It's all a bit creepy...

For ages I’d been playing about with various ways to try and show the effect of bracket creep in a chart. Over the last year or so, I’ve settled on one that illustrates the combined effect of creep and inflation, plus whatever measures have been put place in the tax-transfer system that add to or subtract from them. I thought the format was reasonably self-explanatory, but when I use it for charts on Twitter I get more than the usual number of requests to explain just what I’m trying to show.

So here goes.

And in the end...

Over the last few years I've done a series of posts looking at how particular households were affected by tax-transfer system decisions coming into effect over a succession of Parliaments. The elections for Parliament 45 brought to an end the period that I loosely attribute to Parliament 44 and so I thought it was worth updating the coverage for the aforementioned households, this time in a single post.

The curse of special money...

Shortly after this year’s Federal budget it dawned on me that the Government’s proposal to scrap the energy supplement for new claimants of certain transfer payments (eg, Newstart allowance) would actually make them worse off than if the supplement had never been introduced in the first place. To draw attention to this issue, on 4 May I started what has been an ongoing series of posts about it on Twitter, along with a more detailed blog post on 14 May.

Since then I’ve been writing to MPs, Senators, Ministers and their parties about it, as well as journalists in the major media outlets, mainly via Twitter. I’ve also chatted (in the good old fashioned verbal way!) with a few people about it over the intervening months.

These efforts have shown me that it can actually be a bit difficult for some people to get their head around how it’s possible to remove a no-longer-needed extra bit from a payment and in doing so have people end up with less than the original, pre-extra bit, amount. So here’s another go at explaining it; one that doesn’t use pictures or tables or discussions about the CPI. It’s a vast simplification compared to what is actually going on, but the essential mechanism is there…

Malice or Misunderstanding?

Note: This post has been amended since originally posted to include a table of examples.

One of the measures announced in the Government's 2016 budget was the abolition of 'carbon compensation' payments for those newly claiming a range of welfare payments, including Newstart allowance. Originally referred to as clean energy supplements, but later renamed energy supplements by the Government, they were brought in by Labor to offset the increase in costs caused by the introduction of carbon pricing. The removal of said pricing makes the supplements redundant and so their abolition has a certain logic. However, if the removal goes ahead as announced, the rates of payments for new applicants will actually be less than if compensation for carbon pricing had never been introduced.

As an example, for a person claiming the (usual) lower single Newstart allowance rate, this will mean their payment is not just $8.80 a fortnight less than current recipients (who get to keep the energy supplement), but $3.60 less than it would have been had there been no carbon tinkering. Let that sink in for a moment - in spite of seemingly endless calls for the rate of Newstart allowance to be increased, the Government is proposing to reduce it to less than its pre-carbon price compensation value.

EMTR and related charts

After posting in a few discussion forums, and finding I was unable to paste in a chart or two to make my point, I've decided to try having a 'reference' post which is a kind of chart repository. I can then put links to it in forum posts.

I envisage that as a post it will be rather free of text, so won't make for much of a read. I also intend to add charts to it as I need them (and to update them). Don't forget - if the charts appear a bit small, you can select them individually and they will open separately, and, I hope, larger.

The family/household types for which charts are currently available are:

• single jobseeker payment (age <55)
• single age pension (age 65+)
• couple, single income, both jobseeker payment (both aged < 55)
• single (age <55), parenting payment, 2 children (6, 8)
• single jobseeker payment (age <55), 2 children (14, 15)
• couple, single income, both jobseeker, one with partial capacity for work (would have been disability support pension pre-July 2006, both aged <60), 3 student children (16, 18, 20)
• couple, single income, one jobseeker payment, one age pension (one aged 60-64, one aged 67+)
• couple, single income, one jobseeker payment, one parenting payment (both aged <60), 2 children (2, 4)
• couple, single income, one jobseeker payment, one disability support pension (both aged <60)

Note that the charts show annualised results.

With that said...

It's All Downhill From Here...

We've now passed the half-way point of Parliament 44's term and are well into the downhill run to the next election.  The recent release of the June quarter CPI has prompted me to wrestle aside my customary laziness and update my chart collection to show the effect of tax-transfer changes on disposable incomes over that first half. 

Nit-pickers might say that the first half really ended in the March quarter, but the charts for that period were pretty boring.  As I noted in my previous post, very little of the contentious parts of the Government's budget agenda had managed to take effect at the 12 month point, and this remained more or less the case until 30 June.  But then the floodgates opened, the budget's fangs began to bite, and the tax-transfer excitement level went up a notch.  So lets look at the changes up to this slightly over half-way point.

One Year In

It's a bit over a year since the last Federal election and I had been considering doing a post to show the changes that have occurred in the tax-transfer system over the first 12 months of Parliament 44.  I have to confess though, that the charts showing the 12 month results are, for the most part, pretty boring, and to date this had stayed my hand.

 

However, I have been intrigued by the continuing coverage that the Government's first budget has been getting, a recent example being this opinion piece by Ross Gittins. The article outlines a number of budget measures that might be perceived as unfair, suggesting that this is giving the Government continuing grief, popularity-wise.  What struck me about this is that almost none of the measures mentioned in the article have actually come into effect, having been held up, voted down or amended by the Senate.

 

In fact, despite the rhetoric around the impact of the Government's budget measures, the changes to the tax transfer system that have actually occurred over the first 12 months arguably look more like stereotypical Labor outcomes.  That's not to say that this will remain the case.  Many budget measures have had their implementation dates pushed back as part of the wheeling and dealing to get them through Parliament. Others are still before Parliament and may yet see the legislative light of day.  But the key thing, for me at least, is that most of the 'horror' budget has yet to actually bite.

 

So, let's look at how the first 12 months has treated some selected household types, but with an added twist: we'll also look at what the Government had intended to achieve, tax-transfer wise, and thus see the difference between intention and outcome.