tag:theconversation.com,2011:/es/topics/federal-budget-2017-37523/articlesFederal Budget 2017 – The Conversation2018-03-20T03:40:44Ztag:theconversation.com,2011:article/936412018-03-20T03:40:44Z2018-03-20T03:40:44ZNew Zealand, US and UK outrank Australia in scores on budget transparency<p>Australia ranks 12th in the Open Budget Index, and scores 74, much higher than the global average of 42 and the OECD average of 68. But Australia’s budget could still be more transparent if it included more on the budget’s impact on welfare and tax and by gender.</p>
<p>The Open Budget Index is published every two years and ranks countries using a transparency score, which is based on a survey for each country about publishing of budget documents, budget oversight and public participation. </p>
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<p>This year, there were 115 countries in the index and Australia was included for the first time. Australia ranks behind our neighbours New Zealand and also behind the United States, United Kingdom and France. The top three countries in the index are New Zealand (with a score of 89), South Africa (89) and Sweden (87).</p>
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<p>Each country’s survey for the index is prepared independently by an in-country civil society organisation or academic researcher. Applying standardised questions and based on evidence, researchers at the Tax and Transfer Policy Institute conducted the <a href="https://www.internationalbudget.org/wp-content/uploads/australia-open-budget-survey-2017-responses.pdf">Australian survey</a>. The assessments are also <a href="https://www.internationalbudget.org/wp-content/uploads/australia-open-budget-survey-2017-responses.pdf">reviewed anonymously.</a>. </p>
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<a href="https://theconversation.com/the-citizen-budgets-of-africa-make-governments-more-transparent-58275">The 'citizen budgets' of Africa make governments more transparent</a>
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<h2>How transparent is the Australian budget?</h2>
<p>The survey assessed Australian federal budget process for the 2015-2016 year and the first half of the 2016-2017 year. Australia’s government performs well in publishing most budget documents at different points in the budget process. </p>
<p>The budget documents include: <a href="http://www.budget.gov.au/2016-17/content/bp1/html/">Budget Paper No. 1</a> (with a score of 87), the <a href="http://www.budget.gov.au/2016-17/content/myefo/html/">Mid-Year Economic and Fiscal Outlook (MYEFO) report</a> (with a score 93) and the <a href="https://www.anao.gov.au/work/annual-report/auditor-general-annual-report-2015-16">The Auditor-General annual report</a> (81). The government reformed these documents in the 1990s with the introduction of the <a href="http://www.revparl.ca/40/1/40n1e_17_Chohan.pdf">Charter of Budget Honesty</a>.</p>
<p>Where the Australian budget falls down is in engaging the public in the budget process. The index evaluates public participation with 18 indicators. Australia’s weakest score is in budget participation (41 out of 100). This indicates limited opportunities for the public to engage in the budget process.</p>
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<p>For example the Australia government doesn’t publish a pre-budget statement and publishes less information in <a href="https://www.finance.gov.au/resource-management/appropriations/guide-to-appropriations/">the budget that has been approved by the parliament</a> and the <a href="http://www.budget.gov.au/">government summary of the budget</a> (a simpler and less technical version of the government’s budget proposal and other budget documents). Australia also lags behind New Zealand in transparency of most reports.</p>
<p>Yet, given participation opportunities are much scarcer in most other countries in the world, Australia is in fact one of the top performers on this measure. Almost all countries have only scant opportunities for public participation (score 40 and below), except New Zealand, the United Kingdom, Australia and the Philippines.</p>
<p>Where Australia scores really well is in its budget oversight by the Australian National Audit Office (a score of 100). But Australia presents a mixed picture on the checks and balances in overseeing the budget. The parliament provides adequate oversight at the executive and audit stage (that gets a score of 67); but limited oversight at the formulation and approval stage for the budget (with a score of 48). Overall, Australia gets a score of 70 out of 100, lagging considerably behind Norway (91) and Germany (89).</p>
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<p>The main barrier to improving this is the lack of pre-budget debate by the parliament. Budget Paper No. 1 is given to members of parliament less than two months before the start of the budget year, and in-year budget implementation is not examined by a parliamentary committee.</p>
<h2>Room for improvement</h2>
<p>It’s crucial that budget processes are fair, open, democratic and accountable. Australia performs well generally on budget transparency – as we should expect as citizens in a robust parliamentary democracy. But there is some room for improvement.</p>
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<p>For example, Australia’s budget contains much less information than in the past about distributional effects of budget policy on taxes and welfare. The government is no longer providing “cameo” tables, which show the projected impact in the real disposal incomes of different hypothetical families, as it did in the previous budgets prior to 2014-15.</p>
<p>The Australian budget also does not contain any analysis of the budget by gender. This is in contrast to the 1980s, during that time Australia was the pioneer in introducing gender budget analysis.</p>
<p>These gaps show us why it’s important for us to keep an eye on transparency. We should not be complacent. We need more public reporting, analysis and opportunities for public participation in the budget process.</p><img src="https://counter.theconversation.com/content/93641/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Miranda Stewart receives funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>Teck Chi Wong does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In it’s first inclusion in the Open Budget Index of 115 countries, Australia ranks 12th.Miranda Stewart, Professor and Director, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityTeck Chi Wong, Research Assistant at the Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/890142017-12-18T04:36:45Z2017-12-18T04:36:45ZSeven charts on the 2017 budget update<p><em>Here’s how the budget is looking at the mid-year mark, in seven charts.</em></p>
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<p>The A$5.8 billion drop in the 2017-18 underlying cash deficit compared with the original May budget is due more to higher revenue than lower spending. Receipts are higher by A$3.6 billion and payments are lower by A$2.1 billion. </p>
<p>The higher receipts reflect the stronger economy, which implies higher company tax (up A$3.2 billion) and superannuation fund taxes (up A$2.1 billion).</p>
<p>Receipts would have been even higher if not for stubbornly weak wages growth which, despite stronger employment growth, has tended to dampen individuals’ income tax receipts. These are in fact down by A$0.5 billion.</p>
<p>The estimates of GST and other taxes on goods and services remain unchanged since the budget.</p>
<p>The lower payments of A$2.1 billion are driven by several changes having opposite effects. Some of these are: </p>
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<li><p>A$1.2 billion (over four years) lower welfare payments to new migrants due to longer waiting times;</p></li>
<li><p>A$1 billion (over four years) lower payments to family daycare services due to more stringent compliance checking; and</p></li>
<li><p>A$1.5 billion (over four years) lower disability support payments due to lower than expected recipient numbers.</p></li>
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<p>There is not much change in the net debt projections relative to those in the 2017-18 budget. Net debt is A$11.2 billion lower at A$343.8 billion in 2017-18 (around 19% of GDP). Debt stabilises in 2018-19 and starts to steadily decline thereafter to about 8% of GDP in the next ten years. </p>
<p>The lower deficits as a share of GDP are obviously reducing debt, but one factor tending to increase debt is student higher education loans. These are projected to increase by 32% from A$44.4 billion to A$58.8 billion over just the next four years.</p>
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<p>The economic outlook continues to be a puzzle. National output of goods and services, real GDP, is expected to grow slightly slower in 2017-18 than the budget forecast – 2.5% compared with 2.75%.</p>
<p>However this is an improvement on the 2% achieved in 2016-17. And it is expected to increase further to 3% in 2018-19. </p>
<p>The economy is being driven by strong global growth and strong domestic business investment. Australia’s major trading partners are forecast to grow (meaning real GDP growth) at a weighted average of 4.25% in each of the next three years.</p>
<p>Wages and household consumption are the puzzle – they are not growing as fast as expected from the stronger than expected employment growth (up 0.25% on the budget to 1.75%) and lower than expected unemployment rate (down 0.25% on the budget to 5.5%). </p>
<p>Household consumption growth is down 0.5% on the 2017-18 Budget forecast to 2.25%. This has in fact become a global phenomenon due to higher costs and job insecurity from the forces of globalisation and automation.</p>
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<p>Commodity prices are notoriously volatile and hard to predict, yet they are critical to the budget forecasts because they impact the revenue of resource companies which feeds into company taxes and other taxes.</p>
<p>Iron ore prices are assumed to remain flat at US$55 per tonne over the forecast period, as in the budget. This forecast is almost certain to be wrong because iron ore prices never stay flat for long – the problem is that we can’t say in which direction it will be wrong.</p>
<p>The same applies to thermal coal prices which are assumed to be flat at US$85 per tonne which is again consistent with the budget forecast.</p>
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<p>Australian taxpayers continue to bear most of the burden of budget repair. The government can claim with some justification that their efforts to reduce payments further have been thwarted by the Senate.</p>
<p>Excluding the effect of Senate decisions, new spending has been more than offset by reductions in other spending. The gap between the revenue and payment is reducing at the rate of about 0.6 percent per year. </p>
<p>As a share of GDP payments are expected to be 25.2% in 2017-18, falling to 24.9% of GDP by 2020-21 which is slightly above the 30-year historical average of 24.8% of GDP.</p>
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<p>Wage growth has been revised down from an already low 2.5% in the budget to 2.25% in MYEFO. With the Consumer Price Index forecast to grow at 2%, wages are barely keeping pace with inflation – growing in real purchasing power by only 0.25%. </p>
<p>This provides a meagre compensation for labour productivity growth which is implied to be about 1% in MYEFO. Wage growth is expected to pick up by 0.5% next year to 2.75%. </p>
<p>This is important because it underpins government revenue growth, yet it’s brave to expect the deep forces that are keeping wages down in Australia and around the world to turn around and exactly match the 0.5% growth in real GDP expected to occur next year.</p>
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<p>New measures since the budget have increased the deficit on both the revenue and expenditure sides of the budget. On the revenue side, for example, higher education changes reduced revenue by A$76 million and the GST by A$70 million. </p>
<p>On the expenses side, needs-based funding for schools has cost an additional A$118 million and improving access to the Pharmaceutical Benefits Scheme costs A$330 million. The roll-out of the NDIS in Western Australia adds another cost at A$109 million, and Disability Care Australia at A$362 million.</p><img src="https://counter.theconversation.com/content/89014/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ross Guest does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Seven charts on the highlights from the government’s mid year update of the budget.Ross Guest, Professor of Economics and National Senior Teaching Fellow, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/892922017-12-18T03:35:39Z2017-12-18T03:35:39ZBudget update shaves growth and wage forecasts but is brighter about the deficit<p>The <a href="http://www.budget.gov.au/2017-18/content/myefo/html/">2017-18 budget update</a> shows an improvement in the deficit forecast for this financial year but predicts lower economic growth and a smaller increase in wages than was expected in the May budget.</p>
<p>The deficit for 2017-18 is now expected to come in at A$23.6 billion, an improvement of A$5.8 billion from the May forecast, according to the Mid-Year Economic and Fiscal Outlook released by Treasurer Scott Morrison and Finance Minister Mathias Cormann.</p>
<p>Growth for this financial year is forecast to be 2.5% compared with the budget’s 2.75%, reflecting recent lower-than-expected growth in household consumption.</p>
<p>Nevertheless Morrison and Cormann said Australia’s growth story “remains a compelling one, and although real GDP growth has been slightly tempered in 2017-18, the trajectory is upward”. Real GDP is forecast to grow at 3% in 2018-19, the same as the budget number.</p>
<h2>Budget update on wages</h2>
<p>The update notes that wage growth “remains low by historical standards in both the public and private sectors and has been more subdued than expected since budget”.</p>
<p>Wages are forecast to increase by 2.25% through the year to the June quarter 2018 and 2.75% through the year to the June quarter 2019.</p>
<p>This is 0.25 of a percentage point lower in both years compared with the budget – vindicating the s<a href="https://theconversation.com/vital-signs-dismal-wages-growth-makes-a-joke-of-budget-forecasts-77870">cepticism that economists expressed</a> about the budget forecast being too optimistic.</p>
<p>The flat wages situation reflects a serious political pressure point for the government, as many people struggle with high power prices and other squeezes on their cost of living.</p>
<p>“Wage growth is forecast to lift as the economy strengthens, inflation picks up and excess capacity in the labour market is reduced,” the update says.</p>
<p>Budget receipts have been revised upwards by about A$3.6 billion in 2017-18 and A$2.8 billion over the forward estimates compared with budget time – driven mainly by company tax and superannuation tax. The company tax forecasts reflect increased profitability and enforcement activity by the Australian Taxation Office.</p>
<p>But “over the forward estimates, lower forecasts for wages and unincorporated business income are expected to weigh on individuals’ income tax receipts,” the update says.</p>
<p>The half yearly revised numbers confirm that the budget is on track to have a surplus in 2020-21. The projected surplus of A$10.2 billion in that year is A$2.7 billion better than estimated in May.</p>
<h2>Savings measures on education and welfare</h2>
<p>The government has announced in the update a new welfare crackdown to save money and also an alternative higher education savings package after it could not pass its earlier proposals.</p>
<p>Savings of A$1.2 billion over four years will be reaped by broadening the criteria for waiting periods for new migrants before they can get various welfare benefits.</p>
<p>The changes will extend the present two-year waiting period for a range of payments, such as Newstart, to three years, and introduce a consistent new three-year waiting period to apply to a further number of benefits such as Family Tax Benefit and Paid Parental Leave.</p>
<p>Social Services Minister Christian Porter said the measures “will reinforce the foundational principle that Australians’ expectation of newly arrived migrants is that they contribute socially and economically for a reasonable period before having access to our nation’s generous welfare system”.</p>
<p>The higher education package includes a freeze on total Commonwealth Grant Scheme funding from January 1, set at 2017 levels, and a combined limit for all tuition fee assistance under all HELP and VET Student Loans.</p>
<p>The government will also pursue an alternative set of HELP repayment thresholds from July 1 next year, with a new minimum repayment threshold of A$45,000, higher than the A$42,000 in the original plan. At present the threshold is A$55,000.</p>
<p>Most of the new higher education package doesn’t have to be legislated, thus avoiding the Senate hurdle. The previous higher education package was set to save A$2.7 billion over the forward estimates; the new one saves A$2.1 billion.</p>
<p>Real growth in payments over the budget period is expected to be an annual average of 1.9%. Compared with the budget, nominal payments are lower in every year of the forward estimates.</p>
<p>The payment to GDP ratio is expected to fall to 24.9% of GDP by 2020, slightly above the 30 year historical average.</p>
<p>Morrison told a joint news conference with Cormann: “As we push into the new year, there is still more work to be done but we are on the right track.</p>
<p>"Jobs and growth will continue to be our mission and our focus. Helping the lives of the thousands of Australians, millions of Australians, and their families and returning the budget back to balance.”</p>
<p>Cormann said: “This is a good set of numbers in all of the circumstances.”</p>
<p>Shadow treasurer Chris Bowen said the government remained committed to increasing the tax paid by working Australians. He said there was no mention of personal tax cuts – which Malcolm Turnbull has foreshadowed – in the update. People only got a tax rise.</p>
<p>He condemned the revised higher education package, saying it would particularly hit those from a lower socioeconomic background. </p>
<p>The chair of Universities Australia, Professor Margaret Gardner, said the package would leave university funding “frozen in time”. She said the blow would be hardest in areas where university attainment was lowest, such as regional areas.</p>
<p>The Business Council of Australia said the budget update showed “welcome signs of improvement but it also signals the key role the business community will pay to strengthen the budget in the future”.</p>
<p>BCA chief executive Jennifer Westacott said business needed to be given the right environment to grow, including a competitive tax rate and a highly skilled workforce. “Delivering the remainder of the government’s plan for a reduced company tax rate has to be the starting point,” she said.</p>
<p>The Australian Industry Group’s chief executive Innes Willox said the improved budget position provided “room for modest and targeted tax relief for low and middle-income households”.</p>
<p>The Australian Council of Social Service said the improved economic outlook “has been overshadowed by further cruel cuts to vital social security payments for some of the most disadvantaged groups in our community”.</p><img src="https://counter.theconversation.com/content/89292/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government hasn’t abandoned its jobs and growth mantra in the budget update and remains optimistic despite lower growth and wages forecasts.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/878462017-11-21T19:28:45Z2017-11-21T19:28:45ZYoung Australians will wear the costs of Turnbull’s middle income tax cut<p>Malcom Turnbull has promised tax cuts for middle-income earners <a href="http://www.abc.net.au/news/2017-11-20/malcolm-turnbull-hints-at-middle-income-tax-cut/9172234">in the next budget or even earlier</a>. The short-term political benefits of pre-election tax cuts are not in doubt. But unless the government is willing to increase taxes elsewhere to pay for these sweeteners, there will be longer-term costs for the budget and the economy. And younger Australians will wear these costs. </p>
<h2>Young people will pay the price</h2>
<p>If the government goes ahead with tax cuts and nothing else changes, we can look forward to the announcement in the 2021 budget of Australia’s 13th successive budget deficit. This is despite the fact Australia is in the midst of the <a href="https://www.austrade.gov.au/news/economic-analysis/australia-has-experienced-the-longest-economic-growth-among-major-developed-world">longest period of uninterrupted economic growth</a> anywhere in the developed world. And the unlucky recipients of this legacy of poor budget management are the young. </p>
<p><a href="https://grattan.edu.au/report/the-wealth-of-generations/">Grattan Institute research</a> shows that each year the government runs a A$40 billion deficit, it increases the lifetime tax burden for households headed by a person aged 25 to 34 by A$10,000. This is based on the share of debt they would have to repay - with interest - over time. With each successive budget deficit, the tab grows for today’s young Australians. </p>
<p>And the government is magnifying the cost of future economic downturns. Australia was well placed to respond to the global financial crisis because of its healthy fiscal position. But with net debt now sitting at A$322 billion (18.4% of GDP), the government has less room to respond if there is another serious downturn.</p>
<h2>Middle-income earners are hit by bracket creep</h2>
<p>In the <a href="http://budget.gov.au/2017-18/content/">2017-18 budget</a>, the government was clear: if the senate won’t support spending cuts, then tax increases will have to do the “heavy lifting” on budget repair. And this heavy lifting is largely happening through bracket creep – growth in income taxes as a share of wages.</p>
<p>Middle-income earners are particularly hurt by bracket creep. Based on the wages growth projected in the 2017 budget, the average tax rates for people in middle-income groups will increase by between 1.9 and 2.9 percentage points by 2021. For example, a person earning A$50,000 a year will go from paying an average tax rate of 17.1% in 2017 to 19.5 % in 2021 – and that’s before the government’s proposed increase in the Medicare levy. </p>
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<p>No government likes to go to an election with taxes going up, so the temptation to “give back” bracket creep was always going to prove irresistible in next year’s pre-election budget. And as the prime minister flagged, there is also an economic case for such tax cuts. High marginal tax rates for middle income earners can significantly affect incentives to participate in the workforce, particularly for for <a href="https://www.pc.gov.au/inquiries/completed/childcare/report">women with children in childcare</a>. </p>
<h2>Tax cuts will blow the surplus</h2>
<p>But the kicker is the effect of the promised tax cuts on the budget bottom line. The Australian government has been running budget deficits since 2009. In the last budget, the treasurer promised a <a href="http://budget.gov.au/2017-18/content/">return to surplus in 2021</a>. </p>
<p>That promised surplus always relied on <a href="https://grattan.edu.au/wp-content/uploads/2017/07/Melbourne-Institute-budget-projections-16-9-print-version.pdf">optimistic assumptions</a>: strong wages growth, healthy growth in profits, government spending restraint, and, importantly, no cuts to income taxes. The government’s proposal is light on details, but even modest cuts to tax rates could eliminate the forecast surplus. </p>
<p>For example, if the government was to reduce the tax rate only in the middle bracket (A$37,000-$80,000) from 32.5% to 30%, the cost to the budget bottom line would be about A$7.3 billion in 2021, almost wiping out the promised A$7.8 billion surplus. </p>
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<p>If Malcolm Turnbull wants to cut income taxes but is still serious about delivering on his commitment to return the budget to surplus, then he will need to look elsewhere for revenue. Winding back <a href="https://grattan.edu.au/report/hot-property/">the capital gains tax discount or negative gearing</a>, better targeting of <a href="https://grattan.edu.au/wp-content/uploads/2017/02/Supplementary-Submission-to-inquiry-into-Superannuation-Objective-13-February-2017-FINAL.pdf">superannuation tax concessions</a> and <a href="https://grattan.edu.au/report/age-of-entitlement/">tax breaks for older Australians</a>, or <a href="https://grattan.edu.au/report/a-gst-reform-package/">increasing or broadening the GST</a> are just a few policies we could suggest. </p>
<p>But if the PM pursues the sugar hit of tax cuts without the difficult work on paying for them, then politics will once again have trumped policy and the economic future of today’s young Australians.</p><img src="https://counter.theconversation.com/content/87846/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p><p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities</span></em></p>Unless the government is willing to increase taxes elsewhere to pay for tax cuts there will be longer-term costs for the budget and the economy. And younger Australians will wear these costs.Danielle Wood, Program Director, Budget Policy and Institutions, Grattan InstituteHugh Parsonage, Associate, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/783942017-05-26T03:33:33Z2017-05-26T03:33:33ZVIDEO: Michelle Grattan on the fate of budget measures in the Senate<figure><img src="https://images.theconversation.com/files/171093/original/file-20170526-23279-ztdavz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
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<p>The University of Canberra’s vice-chancellor and president, professor Deep Saini, and professorial fellow Michelle Grattan discuss the week in politics, including how the budget bills will go in the Senate, whether the government will get support from the Greens to pass its education reforms, the leaked recording of One Nation staffer James Ashby suggesting a scam on taxpayers, and what the implications could be for Australian security of the terrorist attack in Manchester.</p><img src="https://counter.theconversation.com/content/78394/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The University of Canberra’s Deep Saini and Michelle Grattan discuss the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraPaddy Nixon, Vice-Chancellor and President, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/776162017-05-24T20:15:50Z2017-05-24T20:15:50ZLet graduates use super to pay off HELP debt faster<figure><img src="https://images.theconversation.com/files/169052/original/file-20170512-32588-nygg8e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Those already working will face tax increases of 1%-2% of their income from 2018. </span> <span class="attribution"><span class="source">from shutterstock.com </span></span></figcaption></figure><p>If the Senate passes <a href="https://theconversation.com/federal-budget-2017-whats-changing-in-education-77177">budget reforms</a> for higher education, Higher Education Loan Program (HELP) repayments would start earlier, with a wider range of rates: 1% of income for those earning A$42,000, rising to 10% at $120,000. </p>
<p>To put this in context, in 2017 the Australian minimum full-time wage is about $35,000 and the <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6302.0">average full-time wage about $80,000</a>.</p>
<p>This is an alternative to the government’s 2014 plan to <a href="https://theconversation.com/the-best-compromise-for-help-loan-interest-rates-31727">charge real interest</a> on HELP loans, and a 2016 Grattan Institute proposal to apply a <a href="https://grattan.edu.au/report/shared-interest-a-universal-loan-fee-for-help/">15% loan fee</a> to new HELP loans.</p>
<p>The Grattan Institute has <a href="https://theconversation.com/explainer-how-will-the-changes-to-help-student-loans-affect-you-76977">mapped</a> the overall effects of the government’s 2017 proposal. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=472&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=472&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169055/original/file-20170512-32602-jb2ysc.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=472&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">HELP loan repayments if reforms are passed.</span>
<span class="attribution"><span class="source">Grattan Institute</span></span>
</figcaption>
</figure>
<p>Grattan’s Andrew Norton <a href="http://It%20would%20also%20make%20it%20easier%20for%20graduates%20to%20repay%20loans%20more%20quickly%20than%20required%20by%20the%20compulsory%20repayment%20settings.">supports it</a>, as does the Mitchell Institute’s <a href="http://www.afr.com/leadership/despite-15b-budget-injection-vocational-education-lacks-longterm-strategy-expert-20170511-gw2j35">Peter Noonan</a>. The new settings will curb the rising public cost of over $50 billion in outstanding debt. </p>
<p>Against this, Sharon Bell of the Australian National University warns of more <a href="http://www.theaustralian.com.au/higher-education/increasing-student-debt-load-puts-principle-of-access-at-risk/news-story/a834e5d83fca03d1c990c1fd754d8e6a">financial stress for students</a> with other debts to manage.</p>
<h2>Cash effects of new HELP settings</h2>
<p>If passed in the Senate (where views <a href="http://www.abc.net.au/news/2017-05-02/will-the-governments-university-funding-changes-pass-senate/8490662">range widely</a>), the changes would apply to existing HELP debtors already in the workforce. </p>
<p>The chart below shows the effect in round figures of these “tax increases” in 2018. It compares minimum annual repayments under existing and proposed settings.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=316&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=316&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=316&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=397&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=397&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169051/original/file-20170512-32585-1ogul5b.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=397&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Cash effects of faster HELP repayments (thresholds are rounded, payments are indicative only).</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>There would be new payments at lower incomes in the $42,000 to $52,000 range. </p>
<p>In the $52,000 to $57,000 range, payments would be 1-2 percentage points higher. The same would apply in the $107,000 to $120,000 range. As the chart above shows, an increase from 8% to 10% at the $120,000+ level has significant cash effects.</p>
<p>The changes are both regressive and progressive. </p>
<p>At lower incomes in particular, a concern for many will be the cash-flow effect of new or larger repayments. Education Minister Simon Birmingham notes that the cash impact at the $42,000 threshold is about <a href="http://www.abc.net.au/7.30/content/2017/s4661955.htm">$8 a week</a>. But at $47,000 a 2% repayment would cost about $940 in a tax return, compared with zero at current settings.</p>
<h2>Should the government consider a super payment option?</h2>
<p>The lower thresholds may change in Senate negotiations. But if these are adopted the government should consider adding a <a href="https://theconversation.com/reforming-help-loans-combine-lower-repayment-thresholds-with-a-super-payment-option-57655">“super payment option”</a> that allows graduates to redirect up to 20% of compulsory superannuation contributions into HELP repayments.</p>
<p>This would help graduates manage the cash effect of higher HELP repayments. And those taking it up would confirm that their employers are complying with Superannuation Guarantee obligations.</p>
<p>The background here is that the recent Senate committee <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/SuperannuationGuarantee/Report/c03">inquiry</a> estimated that 2.4 million workers miss out on super entitlements due to underpayments by their employers. </p>
<p>And the Financial Services Council noted recently that many super fund managers assume younger workers are <a href="http://www.smh.com.au/comment/why-consumers-need-super-funds-that-work-for-them-20170508-gw00nb.html">“chronically disengaged”</a> and neither know nor care about their super balances.</p>
<p>Thus the “gig economy” meets the Super Guarantee. Financial Services Council CEO Sally Loane says that changes are needed for an <a href="http://www.smh.com.au/comment/why-consumers-need-super-funds-that-work-for-them-20170508-gw00nb.html">“Uber-ised” millennial workforce</a>:</p>
<blockquote>
<p>The competitive superannuation model the Financial Services Council has proposed – which we call Super 2.0 – offers consumers choice between funds, is competitive, flexible and fit for purpose for young Australians entering the workforce. This model can be contrasted with the status quo – our industrial model that encourages disengagement.</p>
</blockquote>
<h2>Cash-flow effects of super-HELP repayments</h2>
<p>The chart below shows the cash effect of letting graduates tap up to 20% of their 9.5% employer contributions under the Superannuation Guarantee to meet HELP debt obligations.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/169053/original/file-20170512-32578-14v4xgn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169053/original/file-20170512-32578-14v4xgn.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=343&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169053/original/file-20170512-32578-14v4xgn.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=343&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169053/original/file-20170512-32578-14v4xgn.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=343&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169053/original/file-20170512-32578-14v4xgn.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=430&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169053/original/file-20170512-32578-14v4xgn.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=430&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169053/original/file-20170512-32578-14v4xgn.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=430&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Cash effects of using super to repay HELP loans.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>In most cases, doing so would more than cover the increase in payments under the new HELP settings. Graduates could repay debts faster as proposed, but with better cash flow than under the current repayment settings for 2018.</p>
<p>At an income of $42,000 a graduate could choose to meet their full HELP debt obligation that year with just over 10% of the superannuation contribution their employer should pay into their super fund.</p>
<p>At an income of $47,000, tapping 20% of employer contributions would not quite cover the HELP debt repayment increase. Nor would it do so at $120,000.</p>
<p>But at many income levels in between, graduates would actually be better off in cash terms than under the existing HELP settings for 2018.</p>
<h2>Should super contributions be used this way?</h2>
<p>Using <a href="https://theconversation.com/use-super-contributions-to-repay-student-loans-40759">super to repay HELP loans</a> is not a part of the budget measures now making their way through parliament. </p>
<p>The design risk is that such a policy may undermine the aim of compulsory super. Lower contributions translate to lower super balances on retirement. However, those under the age of 30 can reasonably expect to be in the workforce until the age of 70. There is ample time to reinvest in super.</p>
<p>For younger or cash-poor graduates, meeting HELP payments may be a better use of part of the super contributions made on their behalf. It would mean more flexibility to invest in other priorities: credit card debt management, business start-ups and home loans.</p><img src="https://counter.theconversation.com/content/77616/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Geoff Sharrock does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government should add a ‘super payment option’ that allows graduates to offset the cost of their HELP repayments.Geoff Sharrock, Honorary Senior Fellow, Centre for Vocational and Educational Policy, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/780372017-05-19T04:15:30Z2017-05-19T04:15:30ZVIDEO: Michelle Grattan on the government’s budget sales job<figure><img src="https://images.theconversation.com/files/170067/original/file-20170519-12266-klye.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">AAP/David Mariuz</span></span></figcaption></figure><figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/DwZTFlBgX7I?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>The University of Canberra’s vice-chancellor and president, Deep Saini, and professorial fellow Michelle Grattan discuss the week in politics, including the post-budget polls, how the banks will cope with the budget, Standard and Poor’s Global reaffirmation of a negative outlook, and how the issues with Donald Trump’s administration will affect Australia.</p>
<iframe src="https://www.podbean.com/media/player/jj7pe-6b2773?from=yiiadmin" data-link="https://www.podbean.com/media/player/jj7pe-6b2773?from=yiiadmin" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/78037/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The University of Canberra’s Deep Saini and Michelle Grattan discuss the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraPaddy Nixon, Vice-Chancellor and President, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/778742017-05-19T04:12:18Z2017-05-19T04:12:18ZWith its 2017 budget the government is still discouraging women<figure><img src="https://images.theconversation.com/files/169900/original/file-20170518-24315-1mr25bo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Recent figures show that women are adversely effected by the 2017 federal budget.</span> <span class="attribution"><span class="source">AAP Image/Tracey Nearmy</span></span></figcaption></figure><p>The 2017 federal budget was pitched as a fair budget, but much depends on your definition of fairness. Reviewing the policies through a gender lens, there is little to address the <a href="http://www.aph.gov.au/Parliamentary...women...retirement/...women...retirement/report.pdf">entrenched economic disadvantage</a> experienced by women. </p>
<p>Australia was known for being a pioneer of policies that are sensitive to the impacts on different genders, but that 30-year history came to an end in 2014 when the Abbott government announced it was abandoning the practice. Rather than see this analysis disappear, the <a href="http://www.nfaw.org/gender-lens-on-the-budget/">National Foundation for Australian Women</a> (NFAW) stepped in and partnered with academics like us, to analyse the budget through the gender lens. We review the effect that each announced policy will have on women’s lives: their economic status and well-being. </p>
<p>We found there were no measures designed to specifically address gender inequality and the related women’s entrenched financial vulnerability.</p>
<p>It’s a relief that the government has abandoned the <a href="http://www.tai.org.au/sites/defualt/files/160709%20-%20Coalition%20Election%20Measures%20Table.pdf">so-called “zombie measures”</a> which included changes to the family tax benefit and paid parental leave measures. These measures would have had a direct impact on women by adding to the effective marginal tax rate. They would also have reduced the female workforce participation rate, having a long-term effect on the economic well-being of women and their families.</p>
<p>However the budget still includes measures that have a disincentive effect in the workforce. The increase in the Medicare levy will affect those on incomes greater than A$21,644. For those with eligible children, the Family Tax Benefit A payment rates are frozen for two years and those who pay child care fees receive will continue to face high effective marginal tax rates (EMTR’s). </p>
<p>A flat increase in taxes or levies will particularly impact low income earners. Women are overrepresented in the lowest income levels, so changes to government benefits and increases in taxes have a disproportionate affect on women. Recently released <a href="http://data.gov.au/dataset/taxation-statistics-2014-15/resource/5f10224a-301e-4f8c-b90e-d42b16cc3bdd?inner_span=True">ATO statistics </a> show the median income for women was A$47,125 in 2014/15, while for men the amount was A$61,711.<br>
And the recent reduction in penalty rates has already been <a href="https://theconversation.com/myths-about-penalty-rates-and-those-who-rely-on-them-49947">identified as disproportionately affecting women</a>.</p>
<p>These changes hit those earning well below the average wage, and are particularly harsh for women. Combined, these changes could lead to effective marginal tax rates of possibly 100% or higher for some women, particularly as Family Tax Benefit Part A begins to decrease at A$51,903.</p>
<p>The long awaited housing package will have some benefits for women. But community organisations will need to be vigilant in ensuring that the new <a href="http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_17.htm">National Housing and Homelessness Agreement </a> ensures that funding is guaranteed for the homeless and for women fleeing domestic violence. </p>
<p>There has already been <a href="http://www.news.com.au/finance/money/wealth/budgets-downsizingtosuper-boost-needs-a-number-crunch/news-story/7561aeb81fe49099f85c143337fe4416">criticism of initiative to encourage older Australians to downsize their homes</a>, but when a gender lens is applied, the inherent bias becomes clear. Economic patterns established during a woman’s pre-retirement years mean that women are more likely to be in receipt of the age pension, and are <a href="https://www.dss.gov.au/publications-articles/research-publications/statistical-paper-series/statistical-paper-no-12-income-support-customers-a-statistical-overview-2013">more likely to be receiving the full age pension</a>. They are also <a href="https://www.superannuation.asn.au/ArticleDocuments/359/ASFA_Super-account-balances_Dec2015.pdf.aspx">less likely to have superannuation, and the balance will be lower.</a> </p>
<p>Where a person is in receipt of the age pension, the downsizing initiative will reduce it, so single women are more likely to lose entitlements if they access this benefit. For example, a widow maintaining a home that is bigger than she now needs, will not be able to benefit from downsizing with this policy.</p>
<p>The increase in the Medicare levy to fund the National Disability Insurance Scheme (NDIS) is also a mixed outcome. The primary carer for a person with a disability will benefit from access to the NDIS, as the additional funds for services will relieve financial and emotional pressure on the carer. But because women are still more likely <a href="http://www.humanrights.gov.au/our-work/sex-discrimination/publications/investing-care-recognising-and-valuing-those-who-care">to be the primary carer for a family member with a disability</a>, this measure will disproportionately improve the lives of women.</p>
<p>Despite the commitment to fully fund the NDIS there are no measures to address workplace conditions. The caring economy is still <a href="https://www.security4women.org.au/wp-content/uploads/eS4W-Counting-on-Care-Work-in-Australia-Final-Report.pdf">largely based on women</a>, whether they provide paid care or unpaid care. </p>
<p>Women working in the care sector still endure historically undervalued <a href="http://bcec.edu.au/assets/084525-BCEC-WGEA-Gender-Pay-Equity-Insights-2016-Report-MR-LINKED.pdf">pay rates</a> and <a href="https://researchbank.rmit.edu.au/view/rmit:26937">working conditions</a>, whether in the NDIS, childcare or aged care. The current consumer directed care model encourages the use of casual workers, which further reduces economic security for these women.</p>
<p>This year’s budget delivers some significant improvements in infrastructure, disability support, health and housing. These are welcome because they place a higher weight on the provision of government services, than unfair policies aimed at arbitrarily reducing the surplus. </p>
<p>The 2017 budget contains initiatives that help alleviate some of the worst aspects of its predecessors. However, it doesn’t radically turn things around for women.</p><img src="https://counter.theconversation.com/content/77874/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helen Hodgson receives funding from AHURI and the ARC. Helen is a member of the Social Policy Committee and a Director of the National Foundation for Australian Women, and is on the Tax and Superannuation Advisory Panel of ACOSS. Helen was a Member of the WA Legislative Council in WA from 1997 to 2001, elected as an Australian Democrat. She is not a current member of any political party. </span></em></p>The 2017 budget contains initiatives that help alleviate some of the worst aspects of its predecessors. However, it doesn’t radically turn things around for women.Helen Hodgson, Associate Professor, Curtin Law School and Curtin Business School, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/778702017-05-18T20:27:55Z2017-05-18T20:27:55ZVital Signs: dismal wages growth makes a joke of budget forecasts<figure><img src="https://images.theconversation.com/files/169912/original/file-20170518-12226-1d3qe01.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Pay packets rose just 0.5% in the first quarter.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/bradleypjohnson/5406251765/in/photolist-9eJsik">bradleypjohnson/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p><em>Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.</em></p>
<p><em>This week: investor loans continue to rise, unemployment ticks down, wages growth remains distressingly low, and consumers are unconvinced the budget will improve their financial situation.</em></p>
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<p>Now that Australia’s two major political parties (and the Greens) have decided that robbing banks is legitimate public policy, we return our focus to how the Australian economy is actually functioning.</p>
<p><a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0">ABS data released Monday</a> showed that investor housing loans rose slightly, up 0.8% on the previous month. The really interesting figures on this front are still to come, since the Australian Prudential Regulation Authority announced <a href="http://www.apra.gov.au/MediaReleases/Pages/17_11.aspx">tighter macro-prudential measures</a> – especially on interest-only loans – at the end of March. There are already some <a href="http://www.afr.com/real-estate/citi-sees-house-prices-falling-as-much-as-7pc-as-housing-boom-unwinds-20170502-gvxuj3">anecdotal suggestions</a> that these have started to dampen investor demand, but there is no proper evidence yet. The next round of ABS housing finance data will certainly provide some clues.</p>
<p>The ABS also reported this week that <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6345.0">first quarter wage growth</a> was distressingly low, with pay packets rising just 0.5%. That puts private-sector annual wages growth at 1.8%. The main concerns here are, of course, for workers struggling to get by and the fact that <a href="http://www.news.com.au/national/income-inequality-means-were-no-longer-the-land-of-the-middle-class/news-story/90821b0b0b013babd29d2ac4c5dfd304">rising levels of income inequality</a> are not being dented by robust wage growth.</p>
<p>Added to this, however, is the impact of low wage growth on the budget, and the economy more generally. The RBA has pointed out in recent months that around <a href="http://www.abc.net.au/news/2017-04-13/reserve-bank-financial-stability-review-april-2017/8442242">one-third of mortgage holders have less that one month’s repayment buffer</a>. As the cost of living keeps rising, but wages don’t, people with close to no wiggle room get squeezed more and more.</p>
<p>Last week’s budget, and the forecast return to surplus in 2020-21, was predicated in no small part on very robust wage growth. </p>
<p>On budget night <a href="https://theconversation.com/budget-2017-bank-populism-will-be-paid-for-by-australians-77318">I wrote that</a> these wage growth assumptions were bullish and unlikely to eventuate. 3% going to 3.75% annual wage growth looks really aggressive against a stagnating 1.8 - 1.9% (counting the public sector’s slightly stronger growth). When wage growth is lower than it has been since the mid 1990s, how can one forecast with a straight face that the growth rate will double?</p>
<p>Ratings agency Standard & Poor’s certainly understands this. It almost grudgingly <a href="https://theconversation.com/ratings-agency-sandp-keeps-australias-aaa-rating-but-doubtful-about-governments-surplus-timetable-77875">reaffirmed Australia’s AAA credit rating</a> this week, but cast doubt on the projected return to surplus, saying “budget deficits could persist for several years, with little improvement, unless the Parliament implements more forceful fiscal policy decisions”.</p>
<p><a href="http://www.abs.gov.au/ausstats/abs@.nsf/0/F756C48F25016833CA25753E00135FD9?Opendocument">Figures released Thursday</a> showed the unemployment rate fell from 5.9% to 5.7%. This is seemingly good news, although this ABS series has been notoriously unreliable in recent times. </p>
<p>The workforce participation rate was steady at 64.8% – and this may be a better and more relevant measure of short-term fluctuations in employment.</p>
<p>There was also a continued shift to part-time employment. Total jobs were up 37,400, but people in full-time work fell by 11,600 and the number of part-time jobs was up 49,000.</p>
<p>Consumer confidence weakened a little in May according to the <a href="http://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0007/2358511/Media-Release_CIE1705.pdf">Westpac-Melbourne Institute Index</a>. It was down a point to 98.0 in May (recall that for indices like these 100 is the level at which optimists and pessimists are in equal supply).</p>
<p>Westpac chief economist Bill Evans said: </p>
<blockquote>
<p>Respondents’ confidence in housing and the outlook for house prices deteriorated sharply, while the assessment of the budget around the outlook for family finances was decidedly weaker.</p>
</blockquote>
<p>And why wouldn’t it be? The budget contained <a href="https://theconversation.com/budget-2017-government-still-tinkering-with-housing-affordability-77316">essentially nothing to address the housing affordability crisis</a>, further fuelling concerns that there will be a messy correction to prices. </p>
<p>Meanwhile, the government’s best ideas for how to grow wages and incomes were to waive a white flag about spending restraint, whine about how the Senate won’t pass their legislation (“this is a Senate tax”, said the treasurer on budget day), and launch a populist attack on our five largest banks.</p>
<p>And that attack – the bank tax – <a href="https://theconversation.com/research-shows-the-banks-will-pass-the-bank-levy-on-to-customers-77782">will be passed on to consumers</a>, just like the last increase in regulatory capital required by APRA. </p>
<p>So the government raised the taxes of most Australians and blamed the cross-bench. That doesn’t fill me with confidence. And it seems I am not alone.</p><img src="https://counter.theconversation.com/content/77870/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden is an ARC Future Fellow.</span></em></p>The government’s best ideas for how to grow wages and incomes do not inspire confidence.Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/779952017-05-18T12:49:51Z2017-05-18T12:49:51ZGrattan on Friday: Budget-making is undermined by the continuous election campaign<figure><img src="https://images.theconversation.com/files/169966/original/file-20170518-12263-v0u10l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Scott Morrison has been on the campaign trail selling the budget.</span> <span class="attribution"><span class="source">Dean Lewis/AAP</span></span></figcaption></figure><p>The budget did enough to ward off a credit downgrade from the ratings agency Standard and Poor’s (S&P), partly thanks to the A$6 billion slug on those big banks everybody loves to hate. But the S&P report issued this week should make sobering reading for politicians on both sides of parliament and on the crossbench.</p>
<p>The message is that Australia is on notice: external and internal vulnerabilities pose risks. As for that narrative – aka projection – about returning to surplus in 2020-21, S&P will believe it when it happens. The agency spokesman said tartly: “We have seen governments forecast surpluses for many years now and they haven’t materialised … we don’t think further pushback on the surplus target is consistent with the AAA rating here on in.”</p>
<p>Australia faces all sorts of challenges in the post-mining boom years. But it is hard to avoid the conclusion that a major one has been and continues to be the performance of our politicians, across the board. A combination of incompetence and expediency has let down the country in the task of fixing up the budget.</p>
<p>The 2014 budget, following the Abbott government win with a big majority, provided an ideal time for repair. But the government, having drunk treasurer Joe Hockey’s “age of entitlement” Kool-Aid, gave short shrift to fairness and previous promises. This invited disaster and the Senate, including a newly arrived swaggering Palmer United Party, delivered it.</p>
<p>Remember PUP, formed before the 2013 election, fragmenting in parliament, and recently disbanded?</p>
<p>As we watch Clive Palmer in court these days, we might wonder how, for a brief time, he could have gained so much political power. The answer was money, the Senate voting system and a disillusioned electorate. Opinions will differ, in relation to individual measures, whether these senators used their clout for good or ill, but they certainly helped destroy the budget.</p>
<p>Having blown itself up in 2014 the Coalition, first under Tony Abbott then under Malcolm Turnbull, went into retreat on budget repair. Voters, stressed by cost of living pressures and fed up with politicians, won’t be persuaded anymore of the need for tough decisions. The government hangs its battered repair hat on that shaky projected on-the-horizon surplus.</p>
<p>Turnbull has had more success with the Senate than Abbott; this budget has been crafted in considerable part with the Senate in mind, so the government hopes its main initiatives will pass relatively unscathed. The bank levy has bipartisan support. But Labor has signalled it will try to limit the planned increase in the Medicare levy to those with incomes of more than A$87,000 and so that is likely to be at least in play.</p>
<p>Whatever happens with the Medicare levy increase – which doesn’t have to be legislated quickly because it only starts in 2019 – the Senate seems to have no intention of approving the second tranche of the 2016 company tax cuts, which remains government policy.</p>
<p>When they consider budget measures, the opposition and the crossbench should have in mind the S&P warning, as well as other factors. </p>
<p>Certainly S&P has the Senate firmly in mind, saying that “enacting further savings or revenue policies could remain a challenge, given the Senate’s unwillingness in recent years to legislate many of the government’s fiscal policy measures or doing so after considerable delay. This dynamic, which could continue, presents further downside risk to the outlook for fiscal balances”.</p>
<p>There is no broad agreement about how far the Senate should go when dealing with budgets. Only questions. Should a government be accorded the right to get its main measures through, albeit with some amendments? Is an opposition justified in trying to obstruct any measure it regards as bad, regardless of the wider budget picture? Is it appropriate that crossbenchers elected on relatively few votes can be in a pivotal position to thwart a government or demand expensive concessions in return for support?</p>
<p>Abbott says the Constitution should be changed to allow blocked legislation to be considered by a joint sitting without the present requirement of a double dissolution. There is an argument for such a change, but it wouldn’t get through a referendum.</p>
<p>Certainly there is a case for oppositions more often to contest measures without seeking to block them, leaving judgements for election time.</p>
<p>Political self interest will always be a major factor in how players approach budgets – it’s unrealistic to think otherwise. But the permanent election campaign that now dominates politics encourages everything to be fought to the death, whatever the economic and fiscal cost. At some point, the price becomes very high.</p>
<p>With an eye to fiscal credibility and the AAA rating, the government came up with its levy on the five major banks. The banks have forfeited much of their social licence so are an easy target. Regardless of the merits or otherwise of the levy, it is fruitful politics. Who once would have thought Scott Morrison would so relish bank bashing?</p>
<p>Accepting the budgetary imperative for the levy, the way the government is conducting its stoush with the banks is unedifying.</p>
<p>When Ken Henry, former Treasury secretary under both sides of politics and now NAB chairman, bought into the row, the government made things personal, suggesting he was politically biased. Not that Henry can’t look after himself – in February he delivered a swingeing critique of politicians dug “into deep trenches from which they fire insults designed merely to cause political embarrassment”.</p>
<p>The government’s insistence that the banks sign a confidentiality agreement, preventing them from publicly discussing details of the levy legislation during the extremely brief consultation period, was wrong in principle and hypocritical. After all, the budget is – rightly – insisting the banks must be more transparent.</p>
<p>Apart from its blatant political purpose, the government’s aggro approach appears to be stoked by its frustration with the banks over various issues, including the Australian Bankers’ Association appointing former Labor premier Anna Bligh as its chief executive.</p>
<p>It would be better to deal with the banks’ blowback in a more restrained manner. After all, one of the government’s points against a royal commission has been that it would send a bad message to investors abroad. Surely it has to guard against doing the same itself by talking down the banks.</p>
<p>On the other hand, maybe it is starting to wonder why it didn’t give in to the calls for a royal commission. That would have been as popular with the public as the levy is.</p>
<iframe src="https://www.podbean.com/media/player/jj7pe-6b2773?from=yiiadmin" data-link="https://www.podbean.com/media/player/jj7pe-6b2773?from=yiiadmin" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/77995/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan owns bank shares.</span></em></p>A combination of incompetence and expediency has let down the country in the task of fixing up the budget.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/778512017-05-18T02:51:10Z2017-05-18T02:51:10ZPrograms that prepare students for university study may no longer be free<figure><img src="https://images.theconversation.com/files/169660/original/file-20170517-24333-10jzcka.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Not everyone is in a position to start university straight away.</span> <span class="attribution"><span class="source">from shutterstock.com </span></span></figcaption></figure><p>For the first time, students may have to pay up to A$3271 for “enabling” courses, designed to prepare students for university study.</p>
<p>The change was announced as part of the government’s recent <a href="https://docs.education.gov.au/system/files/doc/other/ed17-0138_-_he_-_glossy_budget_report_acc.pdf">higher education reform package</a>.</p>
<p>Until now, university enabling programs have been subsidised by the government - and are therefore free for students. The new plan to shift the cost onto students will likely deter some students and affect who is able to access higher education. </p>
<h2>What do enabling programs do?</h2>
<p>Not everyone is in a position to start an undergraduate degree directly. Some people need more academic preparation or confidence, including those who may have been out of the education system for several years. Many of these people currently enrol in “enabling” courses.</p>
<p>These preparatory courses typically run for six to 12 months and focus on developing the discipline, knowledge and academic skills required for higher level learning. </p>
<p>The courses are run by universities and give students a sense of campus life and expectations before they commit to a full undergraduate degree with tuition fees. </p>
<p>Enabling courses are a low-cost government investment of $30 million per year, offering people from low socioeconomic and other disadvantaged backgrounds a viable opportunity to qualify and prepare for university.</p>
<p>Courses are not specifically targeted at equity groups, but around <a href="https://www.ncsehe.edu.au/wp-content/uploads/2016/07/Final-Pathways-to-Higher-Education-The-Efficacy-of-Enabling-and-Sub-Bachelor-Pathways-for-Disadvantaged-Students.pdf">50% of students</a> enrolled in enabling courses are from equity groups, including Indigenous students. </p>
<p><a href="https://www.ncsehe.edu.au/wp-content/uploads/2016/07/Final-Pathways-to-Higher-Education-The-Efficacy-of-Enabling-and-Sub-Bachelor-Pathways-for-Disadvantaged-Students.pdf">A recent review</a> of enabling programs shows that students from low SES backgrounds have more than twice the rate of representation in enabling courses than they do at undergraduate level.</p>
<p>As the <a href="https://www.ncsehe.edu.au/wp-content/uploads/2016/07/Final-Pathways-to-Higher-Education-The-Efficacy-of-Enabling-and-Sub-Bachelor-Pathways-for-Disadvantaged-Students.pdf">national review</a> reports, </p>
<blockquote>
<p>enabling programs transition more equity-group students than the associate degree, advanced diploma, diploma and OUA pathways combined. </p>
</blockquote>
<p>Students who transition via an enabling program are, </p>
<blockquote>
<p>more likely to be studying full-time in their subsequent undergraduate degree, compared to those transitioning via a VET program (85.4% compared to 76.3%). </p>
</blockquote>
<p>Once they are at university, students from low SES backgrounds can receive further support through a different government financial initiative – the <a href="https://www.education.gov.au/higher-education-participation-and-partnerships-programme-heppp">Higher Education Participation and Partnerships Program</a> (HEPPP). This is welcome and signals a government commitment to equity. However, more is needed to support access and academic preparation.</p>
<h2>How will funding arrangements change?</h2>
<p>Since 2004, some preparatory enabling programs have been supported through a combination of Commonwealth funded places and a small additional loading. </p>
<p>The arrangement means that students do not pay fees (or incur debt) as long as no other fees are charged by universities themselves. But the proposed changes to enabling funding would change all that.</p>
<p>Under the new proposals, students will pay fees and funding will be insecure, with universities having to bid for their places every three years.</p>
<p>Universities may also need to compete for funding against private providers, some of whom offer similar courses. </p>
<p>Many private providers have no previous experience in teaching students who have faced prior educational challenges. And unlike universities, they have no specific equity mission or community obligations.</p>
<h2>Why will students now have to pay?</h2>
<p>Because enabling programs are free, they attract different student cohorts from diplomas and other (fee paying) sub-degree programs. </p>
<p>Indigenous, mature age, low SES, and students from refugee backgrounds are more likely to enrol in an enabling program than any other <a href="http://search.informit.com.au/documentSummary;dn=206239542491623;res=IELHSS">sub-degree program</a> . </p>
<p>Apart from improving university access for thousands of under-represented students, enabling programs also deliver effective outcomes. </p>
<p><a href="https://www.ncsehe.edu.au/wp-content/uploads/2016/07/Final-Pathways-to-Higher-Education-The-Efficacy-of-Enabling-and-Sub-Bachelor-Pathways-for-Disadvantaged-Students.pdf">Research</a> shows that enabling students who transition to undergraduate degrees outperform other equity group students in those degrees, despite a higher average level of disadvantage. </p>
<p>So why cut an inexpensive program that opens doors for under-represented students and effectively prepares them for university success?</p>
<p>Two reasons are provided. The first reason for abolishing fee-free enabling places is to improve completion rates. </p>
<p>The <a href="https://www.education.gov.au/higher-education-reform-package-0">budget package</a> reports that fee-free Commonwealth funded university programs have completion rates of 52%, while fee-paying university programs, which do not draw on this Commonwealth funding (programs can only charge fees or claim the funding), have completion rates of 61%. </p>
<p>However, this gap is largely because fee-paying programs are typically much smaller and less flexible and accessible. The government data cited does not compare like with like. </p>
<p>The second reason provided for removing fee-free programs is to ensure a better return to students and taxpayers. Again, this is a questionable claim.</p>
<p>The proposed cuts will mean that many students from disadvantaged and low-SES backgrounds, who are <a href="http://www.olt.gov.au/project-enabling-retention-processes-and-strategies-improving-student-retention-university-based-ena">often unsure</a> of whether university study is for them, will likely not enrol in an enabling program. </p>
<p>Fees are often prohibitive for people who have the potential to succeed in higher education, but who suffer social and economic disadvantage. While the budget proposes a broader expansion of sub-degree places, diversity and full community engagement will suffer if fee-free places are abolished.</p>
<h2>Equity, quality and performance-based funding</h2>
<p>The government is also proposing <a href="https://theconversation.com/why-birminghams-performance-funding-plan-wont-improve-australian-universities-77389">performance-based funding measures</a> that may penalise institutions with relatively low retention and completion rates. </p>
<p>That move is understandable but considered <a href="https://theconversation.com/short-sighted-budget-means-universities-cant-deliver-their-full-economic-benefit-77474">problematic</a> and could threaten student equity <a href="https://theconversation.com/should-university-funding-be-tied-to-student-performance-75385">if not managed carefully</a>. </p>
<p>Performance-based funding is partly designed to deter universities from enrolling students at <a href="https://theconversation.com/the-atar-debate-students-need-to-be-able-to-finish-uni-not-just-start-it-36478">risk of non-completion</a>. </p>
<p>However, fee-free enabling programs already provide an excellent way to mitigate this risk, by enabling access and improving the preparation of students. These benefits are delivered relatively cheaply under the current enabling loading allocations to universities. </p>
<p>To support equity, quality and long-term budget repair, fee-free enabling places could be expanded rather than abolished.</p><img src="https://counter.theconversation.com/content/77851/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Bennett works for the University of Newcastle. She receives funding from sources interested in equity in higher education, including from the Department of Education under the National Priorities Pool. </span></em></p><p class="fine-print"><em><span>Andrew Harvey received funding from the Department of Education for research on enabling programs under the National Priorities Pool. </span></em></p><p class="fine-print"><em><span>Seamus Fagan receives funding from OLT for a grant</span></em></p>Students on ‘enabling’ courses may now have to pay substantial fees under higher education reforms.Associate Professor Anna Bennett, Senior Lecturer, University of NewcastleAndrew Harvey, Director, Centre for Higher Education Equity and Diversity Research, La Trobe UniversitySeamus Fagan, Associate Professor; Director of the Centre for English Language and Foundation Studies, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/774682017-05-15T05:17:20Z2017-05-15T05:17:20ZHelping drug users get back to work, not random drug testing, should be our priority<figure><img src="https://images.theconversation.com/files/169262/original/file-20170515-3675-v2w0rn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Urine samples can pick up some types of illicit drugs but can't say whether that drug use affects someone's ability to look for work.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/275331890?src=oGoKwSo8CDfGFJOwtsfPiQ-1-4&size=medium_jpg">from www.shutterstock.com</a></span></figcaption></figure><p><a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201718/WelfareRecipients">Drug testing people on welfare</a>, <a href="http://budget.gov.au/2017-18/content/speech/html/speech.htm">as proposed</a> in this year’s federal budget, is a blunt way of tackling problems drug users face when looking for work.</p>
<p>The underlying concept of increasing employability for people with substance use disorders has some merit. However, any drug testing needs to be <a href="https://theconversation.com/drug-testing-welfare-recipients-raises-questions-about-data-profiling-and-discrimination-77471">better targetted</a>, may be open to <a href="https://theconversation.com/budget-2017-welfare-changes-stigmatise-recipients-and-are-sitting-on-shaky-ground-77394">legal challenges</a>, and needs to have checks and balances built in to ensure fairness and transparency if welfare payments are quarantined.</p>
<p>The federal government has proposed a <a href="https://www.humanservices.gov.au/corporate/budget/budget-2017-18/jobseekers/better-targeting-assistance-support-jobseekers#a3">two-year trial</a> of random drug testing of 5,000 Newstart and Youth Allowance recipients for illicit drugs, <a href="https://www.dss.gov.au/sites/default/files/documents/05_2017/budget_2017_-_welfare_reform_-_fact_sheet_for_web_0.pdf">as part of wider welfare reforms</a>. Those testing positive for drugs such as <a href="https://www.dss.gov.au/sites/default/files/documents/05_2017/budget_2017_-_welfare_reform_-_fact_sheet_for_web_0.pdf">ecstasy, marijuana and methamphetamines (including ice)</a> would have their welfare payments quarantined, limiting cash withdrawals. Further positive tests would have a range of consequences, including a medical assessment with possible referral for treatment.</p>
<h2>We need better targetting</h2>
<p>Unemployed people have <a href="http://www.health.gov.au/internet/main/publishing.nsf/content/A24556C814804A99CA257BF0001CAC45/$File/mha26.pdf">higher rates</a> of substance use disorders (defined as harmful or dependent use) than employed people (8.5% vs 5.5%), so we should applaud the government for trying to address the complex issues of substance use and its impact on people’s ability to work. </p>
<p>However, the proposed intervention should be <a href="http://www.health.gov.au/internet/main/publishing.nsf/content/A24556C814804A99CA257BF0001CAC45/$File/mha26.pdf">better targetted</a>. Alcohol is by far our biggest “drug problem”. Some 4.3% of Australians have an alcohol use disorder, compared with 1% for cannabis and 0.7% for stimulants (amphetamines, ecstasy or cocaine). Alcohol causes <a href="http://www.health.gov.au/internet/drugstrategy/publishing.nsf/Content/34F55AF632F67B70CA2573F60005D42B/$File/mono64.pdf">over twice</a> the productivity lost in the workplace than all illicit drugs combined.</p>
<p>If we are serious about enhancing employment in our under-employed, then addressing alcohol use must be our top priority.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/169261/original/file-20170515-3692-1raaxk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169261/original/file-20170515-3692-1raaxk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169261/original/file-20170515-3692-1raaxk4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169261/original/file-20170515-3692-1raaxk4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169261/original/file-20170515-3692-1raaxk4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169261/original/file-20170515-3692-1raaxk4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169261/original/file-20170515-3692-1raaxk4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The emphasis on illicit drugs ignores the bigger problem, alcohol.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/568799311?size=medium_jpg">from www.shutterstock.com</a></span>
</figcaption>
</figure>
<p>Then there’s the nature of who random drug tests actually identify. While they can identify some people who use drugs, they don’t necessarily identify people with a significant drug problem.</p>
<p>That’s because, despite <a href="https://theconversation.com/alcohol-leads-to-more-violence-than-other-drugs-but-youd-never-know-from-the-headlines-72281">common media portrayals</a>, only a minority of people who use substances (including alcohol, cannabis and stimulants) have a substance use disorder. This is defined as clinically and functionally significant impairment caused by the recurrent use of alcohol and/or drugs. </p>
<p>Such a disorder is often estimated in about one in ten users. For example, <a href="http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=60129549848">10% of Australian adults</a> reported using cannabis in the past 12 months, but only 1% had a cannabis use disorder in the same period.</p>
<p>So randomised drug tests will entangle many people who do not have significant problems from their substance use. </p>
<h2>We need checks and balances</h2>
<p>There may well be a place for financial quarantining for people with severe substance use disorders, namely people experiencing severe harms from dependent substance use. But there are already systems in place to manage this.</p>
<p>For instance, <a href="http://www.ncat.nsw.gov.au/Pages/guardianship/gt_matter_about/matter_guardianship.aspx">guardianship</a> involves a tribunal appointing a guardian to make decisions about a person’s health, accommodation, services or other lifestyle matters. And <a href="http://www.sacat.sa.gov.au/types-of-cases/administration/what-is-an-administration-order">administration orders</a> can be put in place to manage people’s finances if they lack the mental capacity to do it themselves.</p>
<p>But these are restricted to people with severe conditions and there are a number of checks and balances, such as a tribunal process.</p>
<p>A “one strike” approach to welfare quarantining based on a single drug test is not a sufficiently robust approach.</p>
<h2>We need specialist (and timely) referral options</h2>
<p>The proposal to refer regular users for treatment and support should be encouraged. When targeted appropriately, treatment can have major benefits to the individual, their families and the broader community.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/169260/original/file-20170515-3689-sf1iqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/169260/original/file-20170515-3689-sf1iqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169260/original/file-20170515-3689-sf1iqw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169260/original/file-20170515-3689-sf1iqw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169260/original/file-20170515-3689-sf1iqw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169260/original/file-20170515-3689-sf1iqw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169260/original/file-20170515-3689-sf1iqw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">There are already waiting lists for drug and alcohol treatment. So, how will referrals from this proposed random drug testing program fit in?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/569794762?src=cyfPwyLkfPWYjKjlJgUj0g-1-33&size=medium_jpg">from www.shutterstock.com</a></span>
</figcaption>
</figure>
<p>However, this will require a considerable expansion of drug and alcohol treatment services across Australia. In 2015-16, fewer than <a href="http://www.aihw.gov.au/alcohol-and-other-drugs/">one in six people</a> with a substance use disorder received specialist treatment (an estimated 133,895 received treatment of the approximately one million Australians with a substance use disorder).</p>
<p>The current proposal risks further lengthening treatment waiting lists for people with severe substance use disorders. Having treatment places filled with clients with less severe problems motivated by their need to retain welfare payments may not be clever use of resources.</p>
<h2>We need to avoid stigmatising drug users</h2>
<p>The current proposal may also have unintended consequences. The focus on random drug tests with financial consequences heralds a “war on drugs” approach that <a href="https://theconversation.com/budget-2017-welfare-changes-stigmatise-recipients-and-are-sitting-on-shaky-ground-77394">worsens discrimination and stigma</a> against people who use drugs, which in turn limits their willingness to seek help from services and their community.</p>
<p>Targeting particular drugs such as cannabis increase the likelihood that people turn to more harmful drugs not screened for, such as <a href="https://theconversation.com/labs-make-new-dangerous-synthetic-cannabinoid-drugs-faster-than-we-can-ban-them-47896">synthetic cannabinoids</a> or <a href="https://theconversation.com/easier-access-to-prescription-drugs-puts-teens-at-risk-34910">prescription drugs</a>. </p>
<p>We must also recognise many people turn to substance use as a way of coping with stress, such as can occur with long-term unemployment. This strategy further risks increasing the stress and sense of futility experienced by many, particularly in an environment of high unemployment and youth unemployment in particular.</p>
<h2>We need to keep an eye on costs</h2>
<p>The government has not released the cost of this proposed measure, saying it is <a href="https://www.dss.gov.au/sites/default/files/documents/05_2017/budget_2017_-_welfare_reform_-_fact_sheet_for_web_0.pdf">commercial-in-confidence</a>. But the project is likely to be expensive to implement.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/169256/original/file-20170515-3659-pjohhq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/169256/original/file-20170515-3659-pjohhq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/169256/original/file-20170515-3659-pjohhq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/169256/original/file-20170515-3659-pjohhq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/169256/original/file-20170515-3659-pjohhq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/169256/original/file-20170515-3659-pjohhq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/169256/original/file-20170515-3659-pjohhq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Relying on urine samples to detect illicit drugs can bring on legal challenges, which will be costly to defend.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/12506668?src=yeDok7Y7gKCbgKdjK0VLkw-1-42&size=medium_jpg">from www.shutterstock.com</a></span>
</figcaption>
</figure>
<p>It’s not just the random drug tests and the required workforce that are costly, but the likelihood of fighting expensive legal challenges if saliva tests are relied on. So, <a href="https://www.ncbi.nlm.nih.gov/pubmed/11786289">any positive saliva test</a> will need to be corroborated using urine or blood tests, which increases costs considerably.</p>
<p>Previous attempts at introducing similar drug testing schemes for welfare recipients in the US, UK and New Zealand have either <a href="http://www.ncsl.org/research/human-services/drug-testing-and-public-assistance.aspx">stalled or been halted</a> through legal challenge.</p>
<p>Then there’s the cost of medical assessments, and drug and alcohol treatment referrals.</p>
<p>If the <a href="https://thinkprogress.org/what-7-states-discovered-after-spending-more-than-1-million-drug-testing-welfare-recipients-c346e0b4305d">experience in the US</a> is anything to go by, it’s very unlikely there will be any net savings in welfare payments.</p>
<h2>We need to fine-tune the proposal</h2>
<p>Despite these limitations, the underlying concept of increasing employability for under-employed people with substance use disorders has some merit. Yet the government needs to refine the proposal before implementing it.</p>
<p>Refinements should focus on people with severe substance use disorders (including alcohol), and ensuring appropriate drug and alcohol treatment and other services are available to address barriers faced when looking for work.</p>
<p>For example, in a US study of a similarly designed scheme, only <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4764122/">one in 20</a> welfare recipients who tested positive for drugs identified no other significant barrier to employment. Most had a range of other legal, education, general and mental health, housing, and child welfare barriers to finding work.</p>
<p>Integrated and coordinated service packages and partnerships with employers are likely to have longer term benefits, and provide better value than spending money on drug testing programs. Financial or welfare quarantining for people with severe problems may have a role as part of the overall approach, not be the centrepiece.</p><img src="https://counter.theconversation.com/content/77468/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nicholas Lintzeris does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The proposal to drug test welfare recipients needs to be fine-tuned otherwise the government will be targetting the wrong people and be tied up in legal challenges.Nicholas Lintzeris, Clinical Professor and Addiction Medicine specialist, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/774712017-05-12T06:07:18Z2017-05-12T06:07:18ZDrug testing welfare recipients raises questions about data profiling and discrimination<figure><img src="https://images.theconversation.com/files/169066/original/file-20170512-32618-19518y4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Five thousand people on Newstart or Youth Allowance may be targeted for a drug test trial.</span> <span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/centrelink?q=%7B%22pageSize%22:25,%22pageNumber%22:2%7D">AAP Image/Dan Peled</a></span></figcaption></figure><p>The Australian government’s proposed random drug test trial for welfare recipients is not so random.</p>
<p>Announced as part of <a href="http://budget.gov.au/2017-18/content/speech/html/speech.htm">the 2017 federal budget</a>, Treasurer Scott Morrison wants 5,000 people on Newstart or Youth Allowance in three locations to undergo random drug testing from January next year.</p>
<p><a href="https://www.dss.gov.au/sites/default/files/documents/05_2017/budget_2017_-_welfare_reform_-_fact_sheet_for_web_0.pdf">Traces of drugs</a> including ecstasy, marijuana and ice will be sought using saliva, hair follicles and urine samples. If drugs are detected, the user could find their welfare quarantined.</p>
<p>But rather than doing people “a big favour”, as Prime Minister Malcolm Turnbull <a href="https://www.pm.gov.au/media/2017-05-10/interview-fran-kelly-abc-rn-breakfast">put it on ABC Radio</a> Wednesday, such data-based programs often disproportionately target those of low socio-economic status.</p>
<p>Concerns <a href="https://theconversation.com/budget-2017-welfare-changes-stigmatise-recipients-and-are-sitting-on-shaky-ground-77394">are already being raised</a> that the trial undermines the needs-based focus of Australia’s welfare system. The use of data tools to profile people seeking help only adds to the problem.</p>
<h2>How job seekers will be profiled</h2>
<p>The characterisation of the testing as “random” is questionable.</p>
<p>The government <a href="https://www.dss.gov.au/sites/default/files/documents/05_2017/budget_2017_-_welfare_reform_-_fact_sheet_for_web_0.pdf">says the testing</a> will be “based on a data-driven profiling tool developed for the trial to identify relevant characteristics that indicate a higher risk of substance abuse issues”.</p>
<p><a href="http://christianporter.dss.gov.au/node/1121">In a press conference</a> Thursday, minister for social services Christian Porter said a “combination of data” developed with Data61 and the CSIRO would be used, as well as internal information from the Department of Human Services and Department of Social Services.</p>
<p>“We’ll put all of that together and identify a broad group of people and then randomly select inside that broad group inside each of the three trial sites,” he said.</p>
<p>In an interview <a href="https://www.buzzfeed.com/robstott/the-government-will-test-your-waste-water-before-deciding?utm_term=.mopWoyMew#.rkxXP9M3G">with BuzzFeed</a> Thursday, Scott Morrison also suggested the three test areas may be chosen using the results of a national program that looks at drugs <a href="https://www.acic.gov.au/sites/g/files/net1491/f/national_wastewater_drug_monitoring_program_report_1_0.pdf?v=1490333695">in wastewater sewage</a>.</p>
<p>While we may think profiles built from such data sets are rational and without prejudice, computational models are not necessarily free from discrimination. </p>
<p>Rather than being “pure”, like any model, they are based on human-generated assumptions.</p>
<h2>Stereotyping on steroids</h2>
<p>The use of data to profile consumers is nothing new. </p>
<p>Insurance companies, for example, use it <a href="https://rac.com.au/car-motoring/info/car-insurance-terms">to assess customer risk</a> based on factors such as age, profession and type of car. This modelling is used to identify those more “at risk” of having an accident, with insurance premiums priced accordingly. </p>
<p>Even the most careful under-25 driver will feel the impact of falling into a high risk age-based profile, whether or not they’re a bad driver.</p>
<p>But data profiling can become stereotyping on steroids, with human assumptions magnified by computational power.</p>
<p>Data-driven profiling often looks for a target attribute – or class attribute – that the profiler is most interested in predicting. When looking for groups to participate in a drug test trial, for instance, the class attribute could possibly be sensitive groupings such as race, gender, socio-economic background and education level. </p>
<p>This could lead to discriminatory practices where an entire category of people is considered suspect and therefore is more heavily scrutinised.</p>
<p><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2182773">A 2012 analysis of American privacy laws</a>, for example, found lower socioeconomic groups were more impacted by invasive surveillance, such as mandatory drug testing. </p>
<p>I suggest that to be representative and not discriminatory, the sites selected for the federal government’s drug testing trial would need to have the same proportion of drug users as the general population, with the same distribution of ages, gender split and mix of high- and low-skilled labour. </p>
<p>Instead, as previously mentioned, the trial site selection may be informed in part by analysis of drug trace levels found in sewerage. </p>
<p><a href="http://christianporter.dss.gov.au/node/1121">Porter said</a> “astonishingly high” levels of ice usage found in some regions helped prompt the trial: “We want to drive behavioural change in some of those areas at that critical point where people are job searching,” he added.</p>
<h2>Too many unanswered questions</h2>
<p>The data-driven profiling of welfare recipients raises a number of ethical questions the government should answer.</p>
<p>Among them:</p>
<ul>
<li><p>Can the security of the data be adequately protected? </p></li>
<li><p>Will the information be used solely for its original purpose? </p></li>
<li><p>What procedures will there be to challenge your selection for a drug test? </p></li>
</ul>
<p>Not to mention, if the welfare recipient is open to scrutiny, to what extent is <a href="https://www.dss.gov.au/sites/default/files/documents/05_2017/budget_2017_-_welfare_reform_-_fact_sheet_for_web_0.pdf">the “contracted third party provider”</a> running the testing also required to be transparent? Already, the cost of the measure has been deemed “commercial-in-confidence”.</p>
<p>A government spokesperson declined to comment, saying it would make further announcements about the trial at an appropriate time. </p>
<p>Many of our actions are now observable, searchable and traceable, and surveillance is more intrusive and extensive than ever. But the impact of this can fall more heavily on disadvantaged communities.</p>
<p>So-called “random” drug testing is just another example of this worrisome trend.</p><img src="https://counter.theconversation.com/content/77471/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bronwen Dalton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government’s proposed drug test trial shows how data profiling and surveillance targets the poor.Bronwen Dalton, Associate professor, Management Discipline Group UTS Business School, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/775552017-05-12T04:44:23Z2017-05-12T04:44:23ZDon’t be fooled, the Medicare Guarantee Fund provides no real guarantee<figure><img src="https://images.theconversation.com/files/169065/original/file-20170512-32610-1s6hk32.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Medicare Guarantee Fund appears to be no more than an accounting trick.</span> <span class="attribution"><span class="source">from shutterstock.com</span></span></figcaption></figure><p>Treasurer Scott Morrison pulled a health-related rabbit out of his hat on budget night, announcing the government will “<a href="http://www.budget.gov.au/2017-18/content/speech/html/speech.htm">guarantee</a>” the future of Medicare. </p>
<p>It will do this by allocating revenue from the recently increased (from 2% to 2.5%) Medicare levy, after paying for the National Disability Insurance Scheme (NDIS), into a <a href="http://www.health.gov.au/internet/ministers/publishing.nsf/content/budget2017-mediarel-hunt002.htm">Medicare Guarantee Fund</a>. </p>
<p>The government will then cover the shortfall to cover the costs of Medicare – defined in these budget announcements as a combination of expenditure from the Medicare Benefits Schedule (MBS) and Pharmaceutical Benefits Scheme (PBS). In <a href="http://www.budget.gov.au/2017-18/content/speech/html/speech.htm">Morrison’s words</a>: </p>
<blockquote>
<p>Proceeds from the Medicare levy will be paid into the fund. An additional contribution from income tax revenue will also be paid into the Medicare Guarantee Fund to make up the difference.</p>
</blockquote>
<p>Based on the sketchy information so far available, this fund appears to be no more than an accounting trick. The size of the fund will be determined each year based on projected MBS and PBS expenditure. The balancing item, which is the extra proportion of non-NDIS revenue, will also be adjusted each year in line with those expenditure projections. </p>
<p>The guarantee part is that only the MBS and PBS expenditures can be paid from the fund, “<a href="http://sjm.ministers.treasury.gov.au/media-release/049-2017/">by law</a>”. This might sound good, but don’t be fooled. The Medicare Guarantee Fund is nothing more than a rebadging exercise: it changes the badge on a policy in the hope people might think it is a new policy. </p>
<p>It merely provides an additional line in the budget papers, supplementing information that was already there for MBS and PBS expenditure, albeit separately. And by defining Medicare as MBS and PBS expenditure, the government has seamlessly airbrushed public hospitals out of the picture.</p>
<h2>What is Medicare?</h2>
<p>Until budget night this week, most people would have thought of Medicare as the medical services and public hospital scheme, and probably still do. </p>
<p>When Medicare was introduced in 1984, it changed funding arrangements for medical services and public hospitals, removing or reducing financial barriers to access to these services. It did not touch PBS arrangements. </p>
<p>It may now be appropriate to add the PBS as a third component of Medicare, as it is about access to health care. But the PBS should be an addition to how Medicare is defined. It shouldn’t be used to airbrush public hospital access out of any Commonwealth definition of Medicare.</p>
<p>To put it more simply, the Medicare Guarantee Fund does not include the Commonwealth’s contribution to public hospital funding. But it does include the PBS, adopting a unique and idiosyncratic definition of Medicare. </p>
<p>The Medicare Guarantee Fund is being created using a partial statement of Medicare spending: if the public were to assume the Medicare Guarantee Fund is purely about a public commitment to Medicare, they would be misled.</p>
<p>So despite Morrison’s claims the fund will provide “transparency about what it really costs to run Medicare”, Medicare funding will actually be less transparent. </p>
<h2>What does the fund guarantee?</h2>
<p>The government probably hopes the Medicare Guarantee Fund will be its armour against a revised <a href="http://theconversation.com/mediscare-campaign-shows-the-power-of-negative-advertising-61990">Mediscare</a> campaign, like the one Labor ran before the 2016 election. The word “guarantee” linked with “Medicare” sounds good, costs nothing and does not bind the government in any way. But it may be enough to ward off the Mediscare vampires.</p>
<p>Mediscare resonated in 2016 because of the <a href="http://theconversation.com/is-medicare-under-threat-making-sense-of-the-privatisation-debate-61308">2014 budget decisions</a>. These were seen as a breach of trust as they were policies that had been explicitly ruled out in the previous election campaign.</p>
<p>The controversial 2014 budget proposals aimed to reduce Commonwealth expenditure by shifting costs onto consumers and onto states. One way of doing this was through <a href="http://theconversation.com/save-now-spend-later-why-co-payments-for-gp-visits-are-a-bad-idea-25823">co-payments</a> that required patients to make an out-of-pocket payment when they see a doctor.</p>
<p>Another cost-shifting policy was the <a href="http://theconversation.com/confused-about-the-medicare-rebate-freeze-heres-what-you-need-to-know-59661">Medicare rebate freeze</a>, which froze MBS rebates for visits to doctors at 2013 levels, despite inflation since then which has been tracking at <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0">around 2% a year</a>. Since rebates are also paid to consumers, this was another example of a consumer cost shift, although the burden of this strategy probably fell on providers, particularly general practitioners. </p>
<p>Some of the 2014 changes (like the co-payment) required legislation to implement, while others (like the rebate freeze) could be implemented by administrative action without requiring parliamentary approval.</p>
<p>Importantly, none of the changes that required legislation were successful. The only changes in the 2014 budget that were eventually implemented were the ones that didn’t require legislation, such as the rebate freeze and draconian <a href="http://theconversation.com/federal-budget-2014-health-experts-react-26577">public hospital budget cuts</a>. These tore up a previous agreement under which the Commonwealth matched cost increases in public hospitals. </p>
<p>Even these two measures have now been partially wound back - the <a href="http://theconversation.com/another-day-another-hospital-funding-dispute-how-to-make-sense-of-todays-coag-talks-57058">hospital cuts before the 2016</a> election, and the rebate freeze in the 2017 budget.</p>
<h2>What should a Medicare guarantee look like?</h2>
<p>A Medicare guarantee worth its salt would be one that protects the public from the administrative assaults of the 2014 budget. This would involve enshrining in legislation the Commonwealth-state health care agreements – as well as the <a href="http://www.budget.gov.au/2013-14/content/bp3/html/bp3_03_part_2a.htm">“partnership” payments</a>, which are other Commonwealth grants to the states for health care – and introducing automatic indexation of Medicare rebates. </p>
<p>The Medicare Guarantee Fund as proposed in the 2017 budget does not do this. It provides no guarantee of policy stability, no guarantee of additional funding, and no guarantee that a future budget will not tear into the Medicare fabric in the way that characterised the 2014 debacle.</p><img src="https://counter.theconversation.com/content/77555/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the appointment above.
Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p>The fund is nothing more than a rebadging exercise in the hope people might think it is a new policy. And it’s being used to airbrush public hospitals out of the Medicare picture.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/776242017-05-12T03:22:01Z2017-05-12T03:22:01ZVIDEO: Michelle Grattan on the 2017 budget<figure><img src="https://images.theconversation.com/files/169080/original/file-20170512-32588-1uknpaw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">AAP/Lukas Coch</span></span></figcaption></figure><figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/HIxf9HUQhbQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>The University of Canberra’s vice-chancellor and president, Deep Saini, and professorial fellow Michelle Grattan discuss the week in politics – including the 2017 federal budget, Scott Morrison’s budget speech, how the tax on the big banks will affect consumers, drug testing of welfare recipients, and Bill Shorten’s budget-in-reply.</p><img src="https://counter.theconversation.com/content/77624/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The University of Canberra’s Deep Saini and Michelle Grattan discuss the week in politics.Michelle Grattan, Professorial Fellow, University of CanberraPaddy Nixon, Vice-Chancellor and President, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/775492017-05-11T19:23:43Z2017-05-11T19:23:43ZShorten fights on fairness in budget reply, but will it be enough?<figure><img src="https://images.theconversation.com/files/168921/original/file-20170511-32624-asd2zm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Bill Shorten used his budget-in-reply speech to appeal to middle Australia.</span> <span class="attribution"><span class="source">AAP/Mick Tsikas</span></span></figcaption></figure><p>Opposition Leader Bill Shorten is under real pressure for the first time since the 2016 election, as the government attempts to wedge Labor with a circuit-breaker budget.</p>
<p>Shorten used his <a href="http://www.theaustralian.com.au/budget-2017/opinion/bill-shorten-budget-reply-2017-speech/news-story/4528cfd85d651d6cc05195bdf58c1faa">budget-in-reply speech</a> to appeal to middle Australia, putting forward an argument that Labor is the only party that can be trusted to deliver a fair go. He argued the government’s so-called <a href="http://www.news.com.au/finance/economy/federal-budget/could-you-be-the-first-liberal-treasurer-in-history-to-deliver-a-labor-budget/news-story/3e61030e268c5a10c8d2c2f71877f6ec">“Labor-lite budget”</a> is unfair, bringing benefits only to rich.</p>
<p>Since the election, it seems everything – <a href="https://blogs.crikey.com.au/pollbludger/2017/05/10/essential-research-54-46-labor-5/">including the polls</a> – has gone Labor’s way. The Turnbull government has been plagued by infighting and its messages have failed to resonate with the electorate.</p>
<p>However, over the last few weeks – starting with <a href="https://theconversation.com/australian-government-axes-457-work-visa-experts-react-76321">changes to 457 visas</a> and the <a href="http://www.abc.net.au/news/2017-03-16/snowy-hydro-scheme-funding-boost-to-secure-electricity-supply/8358502">expansion of the Snowy Hydro scheme</a> – the Coalition has begun a new conversation with the electorate.</p>
<h2>Shorten’s pitch</h2>
<p>The 2017 budget positioned the government as more centrist. It contained several policy positions ordinarily associated with Labor.</p>
<p>The government’s three-word slogan for the budget was <a href="http://www.sbs.com.au/news/article/2017/05/09/budget-focus-fairness-opportunity-and-security">“fairness, opportunity and security”</a>. It has tried to position itself as a “doing government”, taking on <a href="http://www.sbs.com.au/news/article/2017/04/27/morrisons-good-bad-debt-claim-under-fire-ahead-budget">good debt</a> to invest in infrastructure, funding the NDIS into the future, and adopting measures from the Gonski schools funding plan.</p>
<p>Shorten’s speech was framed around modern class politics. He claimed Labor is the only party that can be trusted to protect low-income workers, and look after the interests of the middle class in terms of Medicare, universities and schools.</p>
<p>Shorten refuted Prime Minister Malcolm Turnbull’s claim that the budget is a fair one:</p>
<blockquote>
<p>This prime minister of many words has learned a new one – fairness – and he’s saying it as often as he can. But repetition is no substitute for conviction … This isn’t a Labor budget – and it’s not a fair budget … Fairness isn’t measured by what you say – it’s revealed by what you do.</p>
</blockquote>
<p>It is highly unlikely that this budget will be viewed as negatively as the 2014 budget. But Labor needs to convincingly discredit it to the point that the government cannot use it to help restore its standing in the eyes of voters.</p>
<p>Labor will need to attack on two fronts. The first will be scare tactics. Voters will need to be convinced they are unnecessarily worse off under this budget.</p>
<p>Shorten claimed:</p>
<blockquote>
<p>There’s nothing fair about making middle-class and working-class Australians pay more, while millionaires and multinationals pay less.</p>
</blockquote>
<p>He highlighted higher tax rates for low-income workers, as a result of the increase in the Medicare levy, as well as the traditional Liberal threat to Medicare. Shorten also posited schools would be much worse off due to the gap in promised funding between Labor and the government. </p>
<p>The second line of attack will be providing an alternative set of policy options that voters view as more attractive than those put forward by the government.</p>
<h2>What is Labor offering voters?</h2>
<p>In his speech, Shorten promised a Labor government would remove the <a href="https://theconversation.com/budget-2017-sees-medicare-rebate-freeze-slowly-lifted-and-more-funding-for-the-ndis-experts-respond-77315">Medicare rebate freeze</a>, rather than wait for indexation to begin in July 2020 – thereby reducing the cost of health care. Labor will also restore A$22 billion to the schools sector.</p>
<p>As an alternative to the measures to assist first home buyers through a savings scheme, Shorten said Labor had a plan for affordable housing that would include the construction of 55,000 new homes over three years, and create 25,000 new jobs every year. He also noted Labor’s commitment to developing more public housing.</p>
<p>In what is likely to prove a popular idea, Labor will seek to close the loopholes allowing multinational companies avoiding tax in Australia.</p>
<p>Likewise, in an effort to halt tax avoidance by wealthy individuals, Labor plans to limit the amount an individual can deduct for the management of their tax affairs to A$3,000 per year. Shorten claimed that less than 1% of taxpayers would be affected, and that measure would save the budget A$1.3 billion over the medium term.</p>
<p>Shorten continued to argue that a royal commission into the banking industry is required. </p>
<h2>Where does Labor stand on individual budget items?</h2>
<p>Labor needs time to review the proposed legislation resulting from the budget in order to determine what it is willing to support. But Shorten outlined Labor’s position on several measures.</p>
<ul>
<li><p>It supports the additional Medicare levy to fund the NDIS. However, it wants to limit the levy to the top two tax brackets, so that only those earning more than $87,000 per year will be impacted.</p></li>
<li><p>It supports the bank levy – but simultaneously put pressure on the government, claiming it is responsible for stopping the banks from passing the cost onto customers. </p></li>
<li><p>It does not support the cuts to universities or the proposed increase in university fees for students. </p></li>
<li><p>It does not support the plan to allow first home buyers to use up to $30,000 in voluntary superannuation contributions. Shorten described the policy as “microscopic assistance”.</p></li>
</ul>
<h2>In this game, it’s the message that matters</h2>
<p>This is a political budget, and so we should expect in the coming weeks that both parties will attempt to appeal to voters’ base instincts, rather than presenting considered arguments for or against policies.</p>
<p>Thus, the government is focusing on forcing greedy banks to “pay their fair share”, secure in the knowledge that former Queensland premier Anna Bligh, as head of the Australian Bankers’ Association, is unlikely to be able to cut through the <a href="https://theconversation.com/politics-podcast-mathias-cormann-and-anna-bligh-on-the-new-bank-tax-77506">bank-bashing mentality</a> of the average Australian voter.</p>
<p>Likewise, Shorten will campaign hard on the natural end of the <a href="https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Temporary-budget-repair-levy/">temporary budget repair levy</a>, which was introduced in the 2014 budget. He is claiming this is a tax cut for the rich at the same time as the government is making everyday Australians pay more tax through a higher Medicare levy.</p>
<h2>Interesting times ahead</h2>
<p>Shorten is right: this budget is about trust. </p>
<p>The government and the opposition both need to convince average working and middle class voters that their policies will provide Australians with the best outcome. In some ways, this is politics as usual. </p>
<p>But, with the polls leaning to Labor and voters’ faith in the government’s ability to deliver low, the stakes seem higher than normal – especially as voters are presented with two positions not as divergent as they have been in recent years.</p><img src="https://counter.theconversation.com/content/77549/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Natalie Mast is the Chair of The Conversation's Editorial Board.</span></em></p>Labor needs to convincingly discredit the 2017 budget to the point that the government cannot use it to help restore its standing in the eyes of voters.Natalie Mast, Associate Director, Business Intelligence & Analytics, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/767942017-05-11T19:21:31Z2017-05-11T19:21:31ZBudget 2017 charts new social and affordable housing agenda<p>Under pressure to tackle deepening housing affordability problems, Treasurer Scott Morrison has included various housing policy measures in his budget, some relating to Australia’s small sector of social and affordable housing. </p>
<p>One headline-grabber is the creation of a new entity, the <a href="http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_18.htm">National Housing Finance and Investment Corporation</a> (NHFIC). This will source private funds for <a href="https://theconversation.com/bond-aggregator-helps-build-a-more-virtuous-circle-of-housing-investment-76793">on-lending to affordable housing providers</a> to finance rental housing development. However, the bigger issue for the sector remains federal and state funding.</p>
<p>This public funding is the money that, along with tenants’ rents, co-funds state and territory housing and homelessness services. Here too Morrison is proposing reform, particularly to the primary federal-state funding arrangement for social and affordable housing, the <a href="https://www.dss.gov.au/housing-support/programmes-services/national-affordable-housing-agreement">National Affordable Housing Agreement</a> (NAHA).</p>
<p>A couple of months ago we suggested the NAHA <a href="https://theconversation.com/australia-needs-to-reboot-affordable-housing-funding-not-scrap-it-72861">needed a reboot</a>. Recognising the seriously run-down state of the system, we argued for an increase in funding from its present starvation level. Morrison now proposes a new federal-state funding agreement, the <a href="http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_17.htm">National Housing and Homelessness Agreement</a> (NHHA). </p>
<p>The <em>level</em> of federal funding will be the same as under the old NAHA. But the Commonwealth will press states and territories for action in defined “priority areas”. In effect, this looks like a return to a Canberra-led reform agenda for social and affordable housing unseen since the early Rudd government. </p>
<h2>Setting aggregate supply targets</h2>
<p>In what appears a significant passage, the budget papers reveal the government’s <a href="http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_17.htm">“priority areas” for the NHHA</a>. We’ll consider these in turn, and then the recurring issue of inadequate funding.</p>
<p>Lack of transparency on the costs incurred by state and territory housing authorities in operating their social housing portfolios has been a particular problem under the NAHA. This is an area where federal engagement is welcome. </p>
<p>All levels of government should be pressed to quantify the level and type of need for housing in the community. And they should be made to set clear “new supply” targets for meeting that need. </p>
<p>That said, the federal government should stop pretending to be shocked at the lack of new social housing delivered by those authorities under the NAHA. The shortfall in NAHA funding has been obvious for years. It simply is too low to bridge the gap between the rents low-income public housing tenants can afford to pay and the costs of properly maintaining the system, let alone growing it to keep pace with <a href="https://johnmenadue.com/?p=10239">rising need</a>.</p>
<h2>Residential land development</h2>
<p>The stress laid on this issue within the budget policy statement reflects the federal government’s stated concern about “the supply side” of the housing affordability problem. It has framed state government planning controls as an impediment to new housing development. </p>
<p>However, merely loosening requirements and offering existing land owners the prospect of greater development does not ensure it will actually happen. </p>
<p>To ensure land owners don’t just sit on development opportunities speculatively, the federal government should use its NHHA leverage. This could include pushing the states and territories to make greater use of <a href="http://blogs.unsw.edu.au/cityfutures/blog/2016/04/the-tax-reform-right-under-turnbulls-nose/">land tax</a>, which would spur development and bring under-utilised land and housing to market. </p>
<h2>Inclusionary zoning</h2>
<p><a href="http://blogs.unsw.edu.au/cityfutures/blog/2017/03/value-sharing-for-affordable-housing/">Inclusionary zoning</a> is a specific type of planning mechanism. It requires housing developments (above a certain size) to include some proportion of dedicated affordable housing. Ideally, this should be rental housing preserved as “affordable” in perpetuity.</p>
<p>Inclusionary zoning is long established in other countries and has long been demanded by housing advocates in Australia. It is now the subject of increasing interest from planning authorities – <a href="http://blogs.unsw.edu.au/cityfutures/blog/2016/11/the-greater-sydney-commission-could-deliver-a-step-change-policy-advance-on-affordable-housing/">for example, the Greater Sydney Commission</a>. </p>
<p>The co-financing arrangements for the NHFIC could incorporate active use of land-use planning powers for inclusionary zoning. Development sites – or developer levy proceeds – could be part of state and territory contributions to funding affordable housing development. </p>
<p>A commitment to build into the NHHA incentives for stepped-up use of inclusionary zoning by state governments is, therefore, very welcome. </p>
<p>However, the budget papers indicate that state compliance with this NHHA expectation might involve not only housing dedicated to affordable rental housing, but also “dedicated first home buyer stock”. This seems to raise the prospect of developers meeting inclusionary zoning requirements simply by reserving some newly built units for first home buyers rather than investors. </p>
<p>The best way to enhance first home buyer prospects vis a vis investor landlords would be to level the playing field by winding back investor negative gearing and capital gains tax concessions, not through this kind of tinkering. And to cast such “FHB reservation” initiatives as in any way equivalent to inclusionary zoning for affordable rental housing would be a highly retrograde step. </p>
<h2>Renewing affordable housing stock</h2>
<p>An interesting inclusion in the proposed terms of the NHHA is a clause about renewing affordable housing stock. </p>
<p>First, it appears positive in acknowledging the need for a public housing overhaul and indicating a new level of federal government interest in making this happen. </p>
<p>At a minimum, states and territories should be required to undertake a comprehensive audit of their existing portfolios. The level of outstanding disrepair has to be costed. They also should identify where renewal can best take place, balancing need for expanded and upgraded housing with sensitive treatment of existing communities. </p>
<p>Second, it indicates federal backing for further transfers of public housing as a growth path for the affordable housing industry. However, as our <a href="https://www.ahuri.edu.au/research/final-reports/278">recent research for AHURI</a> shows, this is feasible only if the operating cost gap is funded. </p>
<p>Past community housing growth through transfers, particularly following the 2009 housing ministers’ commitment to expand community housing to 35% of all social housing, involved an understanding that Commonwealth Rent Assistance, paid through Centrelink to transferred tenants, would help cover that gap. </p>
<p>Without additional funding in the NHHA, a new phase of growth through transfers requires a recommitment by governments to use rent assistance as an effective operational subsidy to community housing providers. A new target and timeframe to replace the 35% benchmark also need to be considered.</p>
<h2>Homelessness services</h2>
<p>Previously the subject of a separate funding agreement (the <a href="https://www.dss.gov.au/housing-support/programmes-services/national-partnership-agreement-on-homelessness">National Partnership Agreement on Homelessness</a>), homelessness services have struggled for years in the face of that agreement’s pending expiry and short-term extensions. </p>
<p>The NHHA will fund homelessness services on an ongoing basis, which the sector has welcomed.</p>
<h2>Funding shortfall remains</h2>
<p>As we’ve indicated throughout, the objectives of the NHHA – and of the social and affordable housing system generally – will continue to run up against the reality that decent housing of this kind costs more than low-income households can afford to pay. </p>
<p>This applies especially to people living on the miserable level of benefits <a href="https://theconversation.com/housing-still-out-of-reach-for-many-even-as-rents-fall-in-post-boom-western-australia-76461">such as Newstart</a>. A subsidy is required, both to build up the stock and to keep it in good order. </p>
<p>Clearer targets, more transparent cost accounting, and innovations like NHFIC finance won’t bridge the gap. On the contrary, to successfully use those initiatives to build more stock, both state and territory housing authorities and non-government affordable housing providers need a larger subsidy than present funding provides. </p>
<p>The budget has indexed NHHA funding to wages. It would be nice to think that land and housing prices will increase only in line with wages. </p>
<p>In reality, properly funding the growth and maintenance of our social and affordable housing stock will require more than what the federal government is offering.</p><img src="https://counter.theconversation.com/content/76794/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Martin receives funding from the Australian Housing and Urban Research Institute.</span></em></p><p class="fine-print"><em><span>Hal Pawson receives funding from the Australian Housing and Urban Research Institute, the Australian Research Council and Launch Housing. </span></em></p>The budget is pushing for a much-needed reboot of the social housing sector. What it isn’t offering is extra funding to renew and expand run-down housing stocks.Chris Martin, Research Fellow, Housing Policy and Practice, UNSW SydneyHal Pawson, Associate Director - City Futures - Urban Policy and Strategy, City Futures Research Centre, Housing Policy and Practice, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/775942017-05-11T15:18:49Z2017-05-11T15:18:49ZGrattan on Friday: With Malcolm Turnbull in pursuit, Bill Shorten decides to run faster<figure><img src="https://images.theconversation.com/files/168998/original/file-20170511-32624-10wbrid.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Bill Shorten runs past Old Parliament House in Canberra.</span> <span class="attribution"><span class="source">Mick Tsikas/AAP</span></span></figcaption></figure><p>Scott Morrison is by nature a chameleon. There is the aggressive, crash-through – and often crash – hyper-partisan Scott. And then there’s the Scott we observed in the budget and on Wednesday at the National Press Club.</p>
<p>There he appealed to the media not to see everything in terms of conflict and personalities (ironically, he was answering a question about the new levy that has infuriated the banks). “For people who aren’t in this room today, they’re sick of that nonsense,” he said, which is true – though not something normally to trouble Morrison.</p>
<p>And Morrison used the emotional personal story of his brother-in-law Gary, who has multiple sclerosis, as part of his pitch to “end the political games” and “gather together and meet in the middle as a parliament” on funding the NDIS with a rise in the Medicare levy.</p>
<p>Apart from the brawl with the banks, the government this week has mostly adopted a more humble tone, well removed from the earlier lecturing, we-know-best-approach. Everyone assumes it’s doing what the focus groups are telling it.</p>
<p>A self-styled whatever-it-takes budget has been all about a government that’s galvanised by the spectre of defeat acknowledging realities and switching tack. No good railing any more about the Senate refusing to pass savings. “We can’t whine and whinge about that … Let’s be honest about it. Rule a line. Move on, apply a solution,” said Morrison.</p>
<p>In 2001, John Howard, in as deep a hole as Malcolm Turnbull is now, ruled lines and moved on. His budget was part of resetting and regrouping and it worked a treat. </p>
<p>Turnbull needs the 2017 budget to play the same role for him. Whether it will is quite another matter.</p>
<p>The public could respond in one of two ways. They could accept the government’s turnaround and indeed see it as the re-emergence of “the real Malcolm” – which it might be – the centrist and pragmatic Malcolm. Or they could be sceptical, regarding the drastic makeover as just another example of politicians being expedient.</p>
<p>There is a third possibility – that voters have switched off.</p>
<p>It will be a while before we get an accurate reading.</p>
<p>Deputy Liberal leader Julie Bishop, exhorting backbenchers to sell the budget hard in their electorates, said at Tuesday’s partyroom meeting that it could take a couple of months for the full implications of the budget to be reflected in public opinion and the polls.</p>
<p>Budgets don’t usually produce poll bounces and indeed even what observers think in the first week may not be their later assessment. The Hockey 2014 budget received a better reaction initially than subsequently, when it came to be regarded as a horror, certainly in political terms.</p>
<p>While budgets don’t usually push the polls up, Turnbull will be desperately hoping this one breaks the mould, because he needs an early boost for party morale. It’s been a confusing budget for Coalition backbenchers, with its dramatic repositioning – they just live in hope it will work.</p>
<p>But backbenchers these days are as impatient as voters. They want to see instant results. If the polls stay negative they’ll become jittery.</p>
<p>As the government sought to fireproof itself in Labor’s areas of strength, the budget produced a new challenge for Bill Shorten.</p>
<p>Its widespread tagging as “Labor-lite” was embarrassing for ministers but potentially dangerous for the ALP. In his Thursday budget reply, Shorten went out of his way to stomp on the claim. “We are not you – and you will never be us,” he said.</p>
<p>But given the Coalition is crowding into Labor’s space, Shorten had to quickly re-establish as much distance as possible between the parties.</p>
<p>There was no way he could give Morrison an easy pass on the Medicare levy increase – but he couldn’t afford to appear unreasonable either, when the NDIS was involved. So Labor will oppose a rise for those on incomes under A$87,000, thus standing as protectors of workers on low and middle incomes.</p>
<p>To raise extra funds, a Labor government would reimpose the deficit levy on high-income earners that comes off automatically on June 30. The combination of the Medicare levy rise and the reimposed deficit levy would put those with incomes of more than $180,000 on a marginal rate of 49.5%, but these people are not Shorten’s crowd.</p>
<p>With the government embracing Gonski and proposing a substantial funding injection into schools, Shorten confirmed Labor will stick to its election commitment – an extra $22 billion over what the Coalition is now planning to spend. The opposition will exploit to the maximum the Catholics’ discontent with the government’s blueprint, which unravels the special deals they have had.</p>
<p>Shorten has also declared Labor will fight the budget imposts on university students, so the government will have to battle those out with the crossbench.</p>
<p>He has not indicated what an ALP government would do about the already legislated company tax cut – for businesses with a turnover of up to $50 million. Sources say the future of that cut, for at least some businesses, is definitely on the table. The government revealed on Thursday that the total cost of the company tax cut, legislated and unlegislated, is $65 billion over the upcoming ten years.</p>
<p>Labor has responded to the Coalition’s offensive and defensive moves in Tuesday’s budget by going further in protecting its territory, in terms of both issues, notably health and education, and constituents – lower- and middle-income earners.</p>
<p>“They tried to be a better Labor government than us – and they can’t,” said one Labor man after Shorten’s speech.</p>
<iframe src="https://www.podbean.com/media/player/55eic-6aa7da?from=yiiadmin" data-link="https://www.podbean.com/media/player/55eic-6aa7da?from=yiiadmin" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/77594/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan owns bank shares.</span></em></p>As the government sought to fireproof itself in Labor’s areas of strength, the budget produced a new challenge for Bill Shorten.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/773942017-05-11T04:25:02Z2017-05-11T04:25:02ZBudget 2017: welfare changes stigmatise recipients and are sitting on shaky ground<p>Some of the budget changes on welfare appear to be about sending the message that receiving welfare is undesirable. Whether these changes actually reduce social security spending and encourage independence to any significant extent remains to be seen. While the 2014 rhetoric of “lifters” and “leaners” may have been dispensed with, the dichotomy between “them” and “us” remains an underlying signal.</p>
<p>There’s actually <a href="https://theconversation.com/budget-explainer-has-there-been-a-blowout-in-social-security-and-welfare-spending-75055">little current evidence</a> of an unsustainable growth in spending on social security and welfare. So it begs the question as to why these measures are needed.</p>
<p>One of the areas attracting the most controversy is the focus on payments for people of working age, particularly the unemployed and lone parents. Some of these measures appear to be more about signalling a stigmatising approach to welfare than identifying what works most effectively.</p>
<p>For example, “a commitment to reduce social harm in areas with high levels of welfare dependency,” will continue through the expansion of the Cashless Debit Card to two new locations and an extension of Income Management for a further two years to June 2019. As academic Eva Cox has pointed out, the <a href="https://www.dss.gov.au/families-and-children-programmes-services-welfare-conditionality-income-management/income-management-evaluations">official evaluations of Income Management</a> didn’t find evidence of significant changes as a result of the policy, even on some its key objectives including <a href="https://theconversation.com/a-147m-budget-saving-missed-income-management-has-failed-41816">changing people’s behaviours</a>.</p>
<p>Then there’s a new approach to compliance for job seekers, a demerits points phase will be followed by a “three strikes” phase to engage with welfare recipients early and prevent them from incurring financial penalties for not meeting their obligations.</p>
<p>The government has also signalled that it will promote “self-reliance before welfare” through changes to the liquid assets test. Currently, there is a waiting period for people making a new claim for Newstart Allowance, Sickness Allowance, Youth Allowance, or Austudy of between one and 13 weeks. It applies if claimants have funds that are equal to or more than A$5,500 for single people with no dependants, or A$11,000 for those who are partnered or single with dependants. </p>
<p>From September 2018, the maximum Liquid Assets Waiting Period will double from 13 to 26 weeks when a claimant’s liquid assets are equal to or exceed $18,000 for singles without dependants or $36,000 for couples and singles with dependants - that is, people with savings above these levels may have to wait up to six months before receiving payment.</p>
<h2>Stigmatising welfare recipients, but at what cost?</h2>
<p>The government appears to be implementing a number of the substantive recommendations of the <a href="http://www.formerministers.dss.gov.au/15960/final-report-of-mcclure-review-into-australias-welfare-system-released/">2015 McClure Review of the Welfare System</a>. In particular, from March 2020, the government will introduce a new, single “JobSeeker Payment”, which will progressively replace a number of payments such as the Newstart Allowance, Sickness Allowance, Wife Pension and Partner Allowance.</p>
<p>While this is presented as simplifying the system, over 99% of people will have no change to their payment rates. The government expects there will be around 800,000 people receiving Newstart at the time of the change and between 15,000 and 20,000 receiving all other payments, to be combined into the new payment. </p>
<p>Work requirements for the unemployed will also increase. Jobseekers will also have to spend more time looking for work or working for the dole – around 270,000 people aged between 30 and 49 years of age will be forced to spend 50 hours a fortnight. That’s 20 hours more than they do currently. This is despite a recent <a href="https://www.oecd.org/els/emp/Employment-Outlook-2013-chap3.pdf">OECD report</a> finding that Australia already has the heaviest set of obligations on the unemployed of seven countries.</p>
<p>In the government’s new approach to job seekers, they accrue demerit points for failing to turn up or being intoxicated. Once four demerit points are incurred over a six-month period, they will be assessed for the next phase. This involves escalating financial penalties for each additional failure; with the first strike leading to a loss of 50% of a fortnightly payment, the second strike leading to a loss of 100% of a fortnightly payment, and the third strike resulting in the cancellation of payment with a four-week exclusion from re-applying.</p>
<p>The rhetoric of “three strikes” (and you’re out) is clearly derived from changes in criminal sentencing.</p>
<p>Another of the more striking initiatives in the budget was the announcement that from 2018, 5,000 Newstart Allowance and Youth Allowance claimants, in two trial locations, may be subject to randomised drug testing for cannabis, methamphetamine and ecstasy, as a precondition of their welfare payment. </p>
<p>Job seekers who test positive will be placed on welfare quarantining to reduce the cash available to spend on drugs. After an initial positive test, the recipient would have further random drug tests, a penalty will only be applied for failing to comply with a test request. It’s notable that the cost of this measure is classified as commercial-in-confidence in the budget papers and has not been published.</p>
<p>In a related initiative, the government will close “loopholes” which allow welfare recipients to be exempt from job seeker requirements solely due to drug or alcohol abuse. The <a href="https://www.dss.gov.au/about-the-department/publications-articles/corporate-publications/budget-and-additional-estimates-statements/budget-2017/welfare-reform">government estimated</a> that because of this 11,000 exemptions annually would no longer be granted. This measure will cost A$28.8 million to implement over four years.</p>
<p>From July 1, 2017, people will also no longer be able to qualify for Disability Support Pension on the basis of their substance abuse alone. It’s estimated by the government that 450 fewer people will be granted Disability Support Pension each year due to this measure, saving about A$22 million over five years. </p>
<p>But the testing of welfare recipients doesn’t end there, from January 2018, a stronger “relationship verification process” for existing single parents will ensure people are not getting higher income support payments by claiming to be single when they are not. From September 2018, people applying for the Parenting Payment (single) or single parents claiming Newstart Allowance will be required to have a third party sign a new form verifying that they are in fact single. Penalties of up to 12 months in prison may be applied to referees - presumably families or friends - who provide a false declaration.</p>
<p>There doesn’t seem to be much concrete evidence for the effectiveness for all these types of measures.</p>
<p>An <a href="http://www.aihw.gov.au/alcohol-and-other-drugs/data-sources/ndshs-2013/ch8/">Australian Institute of Health and Welfare report in 2013</a> did report that use of illicit drugs was more prevalent among the unemployed. It reported people who were unemployed being 1.6 times more likely to use cannabis, 2.4 times more likely to use meth/amphetamines and 1.8 times more likely to use ecstasy than employed people. </p>
<p>But the same report notes that people with the highest socio-economic status were more likely to consume alcohol in risky quantities and to have used ecstasy and cocaine in the previous 12 months than people with the lowest socio-economic status. It also appears these figures don’t control for differences in the demographic profile of the unemployed and those in paid work.</p>
<p>Welfare quarantining policies of this sort have been tried in the United States in recent years. <a href="http://www.ncsl.org/research/human-services/drug-testing-and-public-assistance.aspx">According to the National Council of State Legislatures</a> at least 15 American states have passed legislation regarding drug testing or screening for public assistance applicants or recipients. </p>
<p>Reports of the effectiveness of this testing vary widely. </p>
<p>In the United States, a 2011 review by the federal <a href="https://aspe.hhs.gov/basic-report/drug-testing-welfare-recipients-recent-proposals-and-continuing-controversies">Department of Health and Human Services</a> estimated the prevalence rate of substance abuse among US welfare users ranged between 4% and 37%. However, a <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2690384/">review by US academics in 2005</a> found substance abuse disorders are less common among welfare recipients there than other serious barriers to self-sufficiency (such as physical health, poor academic skill and transportation difficulties, among a range of factors). These academics argued widespread substance abuse is not a major cause of continued economic dependence.</p>
<p><a href="https://www.ncbi.nlm.nih.gov/pubmed/11786289">Earlier research</a> pointed out that in the results of drug testing of welfare recipients there was a large group of “false positives” with no apparent disorder; and that drug-testing could not distinguish “false negatives” who may may be alcohol dependent or experiencing psychiatric disorders and need assistance.</p>
<p>There have also been a number of court cases in the US about the constitutionality of these drug tests when applied randomly, and it has been noted that similar proposals in Great Britain may violate EU based rights to privacy. </p>
<p>It’s worrying that the budget papers do not identify the costs of the proposal nor the expected savings. Overall, it’s difficult to escape the conclusion that this proposal is symbolic, rather than designed to have a positive impact on the well-being of those to be tested.</p>
<h2>Budget spending on welfare continues to increase</h2>
<p>Social security and welfare remains the largest single component of government spending, and is projected to increase from A$164 billion in 2017-18 to A$191.2 billion in 2020-21, or from 35.3% to 36.6% of total expenses.</p>
<p>Overall social security and welfare spending is projected to grow by 0.22% of GDP over the projection period. Spending on the National Disability Insurance Scheme (NDIS) is projected to grow by 0.46% of GDP, compared to other measures such as the spending on child care by 0.07% of GDP and spending on unemployment and related benefits by 0.05% of GDP. Most other components of social security and welfare expenditure are projected to fall over this period, with the largest impact being on spending on Family Tax Benefits.</p>
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<p>The development of the NDIS is clearly the most significant source of new social spending in this year’s budget. The additional 0.5% increase in the Medicare Levy to guarantee funding for the project will apply from July 1, 2019 and will raise an extra A$3.55 billion in revenue in its first year, rising to A$4.25 billion in 2020-21. There are also positive initiatives in continued funding for valuable longitudinal surveys, such as <a href="http://melbourneinstitute.unimelb.edu.au/hilda">HILDA</a> and the Parents Next Programme.</p>
<p>The main area of savings is in the area of Family Tax Benefits, where savings are to be used to fund changes in child care – although the savings over the period are more than twice as great, as the increased spending on child care. These savings of A$1.9 billion over five years are made possible by not indexing payment rates to inflation until July 2019.</p>
<p>In addition, a further A$415 million will be saved over five years through adjustments to the rate at which Family Tax Benefit A is income-tested when family incomes exceed the higher income threshold of around $94,000 of joint family income. As a result, around 24,900 families will lose access to Family Tax Benefit Part A, and around 71,800 families will see a reduction in their family payments.</p>
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<p>Overall, the 2017-18 budget has abandoned many of the most regressive welfare measures that have led to their blocking in the Senate since 2014. However, it remains the case that the freezing of payment rates for Family Tax Benefit will have the largest proportional effect on low income families with children, since these payments form a larger proportion of their disposable incomes.</p>
<p>There are projected increases in spending on income support and services for the aged as a result of the ongoing and predictable ageing of the Australian population. There’s also smaller increases in income support for parents and for the unemployed – perhaps partly due to the simplification of support for working age recipients – but these are more than offset by reductions in other areas of welfare spending.</p>
<p>To a large extent, the challenges facing government in providing the services and benefits that the Australian population values are predictable and manageable, so there is a need to base policies on evidence and not myths or stereotypes.</p><img src="https://counter.theconversation.com/content/77394/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Whiteford has received funding from the Australian Research Council and the Department of Social Services. He is affiliated with the Centre for Policy Development. </span></em></p>The government is reinforcing the dichotomy between “them” and “us” with this budget’s welfare changes, but it lacks solid evidence of effectiveness.Peter Whiteford, Professor, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/774702017-05-11T04:03:06Z2017-05-11T04:03:06ZMental health funding in the 2017 budget is too little, unfair and lacks a coherent strategy<figure><img src="https://images.theconversation.com/files/168842/original/file-20170511-21623-1k5y5qx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mental health remains chronically underfunded.</span> <span class="attribution"><span class="source">from shutterstock.com</span></span></figcaption></figure><p>This week’s federal budget allocated <a href="https://theconversation.com/budget-2017-sees-medicare-rebate-freeze-slowly-lifted-and-more-funding-for-the-ndis-experts-respond-77315">A$115 million in new funding</a> over four years. This is one of the smallest investments in the sector in recent years.</p>
<p>For instance, the <a href="http://www.carersvoice.com.au/assets/files/E-Bulletins/National%20Action%20Plan%20for%20Mental%20Health%202006-2011.pdf">Council of Australian Governments (CoAG)</a> added more than $5.5 billion to mental health spending in 2006. The <a href="http://www.aph.gov.au/about_parliament/parliamentary_departments/parliamentary_library/pubs/rp/budgetreview201112/mental">2011-12 federal budget</a> provided $2.2 billion in new funding.</p>
<p>This compounds a situation in which, in 2014-15, mental health received around <a href="http://www.aihw.gov.au/publication-detail/?id=60129557170">5.25% of the overall health budget</a> while representing <a href="http://www.aihw.gov.au/burden-of-disease/">12% of the total burden of disease</a>. There is no reason those figures should exactly match, but the gap is large and revealing. </p>
<p>They speak to the fact mental health remains chronically underfunded. Mental health’s share of <a href="http://www.aihw.gov.au/publication-detail/?id=60129557170">overall health spending</a> was 4.9% in 2004-05. Despite rhetoric to the contrary, funding has changed very little over the past decade. </p>
<p>We lack a coherent national strategy to tackle mental health. New services have been established this year, but access to them may well depend on where you live or who is looking after you. This is chance, not good planning.</p>
<h2>Hospital-based services</h2>
<p>The general focus of care when it comes to mental health remains hospital-based services. Inpatient – when admitted to hospital – and outpatient clinic care or in the emergency room <a href="https://mhsa.aihw.gov.au/resources/expenditure/">represent the bulk of spending</a>. (The Australian Institute of Health and Welfare includes hospital outpatient services under the heading “Community”, which makes definitive estimates of the proportion of funding impossible.)</p>
<p>Outside of primary care such as general practice, or Medicare-funded services (such as psychology services provided under a <a href="https://www.betterhealth.vic.gov.au/health/conditionsandtreatments/mental-health-care-plans">mental health care plan</a>), mental health services in the community are hard to find.</p>
<p>An encouraging aspect of this year’s budget is the government’s recognition of this deficiency. The largest element of new mental health spending was a commitment to establish a pool of $80 million to fund so-called <a href="http://www.health.gov.au/internet/budget/publishing.nsf/Content/budget2017-factsheet28.htm">psychosocial services</a> in the community. </p>
<p>As Treasurer Scott Morrison said in his <a href="http://www.budget.gov.au/2017-18/content/speech/html/speech.htm">budget speech</a>, this money is for:</p>
<blockquote>
<p>Australians with a mental illness such as severe depression, eating disorders, schizophrenia and post-natal depression resulting in a psychosocial disability, including those who had been at risk of losing their services during the transition to the NDIS.</p>
</blockquote>
<p>Yet, the money is <a href="http://www.health.gov.au/internet/budget/publishing.nsf/Content/budget2017-factsheet28.htm">contingent on states and territories</a> matching federal funds, meaning up to $160 million could be made available over the next four years if the states all chip in with their share of $80 million. But this commitment was made “noting that states and territories retain primary responsibility for CMH [community mental health] services”. Whether the states agree is another matter.</p>
<p>This new funding seems partly a response to the federal transfer of programs such as <a href="http://www.mhcc.org.au/policy-advocacy-reform/strengthening-relationships/partners-in-recovery.aspx">Partners in Recovery</a> and <a href="https://www.dss.gov.au/sites/default/files/documents/07_2013/part_c1_phams_guidelines_april_2013.pdf">Personal Helpers and Mentors</a> to the <a href="https://www.dss.gov.au/our-responsibilities/mental-health/programs-services/personal-helpers-and-mentors-phams">National Disability Insurance Scheme</a> (NDIS). Both these programs offered critical new capacity to community organisations to provide mental health services and better coordinate care.</p>
<p>Partners in Recovery was established in the 2011-12 budget with $550 million to be spent over five years. Personal Helpers and Mentors (along with other similar programs) was established in the same year with $270 million in funding over five years.</p>
<p>With these programs now (or soon to be) cordoned off to recipients of NDIS packages, the 2017 budget measure appears to be designed to offset their loss. However, not all states may choose to match the federal funds. And some may choose to do so but try to use new federal funds to reduce their own overall mental health spending. </p>
<p>States already <a href="http://www.health.gov.au/internet/main/publishing.nsf/content/mental-pubs-n-report13">vary in the types of services</a> they offer. All this raises the prospect that people’s access to, and experience of, mental health care is likely to vary considerably depending on where they live. In a budget espousing fairness, this is a recipe for inequity.</p>
<h2>Lack of coherent strategy</h2>
<p>The budget does attempt to improve the uneven distribution of mental health professionals by providing $9 million over four years to enable psychology services to rural areas though <a href="http://www.health.gov.au/internet/main/publishing.nsf/content/e-health-telehealth">telehealth</a>. It’s well known <a href="http://ruralhealth.org.au/sites/default/files/publications/nrha-mental-health-factsheet-2017.pdf">mental health services in the bush</a> are inadequate. </p>
<p>This investment seems sensible, but $9 million pales in comparison to spending on the <a href="http://www.health.gov.au/mentalhealth-betteraccess">Better Access Program</a>, which I <a href="http://medicarestatistics.humanservices.gov.au/statistics/mbs_item.jsp">have calculated</a> to be $15 million each week. This program provides Medicare subsidies for face-to-face mental health services under mental health care plans. While this program is available for those in rural areas, <a href="https://www.mja.com.au/journal/2015/202/4/better-access-mental-health-care-and-failure-medicare-principle-universality">accessing it is more difficult</a> than in cities.</p>
<p>This budget’s commitment to mental health shows a lack of an overarching strategy. Rather than offering a coherent approach to mental health planning, this budget continues Australia’s piecemeal, patchwork structure, where the system is driven mostly by who pays rather than what works or is needed. </p>
<p>The development of a national community mental health strategy would be most welcome now. This would demonstrate how the primary and tertiary mental health sectors will join up to provide the blend of clinical, psychological and social support necessary to finally enable people with a mental illness to live well in the community.</p>
<p>You could be forgiven for thinking that, albeit slowly, the <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Former_Committees/mentalhealth/report02/index">well-known problems</a> in mental health across Australia are being addressed. But the small pool of funding in this year’s budget says otherwise. And the lack of coherent strategy is a shame. You can’t complete a jigsaw puzzle if you keep adding new pieces.</p><img src="https://counter.theconversation.com/content/77470/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sebastian Rosenberg is a co-opted member of the Executive of the Australian Health Care Reform Alliance</span></em></p>The latest federal budget leaves mental health chronically underfunded, with inequitable access to services, and without a clear national strategy.Sebastian Rosenberg, Senior Lecturer, Brain and Mind Centre, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/774772017-05-11T03:40:06Z2017-05-11T03:40:06ZThe 2017 budget has axed research to help Australia adapt to climate change<p>The 2017 federal budget has <a href="http://budget.gov.au/2017-18/content/bp2/download/bp2_expense.pdf/">axed funding</a> for the <a href="https://www.nccarf.edu.au/">National Climate Change Adaptation Research Facility (NCCARF)</a>, an agency that provides information to decision-makers on how best to manage the risks of climate change and sea level rise. </p>
<p>The NCCARF received A$50 million in 2008 to coordinate Australia’s national research effort into climate adaptation measures. That was <a href="https://theconversation.com/who-should-fund-australias-adaptation-to-climate-change-17595">reduced</a> in 2014 to just under A$9 million. For 2017-18, a mere A$600,000 will be spread between CSIRO and NCCARF to <a href="https://www.environment.gov.au/system/files/resources/e9f767ee-0b12-463c-a6d4-f5f612a6fd97/files/2017-18-pbs.pdf">support existing online platforms only</a>. From 2018, funding is axed entirely.</p>
<p>This decision follows on from the 2014 <a href="https://research.csiro.au/climate/introduction/history-of-climate-adaptation-research-in-csiro/">streamlining</a> of CSIRO’s Climate Adaptation Flagship, and comes at a time when a <a href="http://www.environment.gov.au/climate-change/review-climate-change-policies">national review</a> of Australia’s climate policies is still underway.</p>
<p>Despite a growing global impetus to address the risks of climate change, there is evidence that Australia is being hampered by policy inertia. A review of 79 submissions to the Productivity Commission’s inquiry on <a href="http://www.pc.gov.au/inquiries/completed/climate-change-adaptation/report">Barriers to Effective Climate Change Adaptation</a>, published in 2014, <a href="https://www.researchgate.net/profile/Elissa_Waters/publication/263091031_Contrasting_perspectives_on_barriers_to_adaptation_in_Australian_climate_change_policy/links/0a85e539e582acfc09000000.pdf">found</a> that:</p>
<blockquote>
<p>adaptation first and foremost requires clear governance, and appropriate policy and legislation to implement change. </p>
</blockquote>
<p>Earlier this year the <a href="https://www.weforum.org/reports/the-global-risks-report-2017">World Economic Forum</a> listed “failure of climate change mitigation and adaptation” as one of the top five risks to the world, in terms of its potential impact. Meanwhile, in Australia, <a href="https://www.nccarf.edu.au/content/coastal-climate-risk-management-tool-analysis-end-user-needs">local governments</a>, professionals and community groups have consistently called for more national policy guidance on how best to adapt to climate risks. </p>
<p>The government’s decision to slash funding for climate adaptation research is therefore at odds with the growing urgency of the problem. The Intergovernmental Panel on Climate Change, in its most recent major assessment report, pointed out that <a href="https://www.ipcc.ch/pdf/assessment-report/ar5/wg2/WGIIAR5-Chap25_FINAL.pdf">Australia can benefit significantly</a> from taking adaptation action in highly vulnerable sectors. </p>
<p>These areas of vulnerability include: the risk of more frequent and intense floods; water shortages in southern regions; deaths and infrastructure damage caused by heatwaves; bushfires; and impacts on low-lying coastal communities. </p>
<p>To put it simply, lives and money will be saved by strong climate adaptation measures.</p>
<p>Australia needs a coherent policy approach that goes beyond the <a href="http://www.abc.net.au/4corners/stories/2017/05/08/4663424.htm">current focus on energy policy</a>, although climate adaptation is indeed an important issue for our <a href="https://theconversation.com/lessons-from-south-australias-blackout-we-need-to-make-infrastructure-more-resilient-to-climate-change-66389">electricity grid</a> as well as for many other elements of our infrastructure. A coherent, whole-of-government, approach to climate risk is the <a href="https://ec.europa.eu/clima/sites/clima/files/docs/eu_strategy_en.pdf">economical and sensible approach</a> in the long term. </p>
<p>Like it or not, the federal government has to take a leading role in climate adaptation. This includes the ongoing need to address existing knowledge gaps through well-funded research. </p>
<p>The federal government is the major funder of leading research in Australia, delivered through <a href="https://www.csiro.au/">CSIRO</a>, the <a href="https://www.nhmrc.gov.au/">National Health and Medical Research Council</a>, the <a href="https://crca.asn.au/">Cooperative Reserach Centres</a>, the <a href="http://www.arc.gov.au/">Australian Research Council</a> and universities. This role should not be divested. Without climate adaptation research, Australia can expect significantly higher infrastructure damage and repair costs, more death and disease, and more frequent disruption to services – much of which would be avoidable with the right knowledge and preparation.</p>
<p>The damage bill from the 2010-11 Queensland floods alone <a href="http://australianbusinessroundtable.com.au/assets/documents/Report%20-%20Social%20costs/Report%20-%20The%20economic%20cost%20of%20the%20social%20impact%20of%20natural%20disasters.pdf">exceeded A$6 billion</a>. Since 2009, natural disasters have cost the Australian government <a href="http://www.pc.gov.au/inquiries/completed/disaster-funding/report">more than A$12 billion</a>, and the private sector has begun <a href="https://theconversation.com/how-insurers-can-get-better-at-responding-to-natural-disasters-75846">trying in earnest to reduce its risk exposure</a>. </p>
<p>In response to these known risks, there is demand for robust policy guidance. Effective partnerships between government, industry and the community are crucial. One such example led by the NCCARF is <a href="https://www.nccarf.edu.au/CoastAdapt-beta-release">CoastAdapt</a>, an online tool that collates details of climate risks and potential costs in coastal areas.</p>
<p>For projects like this, success hinges on full engagement with all relevant spheres of government, industry, research, and the community. There is more to be done, and it needs leadership at the highest level.</p><img src="https://counter.theconversation.com/content/77477/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tayanah O'Donnell receives research funding from the ACT Government and the National Climate Change Adaptation Research Facility.</span></em></p><p class="fine-print"><em><span>Josephine Mummery was employed by the National Climate Change Adaptation Research Facility in 2015 and 2016. </span></em></p>The federal government has defunded a national research agency that looks at how best to adapt to climate-related impacts such as floods, droughts and heatwaves - a decision that could cost lives.Tayanah O'Donnell, Research Fellow, University of CanberraJosephine Mummery, Research Fellow and PhD Candidate, climate change policy, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/773972017-05-11T02:42:47Z2017-05-11T02:42:47ZBudget 2017: lack of competition is why government is moving so hard against the banks<p>With it’s latest <a href="http://www.budget.gov.au/2017-18/content/bp2/download/bp2.pdf">budget</a> the government has made a number of moves to create a level playing field in the banking system. It’s taxing the five largest banks, announced a review of rules around data sharing, a new dispute resolution system for banks and other financial institutions, and new powers for the regulator to make bank executives accountable. </p>
<p>All of this is on top of <a href="http://sjm.ministers.treasury.gov.au/media-release/099-2016/">a Productivity Commission inquiry</a> into the competition within the Australian financial system, announced this week. </p>
<p>While some of these moves - such as <a href="https://theconversation.com/budget-bank-levy-too-big-to-fail-not-too-big-to-take-a-hit-77475">the bank levy -</a> will have a positive effect on making smaller banks more competitive, there are more policies that could be considered. These could include the separating out of the retail arms from the other areas of the large banks, increasing the capital requirements of larger banks to equal those of smaller banks, and developing new sources of funding for smaller banks. </p>
<h2>More for competition</h2>
<p><a href="http://www.budget.gov.au/2017-18/content/bp2/download/bp2.pdf">A new “one-stop shop”</a> for dispute resolution will replace the existing three schemes - Financial Ombudsman Service, the Credit and
Investments Ombudsman and the Superannuation Complaints Tribunal. Called the Australian Financial Complaints Authority (AFCA), it will give consumers, businesses and investors a binding resolution process when dealing with financial services companies. The scheme will provide for a basis for more competition as disputes on financial services are consistently resolved regardless of the provider. </p>
<p>And A$1.2 million has been given to fund a review of an open banking system in which customers can request banks to share their data, which could assist financial startups and other competitors enter the market and compete against the big four banks. Banks will likely be forced to provide standardised application programming interfaces (API) that enable financial technology companies to provide services for interested consumers.</p>
<p>The government has also provided A$13.2 million to the Australian Competition and Consumer Commission (ACCC) to further scrutinise bank competition and to run the AFCA. <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/House/Economics/Four_Major_Banks_Review/Report">This follows a House of Representatives report</a> that called for an entity to make regular recommendations to improve competition and change the corporate culture of the financial industry.</p>
<p>The ACCC will provide Treasury with ongoing advise on how to boost competition in the sector. This may include a reduction of cost advantages of big banks, barriers to entry for new firms including change costs for consumers. </p>
<h2>A more concentrated and changing finance sector</h2>
<p>All of these changes come after a decade of consolidation and upheaval in the financial system, which has hurt competition and increased risk.</p>
<p>This chart shows the market shares of the big four Australian banks in terms of Australian loans and deposits:</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/168513/original/file-20170509-20740-1mq5rvj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/168513/original/file-20170509-20740-1mq5rvj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/168513/original/file-20170509-20740-1mq5rvj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/168513/original/file-20170509-20740-1mq5rvj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/168513/original/file-20170509-20740-1mq5rvj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/168513/original/file-20170509-20740-1mq5rvj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/168513/original/file-20170509-20740-1mq5rvj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Market share Big 4 banks.</span>
<span class="attribution"><span class="source">Australian Prudential Regulation Authority</span></span>
</figcaption>
</figure>
<p>As you can see, since 2002 their market share has grown from 69.7% to 79.6% for loans and from 66.3% to 77.3% for deposits. Also, the gap between market dominance in loans versus deposits has closed since the global finance crisis. This means the big banks are attracting a greater share of bank deposits, which has an impact on the smaller banks. </p>
<p>With limited access to deposits, which is a relatively cheap way of raising capital, smaller banks have had to rely on the more expensive wholesale debt markets. Small banks also have difficulties to tap other funding sources such as covered bonds. This makes their products less competitive, and they have struggled as a result.</p>
<p>In part, that’s because a number of banks disappeared or merged with the big banks after the global financial crisis. This includes St George, Bankwest, Bendigo Bank, Aussie Home Loans, Adelaide Bank, RAMS and Wizard. </p>
<p>The <a href="http://fsi.gov.au/publications/final-report/">Murray Inquiry found</a> the big four banks have less than half the capital set aside for emergencies than some smaller financial institutions do. Again, this makes the smaller banks less competitive and needs to be addressed. The government should increase the capital requirements of larger banks to close the cost advantage for larger banks.</p>
<p>In addition, rising house prices have led to a further increase in the concentration of mortgage and other housing loans in the Australian banking system. Today Australian banks have about twice as many mortgages on their books <a href="https://theconversation.com/australian-banks-are-too-exposed-to-mortgages-but-what-if-the-world-was-flat-31000">as in the next highest developed economy</a>.</p>
<p>New financial startups, such as <a href="https://theconversation.com/what-you-need-to-know-about-peer-to-peer-lending-38836">peer-to-peer lenders</a>, have entered the banking system. In time they may rival the big banks in areas like personal lending, but they remain small in terms of market share. And the big banks’ unwillingness to share data may be a hindrance. </p>
<h2>Something needed to be done</h2>
<p>The concentration in the banking sector does not provide the best outcome to all Australians. It has led to a low range and low quality of financial services as well as high costs. This needed to be addressed. </p>
<p>The new banking levy will support competition, as it pushes up the cost for the big banks. The review into data sharing could also be a boon to financial startups and other competitors, although we don’t yet know what the outcome will be.</p>
<p>But even stronger government actions may needed to create a level playing field. The government should consider separating out of the retail arms, from the other areas, of the large banks. Failing that, the low capital buffers of the big banks need to be addressed.</p><img src="https://counter.theconversation.com/content/77397/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Harry Scheule does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The budget included a few measures to make the banking sector more competitive, but they don’t go far enough.Harry Scheule, Associate Professor, Finance, UTS Business School, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/767912017-05-10T19:39:22Z2017-05-10T19:39:22ZBudget needs a sharper policy scalpel to help first home buyers<p>In its 2017 budget, the federal government repeatedly stated its preference for a “<a href="http://www.budget.gov.au/2017-18/content/speech/html/speech.htm">scalpel</a>” rather than a “chainsaw” or “sledgehammer” approach to demand management in the housing market.</p>
<p>The number of housing measures in the budget are more wide-ranging than in previous budgets of recent times. Policy levers on both the supply and demand side have been incorporated within a raft of housing measures. The government claims this is a “<a href="http://www.budget.gov.au/2017-18/content/speech/html/speech.htm">comprehensive package that can make a difference</a>”.</p>
<p>However, do the demand measures go far enough to make much-needed inroads into the housing affordability crisis now facing an entire generation of would-be first home buyers? Or is the so-called scalpel too blunt to make a meaningful difference for them?</p>
<h2>First Home Super Savers Scheme</h2>
<p>The budget’s key housing measure for helping young people gain a foothold on the home-ownership ladder is to allow first home buyers to use up to A$30,000 of voluntary superannuation contributions for a deposit on their first home. </p>
<p>Clearly, the scheme will attract the tax advantages of superannuation. Therefore, in principle, it will help first home savers accelerate their savings to buy a home, thus bridging the deposit gap, while protecting superannuation savings accumulated through compulsory employer contributions.</p>
<p>However, at least two key questions are pertinent. </p>
<p>The first relates to how many first home buyers will likely be well positioned to make voluntary contributions to their super saving account. There appears to be a general reluctance among Australians to make voluntary contributions. </p>
<p><a href="https://theconversation.com/why-australians-dont-make-extra-super-contributions-24841">Existing research</a> has found household budget constraints are a major barrier that make it unaffordable for many to make voluntary superannuation contributions. Poor financial literacy and <a href="https://theconversation.com/why-australians-dont-make-extra-super-contributions-24841">lack of knowledge of the superannuation system</a> are other factors. </p>
<p>The second key question relates to the scheme’s impact on property prices. The scheme does not aim to ease demand pressures in the housing market. It is likely that high house prices will not be curbed, so the prospects of home ownership will continue to fade for many first home buyers. </p>
<p>Existing demand-side levers, including the First Home Owners Grant and stamp duty concessions for first home buyers, have not succeeded in improving the affordability of houses for most young people. Hence, it is difficult to see how an additional demand lever such as the First Home Super Savers scheme is going to have a substantial impact on affordability.</p>
<p>This is not to say that the budget has completely ignored the need to temper demand tensions in the property market. </p>
<p>Demand pressures can be eased via measures that target two other types of property owners – older home owners and property investors. The budget does contain measures that target both groups. Yet again, the question remains as to whether the levers are long enough to produce meaningful impacts.</p>
<h2>Targeting older owners and property investors</h2>
<p>Older downsizers aged over 65 years will be allowed to channel up to $300,000 from the sale proceeds of the family home into their super fund. </p>
<p>Many older home owners are <a href="https://theconversation.com/it-will-take-more-than-piecemeal-reforms-to-convince-older-australians-to-downsize-51043">living in larger dwellings than they need</a> after their children leave home. Helping elderly home owners – sometimes coined <a href="https://www.mediastatements.wa.gov.au/Pages/Barnett/2016/11/Strategy-to-put-WAs-last-homebuyers-first-.aspx">“last home buyers”</a> – to downsize into smaller dwellings can free up larger homes for first home buyers in earlier stages of life who are forming families. </p>
<p>However, the impediments to downsizing are many. These include financial barriers but also non-financial barriers. Importantly, most elderly home owners have strong emotional attachments <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0013/2191/AHURI_Final_Report_No217_Housing-equity-withdrawal-uses,-risks,-and-barriers-to-alternative-mechanisms-in-later-life.pdf">to their family home and local community</a>. </p>
<p>However, a lack of appropriate and affordable dwellings in neighbourhoods where older owners <a href="http://bcec.edu.au/assets/bcec-keeping-a-roof-over-our-heads-report.pdf">would like to stay</a> also poses barriers to downsizing. For downsizing reforms to be effective, financial incentives will need to be accompanied by supply-side solutions that broaden the diversity of the housing stock so older home owners’ housing preferences and needs <a href="https://theconversation.com/lack-of-housing-choice-frustrates-would-be-downsizers-60512">can be met</a>.</p>
<p>The government has not made any significant changes to tighten negative gearing or capital gains tax concessions to reduce competition from property investors. Concern has focused on the potential contraction of <a href="http://www.abc.net.au/news/2017-04-10/morrison-to-reaffirm-opposition-to-changing-negative-gearing-tax/8429638">private rental housing supply</a> should investors withdraw en masse from the private rental market. However, a longer-term perspective would take into account second-round effects. </p>
<p>As investors sell off their rental properties, more properties will become available in the market to meet demand from first home buyers. This will not only have the impact of easing tensions in the rental market as more renters become home buyers, but it will also encourage subsequent second property investment as young career-builders seek to accumulate more wealth in their property portfolios after securing their first home. </p>
<p>Such second- and third-round effects need to be incorporated more into policy thinking so that policy design rests on not just short-term, but medium-to-long-term, considerations.</p>
<h2>Is the scalpel sharp enough?</h2>
<p>The budget contains myriad demand and supply levers that directly or indirectly aim to assist young people with their first home purchase. It represents an overdue but welcome acknowledgement on the government’s part that much needs to be done to improve home-ownership prospects for first home buyers.</p>
<p>A package of measures that seeks to influence both supply and demand simultaneously in the housing market is, in principle, a sensible approach to an entrenched policy concern such as housing affordability. However, in practice, policy design matters. </p>
<p>In the case of the 2017 budget, it would appear that the scalpel will need a whole lot more sharpening if it is to make an effective incision into the housing affordability crisis that’s plaguing an entire generation of aspiring home owners.</p><img src="https://counter.theconversation.com/content/76791/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rachel Ong is Deputy Director of the Bankwest Curtin Economics Centre, an independent economic and social research organisation located within Curtin Business School at Curtin University. The centre was established in 2012 with support from Bankwest (a division of Commonwealth Bank of Australia) and Curtin University. The views in this article are those of the authors and do not represent the views of Curtin University and/or Bankwest or any of their affiliates.</span></em></p>The budget acknowledges the crisis of affordability for first home buyers, but fails to do enough about demand pressures on prices to put home ownership back within their reach.Rachel Ong ViforJ, Deputy Director, Bankwest Curtin Economics Centre, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/775062017-05-10T10:24:48Z2017-05-10T10:24:48ZPolitics podcast: Mathias Cormann and Anna Bligh on the new bank tax<figure><img src="https://images.theconversation.com/files/168730/original/file-20170510-28069-6vs1sc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">original</span> </figcaption></figure><p>Despite the hefty tax imposts in Tuesday’s budget, Finance Minister Mathias Cormann still insists the fiscal problem was a spending rather than a revenue one.</p>
<p>Cornman says the problem was clearly “on the spending side”, but while the government had made significant progress it couldn’t get all the savings measures through the Senate.</p>
<p>“We’ve made some judgements that to the extent that we couldn’t, that the only other way, regrettably, that we were able to make up ground was on the revenue side of the budget.”</p>
<p>Cornman insisted the new bank tax should have no impact on the banks’ customers. </p>
<p>“It a fair proportionate contribution we believe. The way we have designed it it excludes mortgages, day-to-day accounts. There is no reason for banks to pass on this cost.”</p>
<p>But Anna Bligh, CEO of the Australian Bankers’ Association, says many Australians will be financially hit by the tax. She has urged politicians to be less “cavalier” in their bank bashing and says the tax singles them out, and curbs competitiveness.</p>
<p>“I think most Australians care very deeply about having a financial system and banking system that is strong that is well regulated and which attracts investment from international investors.” </p>
<p>In a National Press Club address on Wednesday, Treasurer Scott Morrison argued banks need to “pony up and help fix the budget” by absorbing fees from the tax. </p>
<p>But Bligh rejected this as simplistic: “Taxes cannot be absorbed, they have to be paid”.</p><img src="https://counter.theconversation.com/content/77506/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Despite the hefty tax imposts in Tuesday’s budget, Mathias Cormann still insists the fiscal problem was a spending rather than a revenue one.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/774752017-05-10T06:30:27Z2017-05-10T06:30:27ZBudget bank levy: too big to fail, not too big to take a hit<p>The budget announcement of a 0.06% levy on a subset of bank liabilities looks arbitrary, and is certainly politically opportunistic. But it could be rationalised as a response, albeit probably not the best response, to offset a number of distortions in Australia’s banking market. </p>
<p>The levy will certainly have consequences for bank pricing, forms of funding and competition – and will interact in complex ways with other prudential regulatory changes in the pipeline. </p>
<p>The levy will affect the four major banks and Macquarie. It will apply to liabilities other than deposits protected by the Financial Claims Scheme (ie. under A$250,000) and additional Tier 1 capital instruments. </p>
<p>As a ballpark estimate, it will apply to around 50% of a bank’s total funding. This will raise the overall cost of funding for the affected banks by around 0.03%.</p>
<p>The large banks are perceived to receive a competitive benefit (lower borrowing costs) from an implicit government guarantee associated with being <a href="https://theconversation.com/au/topics/too-big-to-fail-3747">“too big to fail”</a>. On this basis, the levy could be seen as a charge for that benefit. </p>
<p>As it is in Europe, Australia could establish a “resolution fund” to enable the Australian Prudential Regulation Authority (APRA) to facilitate a smooth exit (i.e. by merger) of a failing bank. Although the government is going to set this levy aside for budget repair, rather than being set up in another separate fund, it could be argued that it strengthens the government to support APRA in regulating the banks. </p>
<p>The nature of the regulatory system (such as capital adequacy requirements) creates a competitive imbalance favouring the big four banks. The <a href="https://theconversation.com/apra-fiddles-on-bank-risk-while-rome-burns-72976">imposition of higher minimum capital requirements</a> for mortgage loans by banks (five banks were actually subject to this levy) was only a partial response to this imbalance.</p>
<p>It’s often argued Australian banks have relied too much on funding other than “core/stable” deposits and capital, with potential consequences for safety and systemic stability. Indeed, the large banks have funded their increased share of home mortgage lending since the global financial crisis to a significant degree from wholesale borrowings.</p>
<p>However, there are better ways of dealing with these perceived distortions than the government’s quick, politically opportunistic, measure. And, together with other bank accountability measures introduced in the budget, it may neutralise whatever support exists for a banking royal commission.</p>
<p>The levy is likely to have significant effects on financial markets and consumers of financial services. The levy will flow through the banks’ funds transfer pricing systems to affect loan pricing. </p>
<p>In this regard it is somewhat silly to suggest simultaneously that the big banks shouldn’t increase loan interest rates, as the treasurer has, but that the measure will improve the competitive position of smaller banks. The latter will happen only if the large banks do respond in that way!</p>
<p>The large banks will have incentives to fund loans differently. In particular, by originating and then securitising loans (pooling various types of contractual debt, to get them off-balance sheet and funded by the capital market) they will avoid the levy on that part of their activities.</p>
<p>However, that benefit won’t apply if they use “covered bond” securitisation. This is when a bank issues debt securities collateralised against a pool of assets, giving the investor a claim against both those assets and the bank in general. The levy is thus likely to give a kick to traditional securitisation over on-balance-sheet lending, but stymie the growth of covered bond funding.</p>
<p>The levy will also affect the structure of bank deposit interest rates. Because retail deposits are exempt from the levy, the large banks can be expected to bid for these deposits – pushing up the interest rates offered relative to the cost of borrowing in wholesale and large deposit markets. </p>
<p>That’s going to compound the already apparent effect on relative interest rates due to recent and forthcoming liquidity regulations that APRA is applying. But it will worsen the relative returns that superannuation funds can get on (their large) bank deposits and possibly induce them to look to invest more in securitised products. </p>
<p>It’s worth noting that the budget involves changes that will increase competition for retail deposits. One example is the measure allowing individuals to make limited, tax-advantaged contributions to superannuation which can be subsequently withdrawn for a house deposit.</p>
<p>A further likely effect is to encourage banks to make more use of equity capital and additional Tier 1 (AT1) capital funding (that preferences share structures listed on the ASX and held by many retail investors), relative to Tier 2 capital funding (provided by the wholesale and institutional markets), or other wholesale funding. While more capital funding is still required to meet the “unquestionably strong” criteria proposed <a href="http://fsi.gov.au/">by the Murray inquiry</a>, and accepted by the government, it’s far from clear that increased reliance on the complex AT1 is desirable. </p>
<p>The revenue to be raised is large in absolute dollar amount – but is relatively small as a percentage of current bank profits (in the order of 4-5%).</p>
<p>It could be expected that the banks will pass on some part of the levy to customers, or avoid it by shifting to other forms of funding that do not incur the levy, such that the short-run direct impact on after-tax profits and shareholders is somewhat less than that 4-5% figure. </p>
<p>But the big unknown is how the change, in conjunction with a plethora of other ongoing regulatory changes affecting the financial sector, affects the competitive balance between the big banks, smaller bank competitors and capital markets and their prospects in the long run. </p>
<hr>
<p><em>This piece was co-published with <a href="https://pursuit.unimelb.edu.au/live/budget2017-fairness-security-and-opportunity">Pursuit</a>.</em></p><img src="https://counter.theconversation.com/content/77475/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kevin Davis does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The new levy on banks from the budget is a small hit to their profit but it could have unintended consequences.Kevin Davis, Research Director of Australian Centre for FInancial Studies and Professor of Finance at Melbourne and Monash Universities, Australian Centre for Financial Studies Licensed as Creative Commons – attribution, no derivatives.