lacked coordination and integration. Ten years on we’ve failed to reap its full benefits and in some cases have gone backwards.

The current administration has the opportunity – particularly through its social inclusion agenda and the Henry Tax Review – to finish the job.

Among other things, that means simplifying the overly complex benefits system and introducing a single income support payment with a needs-based ‘add on’ bonus according to individual or family circumstances.

It also means removing remaining barriers to participation – such as the disincentives that exist in the current tax system for welfare recipients seeking to return to work.

We must tackle effective marginal tax rates so when an individual moves from welfare to employment they don’t suffer the double hit of income tax and a dramatic reduction in benefits.

As the majority of disadvantaged Australians are moving from income support to low paying jobs, the combination of income tax and a reduction in benefits is crippling.

And we need the Rudd Government to deliver its disability employment strategy.

While completing these reforms will be challenging and costly they will ultimately benefit us all via greater economic and social participation.

But if we don’t find the political will to see them through the gap between the job rich and job poor will become ever wider, condemning our most vulnerable communities to sclerotic levels of disadvantage.

Toby Hall, CEO, Mission Australia