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Low earners do most in budget lifting, says NATSEM modelling

Treasurer Joe Hockey’s first budget has hit lower income families hard. AAP/Lukas Coch

The budget hits 1.25 million low and middle income families with children on average by about $3000 a year in 2017-18 while it actually benefits upper middle and upper income families through removing the carbon price, according to modelling done by NATSEM at University of Canberra.

Ben Phillips, a principal research fellow at NATSEM, said the modelling’s major finding was that the budget’s pain was felt most strongly by low income families – those with children and particularly single parents.

A single parent in 2014-15 would lose about $1800 up to a wage of $60,000, mainly through losing the school kids bonus and having reductions in family payments if their youngest child had turned six. There was a similar hit for couples with children.

By 2017-18 the full impact of losing Family Tax Benefit B, other changes to family payments, and no school kids bonus combined to hit these families by $4000 for very low income people and more than $6000 for families with incomes around $50-60,000.

The research was commissioned by the opposition leader Bill Shorten. Eighteen measures with direct impact on family budgets were modelled plus removal of the carbon price and the school kids bonus. NATSEM uses the same model as Treasury.

The modelling showed that the more a single mother earned, the more she lost under the budget changes - $4200 on the minimum wage and $6300 on average weekly earnings for a full time female worker. “The incentives seem to be confused with lower payments and higher effective tax rates,” Phillips said.

He said that nearly every couple family with children in the bottom 40% of incomes would be worse off while only one in three in the top 40% will be worse off, with the budget income tax levy only affecting about 3% of families.

Families in the bottom half of the income distribution are worse off by about $1200 in 2014-15 while the top income families with children are worse off by about $700.

By 2017-18, when the income tax levy will have finished, couples with children in low to middle income groups lose an average $2700 ($3500 for single parents). Couples with children will be behind by 7% of income; single parents take a 10% cut to their standards of living. High income groups are ahead.

The paid parental leave scheme (not modelled by NATSEM) would affect just 150,000 families a year and cost more than the entirety of the cuts in the NATSEM analysis.

Phillips said: “There is some good reform in this budget, for example FTB B is limited to $100,000, and indexation of excise. But the overall picture is one where low income families do the heavy lifting.”

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