Thursday, June 30, 2016

Pensioners and unemployed pay for election giveaways

Elections are where we get given things, right?

That's true, for the voters who matter. The rest are treated appallingly. A spreadsheet of Coalition promises maintained by Fairfax Media includes picnic tables, boardwalks, fire trails, skate parks, car parks, netball courts, tennis courts, disabled toilets and lighting for sports ovals.

None are even remotely the responsibility of the Commonwealth, and at any other time the Turnbull government and his ministers would rightly handball responsibility for them to the states, along with schools. But they are in electorates they need to hold. I am told they have set an unofficial limit of $20 million per electorate they believe is in play. It's bribery done cheaply.

Out of sight, they're funding those promises by taking money from people whose votes matter less.

The Newstart unemployment benefit hasn't changed since its inception. Indexed in line with prices rather than wages, it's just $264 a week ($13,700 a year), which is way below the pension at $397 per week. Except for once. On March 20, 2013, under the Gillard government, Newstart recipients got a bonus, an extra $4.20 per week added permanently to their benefit in the form of a clean energy supplement. It was made up of what the carbon tax would do to the cost of living (0.7 per cent) plus an extra 1 per cent.

It stayed when the carbon tax went, leaving Newstart recipients for the first time slightly better off. Wage earners got their own compensation in the form of income tax cuts, which they also kept, something Treasurer Scott Morrison was keen to remind us in the aftermath of this year's budget, telling the press club: "When you get rid of a carbon tax and then you keep the tax relief, that turns from being compensation to a tax cut".

Yet quietly, in the same budget, he removed the clean energy supplement. From September while wage earners keep their tax cut, and existing Newstart recipients keep their Clean Energy Supplement, new recipients will lose it. Morrison is taking away the only proper pay rise they had ever had.

But it's worse than that. Because of the way the clean energy supplement was introduced, removing it will actually leave them worse off. When it came in, their base payment was boosted by 0.7 per cent less than it should have been, because 0.7 per cent of the increase was due to the carbon tax. Then they were given the supplement of 1.7 per cent. Removing the supplement will leave incoming Newstart recipients worse off than if the whole thing had never happened. A calculation by a former department of social security analyst provided to the Australian National University suggests they will be $3.60 per week worse off. Morrison has not only taken away a benefit, he's also given Australia's most desperate citizens a pay cut.

The budget says removing the supplement will save $1.4 billion over five years, which is a fair chunk of the $2.3 billion Morrison and Prime Minister Malcolm Turnbull plan to spend on picnic tables, boardwalks and the like. Australia's least well-off are funding giveaways in marginal, predominantly Coalition, electorates. As are pensioners. The income test for the pension works though something called the deeming rate. Instead of finding out what pensioners' bank deposits and investments actually earn, the government "deems" the rate of interest they earn and then uses the deemed income to restrict access to the pension. The lower the deeming rate, the more access part-pensioners get.

Last March after the Reserve Bank cut its cash rate, the government cut the deeming rate for small investments from 2 to 1.75 per cent and for big investments from 3.5 to 3.25 per cent. "More than 770,000 Australian part-pensioners and allowance recipients will be given a $200 million boost to their payments," the then social services minister crowed. "The current generation of aged pensioners had a deal with the government over their lifetime that if they worked hard there would be an aged pension at the other end. This government is keeping that deal and seeking to make the aged pension sustainable for future generations who will need it." The Social Services Minister was Morrison.

The Reserve Bank has cut its cash rate two more times since then and the private banks have followed. But neither Morrison as Treasurer nor his successor as Social Services Minister have cut the deeming rate. The Commonwealth Bank's pensioner security account is now offering just 0.25 on the first $2000 and 1.25 per cent beyond that. After $48,600 it's offering 2.5 per cent where the deeming rate is 3.25 per cent. Pensioners who bank with the Commonwealth or any of the other major banks are losing income because the government is delaying adjusting the deeming rate in accordance with reality.

They've something in common with the unemployed: they are not particularly visible and they are not good at complaining, which makes them good victims. Along with welfare recipients who'll face greater checks to see they haven't been overpaid, they're helping to bring the deficit down so the rest of us don't have to.

In The Age and Sydney Morning Herald