Wednesday, 11 May 2016

Australian Federal Election 2016: the pain that awaits under a second Abbott-Turnbull Government

If there is a second term for this Abbott-Turnbull federal government it will be one characterized by high public debt and increased borrowings.

With a taxation revenue stream that has been deliberately limited by a $4 billion dollar giveaway to people whose level of earned income already cushions them from the realities experienced by average and low income households and, a further $48.4 billion hit to the revenue bottom line so that government can cut the company tax rate of an est. 2.121 million businesses - 70 per cent of whom don't paid the full rate anyway.

To keep their ship afloat Turnbull & Co would need to implement all those punitive Abbott-era cuts that were predominately aimed at working class households.

Which means among other things, an extension of the 2013-14 indexation freeze on Medicare rebates paid to specialist doctors, GPs and allied health professionals in an attempt to force them to pass on the shortfall to patients as a co-payment. As well as the introduction on 1 July 2016 of upfront payments for x-ray, imaging and pathology services.

Eligibility for Family Tax Benefits will be tightened and government paid parental leave payment rules will be changed to exclude more mothers.

The regressive Good & Services Tax (GST) has also been broaden so that from 1 July 2016 goods purchased overseas via the Internet will attract this tax.

From September this year anyone 22 years and over applying for Newstart Allowance will receive payment at a lower rate - each fortnightly cash transfer for a single unemployed person (with no children) will be $8.80 less and for unemployed couples (with no children) it will be $15.80 less. 

This means that a single person eligible to receive Newstart who applies in September will only have an est. $259.40 per week on which to live and look for work, while couples will only receive an est. $468.50 each week. With average rents in the Sydney metropolitan area ranging between $500-$530 at the beginning of this year, rental stress is likely to increase in unemployed households.

Liberal and Nationals federal politicians are denying that they are conducting "class warfare" yet large tax cuts are going to the top 25 per cent of income earners and will eventually will be extended to businesses with annual turnovers in the billions of dollars, while the economically and socially vulnerable are told they deserve less.

Indeed spatial demographics demonstrate the Coalition's further widening of social and economic division in this country.

On 6 May 2016 The Age revealed that the biggest proportion of income earners who will benefit fully from these personal income tax cuts are in Prime Minister Turnbull's high socio-economic status electorate of Wentworth, where more than a third will have more in their pockets after tax. With the western Sydney electorate of Fowler having the nation's lowest proportion of taxpayers who qualify for the tax cut. In its suburbs of Liverpool, Cabramatta and Green Valley, just one in 20 earners have a taxable income higher than the new tax threshold.

While The Guardian on 7 May reported that, in the relatively lower socio-economic status regional electorate of Page on the NSW Far North Coast, 94.2% of taxpayers would miss out on that same cut in the tax rate because their taxable income was below $80,000 a year. Similarly, neighbouring Richmond and Cowper electorates would see 92.3% and 94.0% respectively missing out on the tax cut.

A brief look at what to expect..........

Unlegislated measures carried forward in the budget estimates—February 2016 update. Date issued: 3 February 2016. Date revised: 12: 30pm, 10 March 2016

The first Turnbull budget will be propped up by about $13 billion of so-called "zombie measures", which are still on the books from the first and second Abbott budgets but have not yet been passed by the Senate.
A parliamentary budget office count for the coming financial year puts the "ghost" measures at $1.7 billion. The biggest are the $600 million from planned cuts to access to Family Tax Benefits, $258 million from the outlawing of alleged double-dipping of maternity leave schemes, and $139 million from increasing co-payments and changing the safety net for the Pharmaceutical Benefits Scheme.

2016-17 Budget PapersStatement 6: Debt Statement, Assets and Liabilities, 3 May 2016:

Net debt is expected to be $326.0 billion (18.9 per cent of GDP) in 2016‑17. Net debt is projected to peak at 19.2 per cent of GDP in 2017‑18, before declining over the medium term to a projected 9.1 per cent of GDP ($264 billion) in 2026-27.The end-of-year face value of Commonwealth Government Securities (CGS) on issue subject to the Treasurer's Direction [government borrowing] is expected to be $497 billion in 2016‑17 and is expected to increase to $581 billion in 2019-20. By the end of the medium term (2026‑27) the total face value of CGS on issue is projected to rise to $640 billion.

2016-17 Budget PapersStatement 4: Revenue, 3 May 2016:

The 2016-17 Budget forecasts for tax receipts, excluding new policy, have been revised down since the 2015-16 MYEFO by $4.6 billion in 2016-17 and $13.5 billion over the four years to 2018-19. Excluding GST, tax receipts are forecast to be $4.6 billion lower in 2016-17 and $14.2 billion lower over the four years to 2018-19…..
the forecast for nominal GDP has been revised down by $27.5 billion over the four years to 2018-19….
In 2016-17, tax receipts as a share of GDP are expected to be 22.2 per cent, lower than the 2015-16 MYEFO estimate of 22.5 per cent.

Financial Review, 3 May 2016:

The government will spend almost $4 billion over the next four years to stop 500,000 taxpayers moving into the second-highest tax bracket…..

2016-17 Budget Papers Part 1: Revenue Measures, 3 May 2016:

The GST will be extended to low value goods imported by consumers from 1 July 2017….
The intent of this measure is that low value goods imported by consumers will face the same tax regime as goods that are sourced domestically.
Overseas suppliers that have an Australian turnover of $75,000 or more will be required to register for, collect and remit GST for low value goods supplied to consumers in Australia, using a vendor registration model.

The Guardian, 4 May 2016:

Asked about the plan to increase the threshold at which the 37% tax bracket kicks in from $80,000 to $87,000 – a tax cut of a bit over $300 a year for the top 25% of earners – the prime minister, Malcolm Turnbull, told ABC radio that even if it was not legislated when he called the federal election at the end of the week it would be implemented "administratively".

On Tuesday the federal government announced it will increase the tobacco excise by 12.5 per cent a year for the next four years.
The plan will cause the price of a packet of 25 cigarettes to rise to about $40, up from $25 today.

ABC News, 5 May 2016:

Prime Minister Malcolm Turnbull has refused to confirm the 10-year cost of the proposal to cut tax for all firms to 25 per cent over a decade.
The Parliamentary Budget Office (PBO) has estimated the proposal, which will be phased in over time and benefit small and medium-sized businesses first, will cost $16.5 billion a year in 2026-27. However, during an interview with Sky News, Mr Turnbull would not confirm that figure, despite being asked more than a dozen times for an explanation.

The Australian, 6 May 2016:

Treasury has revealed a hit to revenue of $48.2 billion over 10 years from the Coalition’s plan to cut company taxes….
The government policy starts by cutting the company tax rate to 27.5 per cent to all companies with a turnover of up to $10 million, taking effect from July….
will be extended to bigger companies year by year, followed by several years of cutting the overall rate to 25 per cent for all companies.

Anyone who signs up for welfare from September 20 will get less than those already on it, creating a two-tiered payments system…..
The government is removing an "energy supplement" 
Newstart Allowance payments have steadily decreased in relative terms over the past two decades to less than 40 per cent of the minimum wage……
The cut comes as national youth unemployment is nearly 13 per cent.

Centrelink, 7 May 2016:

Payment rates for Newstart Allowance…..
single, no children $527.60 [per fortnight]
[couple] $952.80 [per fortnight]

[Newstart non-indexed] Rates include Energy Supplement of $8.80 (single, no children), $7.90 (each member of a couple) and $9.50 (single with children or over 60 after 9 months) per fortnight.

ABC News, 14 January 2016:

The typical Sydney unit rent was $500 a week, while a house was $530 in December 2015.

14 May 2013 Suspension of MBS rebate indexation until 1 July 2014 to align indexation with financial year, announced in 2013-2014 Federal Budget.
13 May 2014 Indexation freeze for specialists, allied health professionals, nurse practitioners, midwives and dental surgeons MBS and DVA rebates until 30 June 2016, announced in 2014-2015 budget.
1 July 2015 Rebate indexation freeze commences…..
The Federal Government is reducing its investment in your healthcare by freezing your Medicare rebates. This means your Medicare rebates will remain the same until 1 July 2018, despite the cost of services increasing. The freeze is a co-payment by stealth and the Government has implemented this measure to reduce the amount it spends on all Medicare subsidised services, including general practice services. ….
Practices where a large proportion or all services are bulk billed will be significantly affected. The rebate freeze will have a detrimental impact on the viability of the practice. These practices may need to consider introducing or increasing out-of-pocket expenses to ensure the sustainability of the practice.
Individual GPs employed by a practice may be asked by their practice to pay a larger service fee to cover increasing practice costs.
Patients will experience a reduction in the value of their MBS patient rebate over time. 
The impacts will be magnified for GPs and practices providing patient services in lower socio-economic areas, where a majority of patients are from vulnerable groups (such as pensioners, Aboriginal and Torres Strait Islander peoples and people on very low incomes.). Many people in these areas cannot afford to meet out-of-pocket costs for care.

No comments: