By Greg Jericho Wednesday 20 May 2015
Photo: The budget makes it look like some households have higher disposable incomes than they do. (Tracey Nearmy: AAP)
Don't buy the budget spin - families receiving government payments have a much lower standard of living than single people on average incomes, and are a very long way from being "welfare rich", writes Greg Jericho.
Usually the budget website is pretty dry, which is fair enough given the budget papers mostly consist of very dry economic tables and discussion.
This year, the Federal Government has gussied up the website with so much marketing-style political sugar-coating that it seems to be covered in consultancy fairy floss. The spin is now even within the budget papers themselves, with the inclusion of tables purporting to show the amount different households pay in tax and receive in benefits. The tables, however, provide a very distorted picture, and fail to show a fair comparison of different households' standards of living.
Under Peter Costello and Wayne Swan, the Budget Overview contained tables called "Benefits for families" and "Helping households with the cost of living" respectively.
These tables revealed the impact of the budget on the incomes of various types of households.
Wayne Swan was rather tricky in his version of the table, using 2007-08 as the base year, rather than the previous year, as occurred under Peter Costello.
But last year, there was no such table. However ANU's public policy experts, Peter Whiteford and Daniel Nethery replicated the tables, and found they displayed a fair bit of carnage for all households.
This year's budget didn't see the table return, but instead Joe Hockey asked Treasury to include tables showing "support for households".
This does not show whether the support is greater or less than previous years, just the amount of tax paid and government assistance given to various types of households. The households range from singles with no children, to families with two incomes and three dependents, to pensioners.
Hockey told News Corp's Sunday papers that he just wanted to show taxpayers how many people they were supporting with their tax.
The table for example shows that it requires the equivalent of tax paid from 0.9 workers on average full-time earnings to cover the cost of welfare payments given to a single parent earning $40,000 a year with two children aged between six and 13.
While last year Hockey sought to show taxpayers where their money went through use of the "tax receipt", this table is less about showing where your dollars go towards education and health and defence, and more, as Insiders' Barrie Cassidy suggested, about building resentment towards those who receive welfare payments.
Such a view certainly is in keeping with Joe Hockey's position last year regarding welfare, where, for example, in his post-budget speech to the Sydney Institute he suggested that welfare "payments are too broadly available to too many people".
Given the Sunday papers ran with the headline "Joe blasts 'welfare rich' who have more money to spend than workers", the media are certainly using the figures to run the resentment angle.
To his credit, Hockey on Insiders did argue that he thought "we have an obligation to help people". His table, however, does not give that impression.
For example, the table notes that a single person on $80,000 has a disposable income of $60,853 after paying $19,147 in taxes. By comparison a two income couple on $80,000 with two children pay $11,674 in tax and receives $17,001 in government benefits for a disposable income of $85,327.
The figures take a rather unique view of "disposable income". Not only does it include payments such as Newstart, the Parenting Payment and Family Tax Benefit Part A and Part B, it also includes the child care rebate and benefit.
Given the government has been at pains to suggest its child care subsidy is, in the words of Scott Morrison, "a jobs package, not a welfare package", it is interesting to see it included among the figures for government assistance.
And as the child care payments are dependent upon a person spending money on child care in order to receive the benefit and/or rebate, it is odd that the government suggests they elevate "disposable income" - especially given, as former public servant David Plunkett noted, the figures don't deduct the child care costs from the disposable income total!
But while this approach does suggest households with children in child care have a higher disposable income than they really do, the table is also misguided because the comparison of the households completely ignores that the cost of living for two adults, let alone those with children, is more than for a single person.
When comparing the standard of living for households, the accepted measure is to start with a single person equalling 1, and to add 0.5 for each adult, and 0.3 for each person under 18. Thus, for a family of four (two adults, two children) to have the same standard of living as a single person, their disposable income would need to be 2.1 times that single person (1+0.5+0.3+0.3).
When we use this measure to compare the households in the table, a quite stark picture appears:
Embed: Households with private income of $80,000
For a two-income couple on $80,000 with two children to have an equivalent standard of living to the single person on $80,000, their disposable income would need to be $127,791 - rather above the $85,327 they currently have.
Similarly when we compare a single person on $100,000 who is shown in the table as paying $26,947 in tax and a disposable income of $73,053, we see that for a family of four to have the same standard of living, they would need to take home $153,411 - well above the amount of disposable income of any of the households shown in the table:
Embed: Households with private income of $100,000
Now, no one expects government payments to make up the difference in standard of living between a single person and a family on the same income. But the households presented in the tables provide a pretty distorted picture.
The only household type in the table, for example, that has a better standard of living than the single person on $80,000 is the single person on $100,000 - but nowhere is that made clear, or even considered.
Embed: Comparison of household disposable income
But this doesn't mean all single people are living the life of riley.
The table notes the disposable income of a single person on $40,000 (which is almost half the average full-time income) is just $35,053. That is a lower equivalent disposable income than all non pensioner household types displayed on the table except for two - a couple with one income of $60,000 and one child under 6; and a couple with two incomes equalising $60,000 and with two children aged 6-13.
The tables might have been created to spin the tale that too many people are too dependent upon welfare that makes them better off than single people on the same income. But what they really show is that such families receiving government payments have a much lower standard of living than single people on average incomes, and are a very long way from being "welfare rich".
Greg Jericho writes weekly for The Drum.
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