Gender lens on the 2018-2019 Federal Budget

The National Foundation of Australian Women has once again put its shoulder to the wheel, expertly reviewing the Federal Budget through a gender lens.

How did women fare in the 2018-2019 Federal Budget?

A return to surplus, together with modest, targeted tax offsets for low and middle-income earners next year, and a substantial aged care package for older Australians with many welcome elements, are mostly positives for women. However, this is based on optimistic assumptions and cyclical bumps including commodity prices, as well as excessively constrained spending, and not on reformed and sustainable fiscal policy.

Median taxable income in 2015-16 for women was $48 690 compared to $63 430 for men. The Low and Medium Income Tax Offset proposed for next year would assist a large number of low to middle income Australians in the short term.

However, the offset mechanism is ‘a retrograde piece of policy design that adds complexity to the system’ (Irvine, 2018).  As a result of the phase out over higher incomes, the LIMTO increases disincentives to work, particularly for part time working women. It is not accompanied by a broader base; the Henry Review proposed abolishing the Low-Income Tax Offset because of complexity.

There are two further stages of proposed personal income tax changes as well as retention of the company tax cut package.

However, stages two and three of the tax cuts, together with the proposed unpopular company tax cuts, are rejected by NFAW.  The proposed flattening of the tax rates reduces the progressivity of the tax system and represents a major and inequitable turning point. The government argues that these changes address bracket creep, are simpler and improve incentives to increase earnings.

Bracket creep can be addressed through changes to thresholds, not the applicable tax rates. NFAW disputes the assertion that the package addresses the need to remove bracket creep. A larger impact on incentives to increase work hours and earnings would be made through addressing the high effective marginal tax rates as a result of the interaction of the tax system with payments such as child care, Family Tax Benefit and HECS. Men and women’s decisions about labour supply are generally different. Many women’s decisions about paid work are far more sensitive, largely because of caring responsibilities. That is female labour supply is relatively elastic compared to men’s. On the other hand, the evidence suggests men’s labour force behaviour is largely unaffected by moving to higher marginal rates.  NFAW, and many others, have drawn attention to the fact that for many women decisions to enter the paid work force are negatively affected by these interactions.

Spending growth is projected to average just 1.1% in real terms over three years, compared to 2.1% average growth in real terms over the government’s two terms in office. That is, we could experience severe austerity. Greg Jericho (2018) has pointed out that flatter taxes are not about cutting taxes but about cutting services and welfare. The tax cuts will reduce revenue by billions. Publicly funded services will take a hit, with the potential to reduce jobs. Only spending on schools and the NDIS will grow in real terms. This is of major concern. Women are over-represented at lower income levels. Changes to government benefits and services affect them disproportionally.

Aged care is an important issue for women as users, as workers providing services and as informal carers. The sector receives a considerable boost, up from $18b a year to $23 billion over four years. Elements of the package are welcomed, including improvements to My Aged Care processes; the introduction of quality assurance processes; the establishment of a Quality and Safety Commission; mental health trials for residents in aged care suffering social isolation or loneliness; money to address elder abuse; extra funding for palliative care; extra funding for Aboriginal and Torres Strait Islander flexible aged care; and a trial introducing consumer centred funding, similar to the NDIS.
The centrepiece of the package is 14000 extra home care packages at a cost of $1.6b.  Women currently receive two thirds of home care packages. However, over 100 000 aged Australians are already on the waiting lists. The increased expenditure for this item also appears to be redirected from an underspend in residential aged care, where women also make up two thirds of residents.
The budget does little in areas such as domestic violence, pay equity, housing, assistance to the marginalised – no increase in Newstart or Commonwealth rent assistance – the environment, health promotion and prevention. There are no longer-term structural approaches to reforms that are required to meet government services needs over the long term.
NFAW welcomes the commitment by the government to produce a Statement on Women’s Economic Security in September. There are substantial policy measures that can be taken to improve current policy settings to support gender equality. However, with limited fiscal resources available in a tax cut environment, the women’s statement in September will face many challenges.



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