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July 2014

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Today is an auspicious day in Canberra, with the terms of new Senators commencing. Once they are sworn in next week, the real challenge starts and the fate of the several key policies announced in the Federal Budget will be decided.  For a reminder of how the Senate looks, and the influence of the PUPettes and their Motoring Enthusiast mate Ricky Muir, the numbers are here.

Amongst all the noise on the budget, this was my contribution published by the Mercury on 5 June 2014, which puts the budget in a broader policy perspective and highlights a number of sectors that have job vacancies potentially suitable for unemployed people in Tasmania.

Budget not all doom, gloom

It seems most of Australia is opposed the federal Budget for at least one reason or another. However, key parts are worth defending.

A major gap in all of the budget analysis is a failure by most people to look beyond policies announced on budget night.

Just like household finances, all policies change over time. As an example, many low and middle income households may not realise that they have a double windfall coming soon.

In its carbon pricing package, the former Federal Government estimated that the cost of living for an average household with two teenage children would rise by $653 in 2013-14, and receive $679 in compensation.

The package was designed to overcompensate low income families to a greater degree. In other words, Australia had a government that was actively and openly actively redistributing wealth.

When carbon pricing is abolished (or if depending on the whims of the Senate cross-benches) there are windfall gains from both reversing the price impacts and keeping the compensation. Nevertheless, many households will have receive less financial support than they would have under previous s settings.

Another angle for the attacks on the budget is the “disproportionate” impact, where low income households are “doing the heavy lifting” to repair the budget. Again, this ignores the evolution of policy.

Through various policies — such as changes to tax scales associated with the carbon pricing package, introduction of a means test for the private health insurance rebate and the temporary deficit levy on incomes exceeding $180,000 — the tax system is becoming more, not less, progressive over time.

Clearly the Government has missed the opportunity to address some of the financial privileges enjoyed by high-income earners. It also did not proceed with 55 “unlegislated tax and superannuation measures” that were announced by the former government, costing $2.9 billion.

Nevertheless, it is seemingly a matter of time before politics gives way and the crackdown on superannuation concessions arrives. When it does, and the fate of the excessive generosity of the paid parental leave scheme is known, the disproportionate nature of the 2014 Budget will again have a different complexion.

As a wealthy country, we must provide a safety net for people who genuinely cannot work. Slowing future growth in welfare payments that form this safety net is part of a strategy to ensure the fiscal position is sustainable in the long-term.

However, the budget doesn’t really address the challenge of how we fund health and education for coming decades. Instead, it transfers this challenge to the States. In their current form, the projected cuts ($2.1 billion over a decade in Tasmania’s case) must mean pressure to raise State taxes that have significant economic costs or the unfairly maligned GST, or reduce service levels.

Instead of being a vehicle to address this challenge, this budget is more focused workforce participation, one of the 3Ps that drive long-term growth (the others are productivity and population).

The endemic problems of unemployment in Tasmania have been described at length. However, it is worth noting that no adults are working in 27 per cent of Tasmanian households, and in almost half, no adults are working full-time.

Changes to the Newstart allowance and waiting periods, the earn-or-learn policy and Work for the Dole are designed to encourage people into the workforce, whether directly or by acquiring new skills.

These policies rebalance the existing carrot of Job Services Agencies working to place the unemployed in jobs and the very light stick of job search obligations that appear to be widely ineffective. They do have risks, especially with cuts to programs that established pathways into the workforce and lengthy waiting periods for some to receive Newstart or Youth Allowance.

Many critics have argued that the policies can’t work because there are few jobs available in Tasmania for those who left school early, have low skill levels and/or are currently unemployed. However, the evidence suggests there are many opportunities in diverse sectors around the State. And not just in fruit picking.

The Department of Employment statistics show shortages in automotive and engineering (metal) trades, with over a third of vacancies unfilled in the most recent surveys. These jobs do not require years of training. Instead they may merely require Certificate II level qualifications, which means around 17 weeks of training at TasTAFE.

Other important sectors of the Tasmanian economy are well-matched to Tasmania’s educational history, with at least 60 per cent of employees in most of the mining and manufacturing sectors leaving school by year 10.

The dairy sector has a shortage of workers, and aged care will continue to grow with Tasmania’s ageing demographics. New programs have been announced to provide training and pathways into employment in both sectors.

While high-level skills are important in many jobs, the reality is basic training is sufficient for many jobs as employers will invest money to provide further training and skill development. If literacy and numeracy are barriers then other programs are available, such as the successful 26TEN Network, before stepping on the path to training and work.

The Prime Minister has been criticised for suggesting Tasmanians may need to move. However, we can’t lock ourselves into a view that people shouldn’t move to get a job and we can’t afford a system that says welfare is a legitimate option to keep unemployed people in the same communities for years.

The criticism also overlooks the potential for people to move within Tasmania, not interstate, where greater support from family and friends is often available.

The budget also implicitly asks whether society should continue to provide assistance to people who won’t move for training or employment. The Government’s answer is obvious.

While that is a choice Tasmanians must face, the long-term social benefits may be profound if the budget successfully increases participation. In the meantime, the budget impacts on individuals and some policies have risks, but let’s not overstate the impacts by ignoring the fact that all policies evolve. 

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