A budget for the rich

Tax cuts eclipsed by rising costs.

‘Tax cuts for all’ was Treasurer Peter Costello’s message in last month’s federal Budget. But don’t get too excited.

A nurse on $50,000 gets a tax cut worth $9.81 a week from July 1.

That is good news – unless you are paying off a mortgage, driving a car or paying for child care.

$9.81 doesn’t even compensate for already-announced increases in petrol prices and home loan interest rates.

Last month’s interest rate rise added $14.67 to weekly repayments on a $400,000 mortgage. Many economists are tipping a second jump in interest rates in September.

Add the recent 10 cent a litre petrol price increase – another $6.80 a week on average. Fuel has soared from just over $1 a litre in the early months of last year to about $1.40 when this edition of The Lamp went to press.

On these figures you are already $11.66 worse off after the tax cut, without even taking increased child care fees into account. They have gone up an average $100 a month in the last year, according to the ACTU.

NSWNA Assistant General Secretary Judith Kiejda described the tax cuts as outrageously unfair and designed to benefit high income earners.

‘Almost all working people on incomes up to $70,000 a year receive tax cuts of only $7 to $10 a week,’ Judith said.

‘High income earners on $200,000 a year win a $138.46 a week tax cut while someone on $100,000 pockets $51.92 a week.’

Judith said the Budget would do little to help mothers who want to, or need to, enter the workforce or return to work.

‘There is no increase in the child-care benefit to help defray the cost of care which has gone up 60% in four years.

‘The tax system still acts as a disincentive for mothers who want to enter or re-enter the workforce. Many women will still be financially better off staying at home rather than paying tax, losing family benefits and forking out for child care.’

The Budget at a glance

  • Aged care

The Budget essentially ignored the growing number of residents of aged care centres, and their families who want to be assured of quality standards in these centres.

A pittance will be spent to increase spot checks on homes, and there is bit more for increased training for community care workers.
Crucially, there was no extra funding to improve training and wages in order to reduce staff ratios and overcome the chronic skills shortage created by poor pay and conditions.

  • Child care

The government lifted the cap on the number of family day care and outside-school-hours care places. But there are already 30,000 vacancies in family day care.

The real crisis is in long day care yet the Budget does nothing to make this more available or more affordable. No increase in the child care benefit, no revival of subsidies for non-profit centres, no initiatives to overcome the shortage of carers, no removal of the Fringe Benefits Tax to encourage employers to provide care.

In February 2006, 250,000 mothers who wanted to work couldn’t, because they couldn’t find childcare.

  • Education

Australia suffers from a chronic skills shortage, yet spending on education as a proportion of total government spending will actually fall from 8 to 7 per cent.

The military now gets more than our schools and universities.

Military spending will be 17.9 billion next financial year compared with $16.3 billion on education.

  • Health

The major initiative was the previously announced extra funding for mental health (see The Lamp May issue).

Medical research was the other big winner. Treasurer Costello said increased funding for research would come from part of the proceeds from the sale of Medibank Private.

There was nothing extra for our cashed-starved public hospitals.

Julia is $34/week worse off

Julia Kinnish is an RN at Blacktown Hospital who earns $57,000 per annum (gross) or $1,094.20 per week. She is paying off a mortgage and has four children, one in childcare and three attend after-school care. Even with the tax cuts announced in the May budget, Julia is more than $34 worse off due to increased day-to-day costs over the past year.

  • Julia gets a $9.81/week tax cut from July 1.
  • Last month’s interest rate rise added $14.67 to weekly repayments on a $400,000 mortgage.
  • $6.80 additional weekly fuel bill due to recent increases in the price of petrol.
  • Childcare costs have increased $23/week over the past year.

What the papers said

‘The Budget was unashamedly directed at helping the rich get richer.’
– John Durie of The Financial Review.

‘The typical Sydney family earning $70,000 a year and supporting two children gets nothing from the family tax benefit changes.’
– Sue Dunlevy of The Daily Telegraph.
‘When Mr Costello says he’s out to help middle-income families, you’d be crazy to believe it.’
– Ross Gittins of The Sydney Morning Herald.