Tax cuts failing to prevent hardship

Petrol prices are a hot topic right now but for the 2.5 million Australians who use welfare services each year, it is only one thread in a complex web of hardship.

Basic food costs, housing, electricity and education are some of the other necessities rising at a rapid rate and putting the squeeze on families.

The Federal Government has attempted to level the playing field by delivering tax cuts it claims were aimed at low and middle income earners. But these tax cuts have done little to ease the pressure.

The fact is someone earning $30,000 a year can only expect to see about $8 a week more in their bank account. With food rising 5.7 per cent in the past 12 months, housing 5.7 per cent and petrol a staggering 18.9 per cent, that $8 extra has already been overtaken by a raft of expenses.

These rises in food, housing and transport - all well above inflation - come on top of 2007 data showing that more than one in three low income families cannot pay electricity, gas or telephone bills on time and that one in four sought financial assistance from friends or family.

Even the announcement recently by the Australian Fair Pay Commission of a $21 a week pay rise for low-paid workers will do little to plug the gaping hole tearing through the weekly budgets of working families.

In the past year alone, Anglicare Victoria has seen a 20 per cent rise in requests for financial counselling across the state and we continue to struggle with the growing demand for food parcels and other emergency assistance.

Our recently released Financial Hardship Survey paints and even more distressing picture of life on a low income. We interviewed a sample group of 50 Anglicare Victoria clients and the results were damning.

Every single person who took part in our survey told us that the cost of food had increased significantly for them in the past year and nine out of 10 people told us they now spent more than half their weekly income on housing and food combined. When asked what they would buy in the grocery shopping each week if they had more money, the most common responses were fresh fruit, vegetables and meat. These were once considered as staples and vital for a healthy diet. It appears that these days they are now labelled as “luxuries”.

Our research told us something else compelling - when people are forced to live moment-to-moment, pay cheque-to-pay cheque, they neglect the bigger picture. Eighty-two per cent of people surveyed had either not been on a holiday in the past five years or had never been on a holiday at all. Some children had never seen more than the grinding routine of their parents’ constant struggle.

Eighty-six per cent of the people we spoke to had no home contents insurance and almost half had absolutely no car insurance. Not even third party insurance. Not surprisingly, 94 per cent had no life insurance and only one person we spoke with had health insurance. For these people, one slip up and they are buried under debt as they pay off a car accident or buy new belongings after a burglary.

Education is proven to be one of the most effective ways of levelling the playing field and providing low income families with an opportunity to break the cycle of disadvantage. But worryingly, this was another area where almost all respondents noted an increase in cost. And 92 per cent of all parents with school-age children told us their children don’t take part in extra-curricular activities like weekend sport or music lessons because they cannot afford it. This can leave children on the outer and discourage them from fully participating in their schooling.

The Federal Government has introduced a new Education Tax Refund to help with the cost of books or a laptop but these payments will have only minimal benefit to those on low income and will not address the systemic issues surrounding public education.

Small tax cuts and one off payments are never going to deliver opportunities for low income families to take part in the Australian community and are a long way from creating an inclusive society touted by Julia Gillard and the Federal Government.

Rather than tinkering around the edges of tax policy, the government needs to make real its rhetoric and invest in the future, in education, transport, housing and other infrastructure. If the $31 billion promised in tax cuts was instead used for schools and hospitals, in the long term our children will be better served.

Through closer partnership with the community sector, the government can tap into vast wisdom and experience to help shape, implement and evaluate social policy designed to create a truly inclusive and prosperous society.

We can help by applying our learning’s to make sure all Australians have not only the economic means but also the skills and support they need to participate in their community. It can only lead to a stronger nation in the long run.

There are many domestic and world forces influencing the cost of living and the Australian Federal Government cannot control all of them. But it can and should ensure that all Australians are able to afford to participate fully in the community and contribute to the fabric that makes up this wonderful country.