29 May 2012

Government oblivious to social time bomb of stagnation

CPAG is alarmed that the 2012 budget does not acknowledge the plight of many children and families.

There are no words of empathy for struggling families, unlike in the Australian budget speech which stated: “We understand the pressures Australians face, paying for electricity, housing, groceries, petrol or even a simple family outing.”

There was no talk by the National-led government of social inclusion or redistribution to ease the pain of a protracted slump. Instead we face the prospect of four more long dark years with food banks, the barometer of distress, already at breaking point.

New Zealand is seriously indebted already and the current account deficit is projected to get worse, adding to borrowing overseas. The Finance Minister’s optimistic forecasts of growth do not stack up against the chart showing that this budget will slow down the economy, and will continue to do so for the next 4 years as population ageing begins in earnest.

There is some magical thinking around asset sales. These make the fiscal deficit worse by $325 million over 4 years, but the budget assumes the gains on disposal of $800 million will make it come right.

Revenue Minister Peter Dunne claimed in a press release, “Budget changes raise revenue, increase fairness”. Revenue will be raised by: tightening the rules around the deductibility of costs relating to holiday homes, boats, and aircraft; putting changes to livestock valuation rules; and removing three tax credits that affect families and children. These 3 changes might raise $100m a year but raising the top tax rate to 39% would raise $870m.

Health Spokesperson, Professor Innes Asher says, “Since the slump started we have seen increased numbers of disadvantaged children hospitalised for preventable diseases which can scar them for life. Yet they get little budget attention apart from some support to improve access to out-of-hours health-care for under sixes and ‘well child’ services. Access is actually reduced for older children through increased prescription charges for children 6 years and above and their families.”

The fiscal black hole was created by expensive tax cuts for high income earners, the refusal to address parameters of New Zealand Super and the failure to reign in housing. The proposed cure is a progressive chipping away at low and middle incomes to balance the books.

New Zealand needs political leadership to ensure the pain is fairly distributed. Instead, the Government’s four priorities are “to responsibly manage the Government's finances; build a more productive and competitive economy; deliver better public services, within tight financial constraints, and to support the rebuilding of Christchurch.”

Co-director of CPAG, Mike O’Brien says “Last year’s budget announced a progressive reduction in Working for Families. We know working families are already struggling, yet the threshold is reducing from $36,827 to $35,000, and the abatement rate is increasing from 20% to 25% by 2018. This means that if a family on $36,827 gets $1,000 more as inflation catch-up in gross income, they will lose $280 this year in Working for Families.”

O’Brien asks “How is fairness increased when the sole parent paying $10,000 a year in day-care fees loses the small refund of $310? How is fairness increased when the tax credit of up to $245 a year for active income of children is removed? How is fairness increased when the tax-free gains in housing are ignored?”

CPAG describes Budget 2012 as a very poor effort. Overall, inequality and poverty will continue to increase; with the misery, injustice and the huge cost to society that entails.

CPAG says the best way to build the future is to invest in children today. They will soon become tomorrow's workers and tax payers. Aside from the misery of a prolonged slump on struggling families, New Zealand faces a massive decline in school leavers. Numbers of school leavers aged 17-19 years will decline nationally by a collective 11,250 over the next four years alone. Demographer Natalie Jackson of Waikato University says, “The idea that so many of this precious pool are struggling is truly worrying, both for them and the economy. New Zealand can't afford to waste one child. This is really a sacrificial budget.”

www.cpag.org.nz

ENDS

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