Government resurrects some ‘zombie’ measures and new Budget savings – April 2017

Filed under: Politics, Australian Politics, Budget,

The Government secured its childcare package and a revised set of Budget savings by dropping its omnibus childcare bill (which included a broad range of welfare cuts), resurrecting its original 2016 childcare bill and introducing a new social security bill.

The Social Services Legislation Amendment (Omnibus Savings and Child Care Reform) Bill 2017 contained a limited number of welfare cuts (worth $300 million over four years on the Government’s figures) and – importantly – a new measure: a two-year indexation freeze on family tax benefit payments, which will save $2.1 billion over four years.

The freeze of the indexation of family tax benefits will affect about 1.5 million families.

Under the deal the Government reached with the Senate cross-bench the family tax benefit and welfare cuts approved by Parliament as part of the childcare package are:

  • Freeze family tax benefit rates for two years from July 1 (not part of the original Omnibus welfare cuts);
  • Freezing "income-free areas" and "means-test thresholds" for certain payments and allowances for three years;
  • Extending waiting periods for parental payments and youth allowance for those who are not full-time students or apprentices; and
  • Automating income stream review processes, which the government says will improve the accuracy of income support payments.

Welfare cuts included in dumped "omnibus" bill and not included in the childcare bill were:

  • Phasing out annual family tax benefit end-of-year supplements;
  • Making young people wait four weeks before receiving income support;
  • Shifting unemployed people aged between 22 and 24 to youth allowance instead of the dole;
  • Ending carbon tax compensation for new welfare recipients;
  • Scrapping the pensioner education supplement; and
  • Stopping pension payments for people (who've spent less than 35 years of their working life in Australia) after six weeks overseas.

Finance Minister Mathias Cormann said the family tax benefit and welfare cuts included  in the childcare bill  would secure savings of $2.4 billion over the period to 2020-21, building to $6.8 billion dollars over the medium term.

According to The Australian Financial Review the measures not included in the childcare bill leave a further “$4 billion in budget savings in limbo, and at risk of being dumped altogether.” The $4 billion figure is a net savings.

The 15 budget cuts that have been shelved are worth about $7.2 billion. This was offset by two other spending measures that were also in the Omnibus bill but have been shelved. These were a $2.3 billion increase in family tax benefits payments and a $690 million decision to increase paid parental leave from 18 weeks to 20 weeks. The net effect of the shelved savings and spending measures is a $4 billion hit to the budget.

The long-stalled childcare package rolls the existing childcare rebate and childcare supplement into a single means-tested payment that will significantly benefit families on lower incomes by skewing the benefits towards them.

Families on combined incomes over $350,000 will not be entitled to the childcare benefit due to a cap demanded by crossbencher senators David Leyonhjelm and Derryn Hinch in return for their support.

The Australian Financial Review also reported, “Last month, sources confirmed all unpassed budget measures, or so-called zombie measures, were likely to be dumped at the May budget because credit ratings agencies no longer believed they would ever pass and the government should take the savings off the books.”

The Australian Council of Social Services said it was “appalled the Turnbull government rammed through social security cuts late last night that will have the biggest impact on people on low incomes, including families.”

ACOSS CEO Cassandra Goldie said the measures in the Social Services Legislation Amendment Bill  were “unfair and should not have been passed. Overnight the lives of people in over 1.5 million households have been altered for the worse.

“These cuts are specifically aimed at hitting people on low-incomes.

“The Turnbull government is still talking about the need to pay for childcare reforms, despite childcare peak bodies saying the reforms will pay for themselves and should not be paid off the back of people in need.”

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