Wednesday, May 11, 2011

On the QT: That’s a bit rich.

By and large the coverage of the Budget in the newspapers today was very good.

But it became clear that the theme for the day was who is rich (well actually there was another theme of the day, but that was only from Matthew Franklin of The Oz who seemed hell bent on getting the PM or Swan to bag the Greens).

It all stemmed from the grossly horrible and vicious cutting back of welfare for people earning over $150,000. Well actually there isn’t much cutting back at all. The Govt is merely freezing the Family Tax Benefit A and B thresholds for a further two years until 30 June 2014 in the following areas:

  • the FTB Part B primary earner income limit will remain at $150,000;
  • the income limit for receiving dependency tax offsets will remain at $150,000;
  • the Baby Bonus eligibility limit will remain at $75,000 family income in the six months following the birth or adoption of a child (equivalent to $150,000 a year);
  • the Paid Parental Leave income limit will stay at $150,000 for the primary carer in the previous financial year before the birth of the child; and
  • the higher income free area of FTB Part A will remain constant. For example, this means the income cut-out for a family with two children under 18 will be limited to around $113,000 in 2014. Each family’s income limit depends on the number and age of their children. 

This led to the media asking Julia Gillard and Wayne Swan if they thought $150k households were “rich”. Yep, we’ve got to that level of stupidity in the media. Abbott of course was all over the “issue”; coming out with this horsesh*t response to these budget measures:image

SABRA LANE: Ok and the phasing out of assistance payments and benefits to families earning $150,000 and more? Shouldn’t families that earn that kind of money pay their own way?

TONY ABBOTT: Well, you know, this is a government which thinks that a policeman married to a nurse is part of a super rich family. This is a government that thinks that two school teachers living as a family in Sydney are super rich. Well, sure there are people who are worse off but why is this Government always targeting people who want to get ahead?

Not just rich! Super rich!

The newspapers were onto this idiocy even earlier though. In The Daily Telegraph we had the wonderful situation where its leading opinion writers Miranda Devine, Andrew Bolt and Simon Benson were heaping scorn on the budget for being weak (Benson calling Swan “Mr Punniverse”) and meanwhile on the front page it was the most evil thing going – due to it pickpocketing families on $150,000. We even heard from “the Grays”:

THE Grays are the quintessential so-called rich Australian family squarely in the crosshairs of the Gillard Government.

Victims of Labor's war on middle-class welfare,

Did we discover who was actually calling them “rich”? Of course not – no one is, it just crap reporting (you can always tell when something is crap reporting when there is no one actually quoted with saying the negative thing).

And so we get to the sob story:

The problem is, Rob and Kerrie Gray certainly don't feel very rich - despite the family earning more than $150,000 a year in combined wages.

Well no joke. But whoever said they were rich? And here’s the other thing (the much more important thing) whoever said you should get welfare until you are “rich” (oh , right, John Howard and Peter Costello, sorry forgot that…)

Middle class welfare is not upper-class welfare it is “middle class”, not rich, not poor, but just doing OK, watching the bills, have some money to spend, doing better than others, not as good as some etc etc.

And guess what – if your household income is over $150,000 this Budget contained no surprises. The flood levy was known. Ditto the Medicare rebate means testing. And everything else? Err well… You weren't eligible for the Family Tax Benefit A anyway. I know this because my household income is in this nice “middle class” bracket. The only welfare we get is the Child Care Rebate. And guess what? That wasn’t touched.

You wouldn’t know this is you were reading The Oz and hearing of the plight of Allardyces:

AT first blush, Julia Gillard should have nothing to fear from Marie-Louise and Phil Allardyce, working parents of two young girls living in Melbourne's inner-west seat of Gellibrand -- the safest Labor seat in the nation.

Like three out of four of their voting neighbours, they plumped for Julia Gillard's ALP at last year's federal election.

An angry Ms Allardyce last night said this budget would make her reconsider her vote.

"She is a woman and I thought she would understand the pressures in the workplace," she said of the Prime Minister. "Maybe Gillard should have a child.

"We have made the choice to better ourselves. When I came to Australia I worked my way up and sacrificed a lot.

Oh charming, Julia Gillard needs to have a baby, am sure Ms Allardyce loves how that comes across (seriously, this whole article is yet another lesson that  the journalist is not your friend).

So they’ve lost her vote. Why?

"We have made the choice to better ourselves. When I came to Australia I worked my way up and sacrificed a lot.

"But the government are making it bloody hard. We need people who want to better themselves and I thought that is what Australia stood for."

The Allardyces both work full-time and together earn about $200,000 a year. That makes the Dutch-born working mum rich according the federal government.


So they think that Australia stands for people getting ahead and then still getting welfare from the Government? Really? Wow – puts an interesting spin on what “un-Australian” now means.

And as for the journalist writing  “That makes the Dutch-born working mum rich according the federal government.” I would love Anthea Cannon to show me the quote from anyone in the Government saying that. But of course she is merely using the Liberal Party view that welfare should go to everyone until they are rich (and also the media’s view).

But what exactly has hurt the Allardyces in the budget?

"We're paying $2000 a month in childcare and $3000 a month in tax," Ms Allardyce said. "If they changed the $7500 childcare rebate our only other option would be to get a nanny and share with two other families, but we chose childcare for the interaction, which makes starting school easier.

So the thing that would hurt them most is the one thing that was not included in the budget!

What incisive reporting. Yeah we really got some insight into how people are coping with the changes from the budget…

Wayne Swan then after his National Press Club speech said something stunning:

“I don't believe those people [households on $150,000] are rich but there are plenty of families out there on incomes of 60 thousand or 70 thousand a year.

imageThis apparently was deserving of this from Simon Benson in The Daily Tel:

TREASURER Wayne Swan has fended off criticism that the government now considered families earning $150,000 were rich.

Now who was suggesting the Government considered such families as rich? Why, as we know, the media and Tony Abbott.

Yeah, Lindsay Tanner was way off base with “Sideshow”…

Joe Hockey’s reaction to the Budget has been just as confused and bizarre. Last night he was saying this to David Speers:

JOE HOCKEY: Well because the Budget deficit is getting bigger, the debt is getting bigger, we have stronger economic growth and lower unemployment and life is getting harder for Australian families. What hasn’t been picked up is a cut in family payments of $2 billion including a real reduction in family tax benefits of families on $45,000 a year. We’ve seen the Government…

DAVID SPEERS: I’m sorry, for families to be on $45,000 a year?

JOE HOCKEY: On $45,000 a year, if on Part A, which applies in full to a family on $45,000 a year their payments are in real terms being cut over 3 years because the government is freezing the supplement. So the government is cutting $2 billion from families. It has got a $1.7 billion blowout in border protection in managing the boats alone. Over the next four years -

DAVID SPEERS: Hang on just to go through those. It’s the upper income threshold in the family benefits?

JOE HOCKEY: No, no, I’m sorry, this is wrong. The family tax benefit -

Poor, David Speers. I can well understand his confusion – he must have been thinking, geez I was in the budget lock-up for 6 hours and I missed that??

Hockey repeated this again in an interview with Michael Rowland:

MICHAEL ROWLAND: We saw last night that the Government effectively highlighted the family income figure of $150,000 as what it deems to be high income or wealthy in term of the family tax benefit and the baby bonus being phased out. Do you as a Coalition agree with that definition?

JOE HOCKEY: No, and I would say to you that the cuts to family payments can apply to families earning $45,000 a year as well. What they're doing is they're freezing the family tax benefit supplement - as far as we can see in the Budget papers, and we have to peel it back, as far as we can see - that can apply to a family earning $45,000 a year. It is having part of the family payment frozen at a time when cost of living is increasing substantially. Let us just see as we get through the detail of what this Government's intentions really are but they seem completely out of touch.

So Hockey would have you believe the Family Tax Benefit A level of $45,000 is being cut or at best, frozen (and thus you’ll lose out due to bracket creep). But here’s Families Minister Jenny Macklin in her Budget media release:

The FTB Part A lower income free threshold (currently $45,114) and the FTB Part B secondary earner income threshold (currently $4,745) will continue to be indexed, providing support to low and middle income households.

So errr, Joe? Want to try again?

Joe is also pretty sure he can use this budget to force an early election:

We're going to do everything we can to put the pressure on the government to call an election,” the Coalition's treasury spokesman told MTR radio.

Only two problems – the Independents like the budget, and the Greens are not going to block supply. Sure the Greens will try to get amendments, and sure the ALP might give them some (Gillard loves to negotiate and haggle). But when push comes to shove, what do you think the Greens want more – another election or a price on carbon?

Yep. The Budget will pass.

And so onto Question Time today, which was just too dire for words. I mean really dire.

How dire? The Libs best question was Wyatt Roy asking this:

“I'm about to turn 21. No Labor government in this place has ever delivered a budget surplus in my lifetime. Why should anyone believe you now?"

It got a laugh from both sides – I guess half were laughing with the other laughing at.

Swan replied:

"I thank the Member for Longman for that question because under our youth allowance changes he'd have to keep studying and not go on the dole"

The main problem for the Libs is that was such a good grab for the news that that was all we saw of their attack. As for the six question from Abbott or Hockey. Forgettable and forgotten.

Perhaps they’re still trying to work out that Family Tax Benefit doohickie.


UPDATE Via Samantha Maiden on Twitter. She has pointed out that what Hockey is referring to is this :

Reform of family payments — pause indexation of Family Tax Benefit supplements for three years

The Government will pause indexation of the Family Tax Benefit (FTB) Part A and B supplements for three years. The FTB supplements will be fixed at the current 2010‑11 levels of $726.35 per annum per child for FTB Part A and $354.05 per annum for FTB Part B until 1 July 2014.

The supplements would ordinarily be indexed by the Consumer Price Index. The measure is expected to result in net savings of $803.2 million over five years.

In his interview with David Speers Hockey said this:

DAVID SPEERS: This is the lump sum you get at the end of the year. The 720 or 750 dollars?

JOE HOCKEY: The family tax benefit supplement is being frozen in this Budget, which saves the government $800 million. Now, on top of that, they are freezing all of the other thresholds for a whole range of other family payments, so it covers everyone. The fundamental point here is that the $2 billion they are cutting from families, they have got a $1.7 billion blowout on boats.

DAVID SPEERS: Now, just hang on, when you say cutting though, it is freezing, it is not increasing.

JOE HOCKEY: It is money they are not getting over the next four years.

DAVID SPEERS: They’re not having money taken out of their pocket?

JOE HOCKEY: But their cost of living is increasing. This is where the Budget is completely out of touch and where the Government is completely out of touch.

So yes families on $45,000 will not see the supplement rise with inflation for 3 years. A cut? In real terms, yes. But hardly a killing the family budget given a 3 per cent rise over three years would mean the $726 would be around $793 in 2014 were it not being frozen. 

So yep Hockey was right. Egg on my face there. I should definitely have seen that in the Budget Papers.  An inexcusable error. Apologies to all – especially to Joe Hockey. 


Matt Cowgill over on We Are All Dead has had a look at the figures for average incomes, and asked: What is the typical Australian’s income?

His answer (and it is not a straight forward exercise) is that for a family with two kids in 2007-08 (the latest figures available) it would be around $75,600.

It’s a good read.


Space Kidette said...

As usual Grog, excellent piece. Would you be surprise that the fastest growing category of personal bankrupts is in the professional and semiprofessional bracket.

Sonia said...

Great post Grog. Thanks for clearing up the FTB B thing. I too was confused as like you we dont get it.I loved Tony Abbotts aspirations for us all. Middle class welfare!!
I do feel sorry for all us middle class people. I'm currently trying to decide between an iphone or an ipad. Its pretty tough. I only wish I qualified for some welfare to pay for it

Anonymous said...

Space Kiddette I can relate to that in my job today a "professional" with a 5 million dollar house (and only a 20% mortgage) asked to pay a $10000 debt by instalments. I guess he didnt consider himself rich either.

Anonymous said...

By freezing the indexation of the FTB supplements any increase in the "handed back after submitting your tax return" after the end of the entitlement year won't be happening.

The supplements were introduced by Howard before the 04 election (mostly to escape embarrassing debts) they were later indexed in a Costello budget to keep giving away the huge surplus.

If you are relying on an increase in an end of year payment by the CPI to get by you are in serious trouble

Matthew said...

Oi u dont you ever dare stop blogging, or I will come at you with a blunt plastic rusty Macca's plastic spoon. Haa you thought I'd say knife no sir cant afford that kind of stuff, I'm not even on 45g a year.

Michael said...

In my world, $100,000 a year is rich. It's way above what most people earn. Two people on two hundred thou is beyond my comprehension. I don't know anyone in that scale with or without kids.

Typing_Monkey said...

On the Allardyces in the Oz...if they're earning $200K a year, and paying $5k a month in tax and child care, they're still taking home $11.5K a month.
How anybody could think that theyre doing it tough on that kind of money is beyond me.

Moneypenny said...

@Typing_Monkey - Then you consider that the dole for a single parent with kids is around 10% of what the Allardyces take home each month ($515 per fortnight, I think).

I know there are other concessions and support payments for a Newstart recipient with dependent children - but geez it's not a lot of money for a family to be getting on with.

A family on $150K might not be rich, but they are well-off and with basic financial literacy should be able to pay their own way.

Mr Tiedt said...

The whole debate about "who is rich" is beyond stupid because wealth is one of the most relative descriptors I can think of.

Compared to some countries, just about every single person in Australia is rich beyond their wildest dreams. Compared to some suburbs in Australia, 95% of Australians are poor.

The question of who is rich is the wrong question. The discussion should be at what level it is no longer appropriate to receive subsidies from the government.

It's stupid because almost all such "working family" subsidies are just reverse taxation - they pay (just picking numbers out of the air) $20 000 tax per year, but are entitled to $10 000 a year in subsidies. It is pointless churn - but these people are entitled to their "benefits".

Middle class welfare is a problem, but the solution is going to be, politically, very difficult to resolve.

Gordicans said...

Three best blogs on the budget (not in order of merit):

1)Ben Pobjie in the drum (cocked revolver pointed at his bum; too funny)
2) Prof Julian Disney's succinct rolls royce analysis in Peter Martin's blog
3) this one of course

thefactis said...

The argument of 'is $150000 rich' is ridiculous. My parents don't earn anywhere near that amount of sum but we're not complaining. Just don't spend that much on unnecessary or 'luxury' items and don't take that much of a loan.

Stephen Bounds said...

To me the whole debate about "middle class welfare" is really wrong-headed.

The question shouldn't be whether higher-income families receive subsidies compared to middle-income families.

The question is: Should people who have chosen to raise children should pay less net tax than single and couples who remain childless?

I would argue yes.

There's nothing wrong with trying to focus welfare support on lower income earners but at the moment governments are pinging families and letting the wealthy childless off scot-free.

The cry of "middle-class welfare" doesn't change the fact that these cuts target people who are less able to afford them than others in our society.

Victoria said...

So now the government is supposed to support you if you're 'aspirational' for yourself and your family? Perverse Howard logic gone crazy!

L said...

Considering how stupid everything Hockey was saying was, I think you can be forgiven for assuming that he had no idea what he was talking about.

Rhiannon said...

I have to say as a family of four with an average mortgage, on $50k a year, yes I most certainly DO consider people or families on $150k wealthy.
And despite being married to a 'blue-collar worker' and only having retail experience myself I certainly consider myself middle-class as I am 'second generation tertiary educated' and come from a Canberra public service family (sucking of the public teat, blah blah blah)
I totally approve of child care rebate, and totally approve of FTB, to a point (because I live on it) but I am completely in favour of reducing subsidies for higher-income earners. Yes, yes - class warfare. Politics of envy, blah blah blah.
I spent my baby bonus on part of a 1kw solar electricity system, which means now my kids can actually eat actual food.
I have met someone who spent hers on a diamond ring.
Aspirations need to be subsidised? Hell, I aspire to a new Mercedes. I aspire to a smartphone. I aspire to another qualification so that I can get a job. I aspire to having some heating in my house. I aspire to a 1935 WACO biplane.
Anyone feel like contributing? (Ok, you may be contributing to my further education. Thanks!)

Sorry about incoherent rant - I am just tired and cross about the expectation of more and more public money being directed at people who need it least.

Bushfire bill said...


You shouldn't have retracted your comments Grog.

If they spin, bootstrap and outright lie, then why can't mere mortals?

Where's their retraction of the Gail Kelly story?

Indeed, Nikki Savva on Insiders the other day when confronted with incontrovertible evidence that their Kelly story was wrong to wit, words from Kelly's own mouth - commented that it wasn't the Oz that was at fault, it was Kelly. Apparently the Oz knew Kelly's own mind better than Kelly did!

Oz journalists regard retractions and corrections as signs of weakness. Toughen up mate.

Anonymous said...

I'm confused now. Is the Budget tough?

Patricia WA said...

Half agree with you, Bushfire Bill, but I don't think Grog wants to play by their rules. He'll never join them since he's well able to beat them. Congrats on the praise from Jonathon Holmes on Media Watch, Grog.

Rhiannon, if it's any comfort, just wait till your kids grow up and leave home. You'll have plenty of disposable income then!
During years on struggle street one learns to enjoy simple pleasures that cost little or are free. I know other seniors, like me, who just don't spend all their pension, whether government or self-funded.

Kids' food, clothes, health etc. are big, unremitting costs. Amazingly I've seen and heard comments from DINKS complaining that there's nothing in this budget for them! Everyone has their hand out these days, it seems. Nice to think that
they and others like them are getting a whack from gutsy Gillard's stick in this and hopefully many a budget to come.

Greg Jericho said...

BB and Patricia. No I was wrong - I don't mind admitting so.

Anon, apparently the budget is now tough. Who knew!

Adam said...

@Stephen Bounds, I cannot tell if their is sarcasm in your note.

Wealthy Childless Singles and Couples? Why do I get taxed more when I earn the same as someone else, Because I made a choice not to have children?

Why should we not be treated equally? They chose children. I chose a holiday (x many).

Simply because I have lower costs at home due to my choices, am I now expected to pay more tax?

What if the difference was someone buying a big screen TV, and I go without? Should I pay more tax now because I have less expenses at home?

BTW, if you couldn't extrapolate my argument, I am also absolutely against any govt funded - paid maternity leave.

Having children is a lifestyle choice. If you choose to have children, then you are choosing to raise them, pay for them, look after them. Please don't push the responsibility for your choices onto others.

Anonymous said...

And as for me,trying to survive on newstart at age 59 following a 30 year relationship breakdown with no bloody assets and rent to pay and no savings because I had to spend what I had saved to be eligible for this pissing $464.00 per fortnight, well you can imagine how I feel about this garbage.

Stephen Bounds said...

@Adam -- if you think I'm being sarcastic, you must be a troll.

Apparently buying a flat screen TV contributes just as much to Australian society as raising well-educated, (hopefully) well-adjusted kids?

While you're retired and relaxing on your superannuation, my kids will be paying the taxes that continue to fund the infrastructure you benefit from.

So no, it's not a question of you "paying more tax". It's a question of the government investing in the future of the country for people who are prepared to contribute. Costello's speeches on the Baby Bonus make that quite clear.

I stand by my claim: Means testing things like FTB, Baby Bonus and the Private Health Insurance rebate undermine the reason why these payments were originally established and counterproductively distort our progressive tax system.