Government rejects St Vincent de Paul Society report

The recent paper from the St Vincent de Paul Society challenging the Government’s record in looking after low income workers and their families is mistaken.

The paper has confused measures of inequality with real standards of living. It has also failed to take account of improved incentives for low-income households to improve their standard of living.

For low-income families, the two most relevant factors are employment opportunities and family payments. On employment, the Government’s economic policies have seen a period of sustained real earnings growth and low unemployment – with low-income families sharing in this.

In relation to family payments, the Government has implemented a program of reform of the family assistance and taxation systems – designed to help families raise their children, help them balance their work and family responsibilities and improve the rewards from work.

The operation of the taxation and welfare system has also ensured that there is extensive re-distribution from high-income households to those on lower incomes.

The Australian Bureau of Statistics’ publication Household Income and Income Distribution 2002-03 shows that the standard of living of Australians has improved considerably since 1994-95. The real standard of living in all quintiles of household income has improved. This publication also shows that the percentage of working households has increased and the percentage of households principally dependent on pensions and allowances has declined.

Analysis from the National Centre for Social and Economic Modelling (NATSEM) has found that not only has private income growth been strongest at the bottom end, but that between 1997-98 and 2004-05, the real disposable income of low-income families will have grown by $87 per week. This represents a rate of growth similar to that enjoyed by middle-income families over the same period.

NATSEM has also confirmed that there is extensive redistribution between households due to the operation of the Australian system of taxes and benefits. Their research has found that the net impact of the tax and benefit system is to redistribute income from the most affluent 40 per cent of households to the less affluent 60 per cent.

The following table from NATSEM demonstrates the effect of the tax and benefit system on final incomes for households across the income distribution.

* Average $ per week per household
** Average $ per week per household, after taking account of taxes and transfers

The Australian Council of Social Services has noted that “the Coalition Government’s increases in family payments helped most low income families to keep pace with the growth in incomes enjoyed by middle income families during the current economic boom.”