Treasurer's Economic Note
In many ways, the 20th century was punctuated by the conflict on how wealth should be created and distributed in society. An entire cold war was waged over these competing ideas. However, in the 21st century, there is wide recognition that an agenda for social reform and an agenda for economic growth are not at all mutually exclusive. Rather, they go hand in hand, with social reforms that create opportunity and make societies fairer only possible on the back of economic strength. And you only have strong societies and strong economies when everyone has a stake.
In the wake of the GFC and the global downturn, these truths are all the more self-evident. These days you’ll find free market advocates like The Economist and the Financial Times arguing for greater social mobility and equality. And you’ll find politicians from all sides talking up the benefits of economic growth and productivity. That’s because big social reforms can only be carried on the shoulders of a strong economy. And any economy is strongest when more people have opportunities to share in its prosperity.
This week we’ve seen a classic case in point – securing DisabilityCare through a stable funding stream will lock in a historic social policy reform at least as big as Medicare. The announcement made on Wednesday by the Prime Minister, Minister Macklin and I was a great step forward in securing adequate and sustainable disability services for generations to come. Following that, Victoria and Tasmania have joined New South Wales, South Australia and the ACT in signing up to the full roll-out of DisabilityCare Australia. With only a few states to go and a significant new funding source announced for the states last week, we are hopeful we will soon have all states signed up to a truly national scheme.
DisabilityCare Australia to fix an underfunded, unfair and fragmented system
The current disability support system leaves far too many of our most vulnerable Australians behind. It is inefficient and fragmented, and it’s failing those who rely on it. Funding is limited and rationed so people with significant and permanent disabilities who do get support often have to accept a one-size fits all approach. Those who rely on it have little control over the support they receive, and don’t have the certainty that they will receive proper care.
The Gillard Government is determined that we no longer see the ‘cruel lottery’ where the support people receive depends on the kind of disability they have or where they live. If you or a person you care about were to acquire a disability through a debilitating disease, DisabilityCare will mean that you don’t get less support than someone who acquired their disability through a car accident in a different State, which happens in our current fragmented systems. For a person with a disability right now, it could mean the difference between getting a correctly fitting wheelchair right away, rather than waiting three years for a new one. For an elderly parent looking after their son or daughter with a disability, and wondering what will happen when they can no longer care for them, DisabilityCare will provide certainty of support for the future.
DisabilityCare will be provided through rigorous, fair, and nationally-consistent assessments. This will ensure resources are targeted to where they are needed, and that all people with a significant and permanent disability – over 400,000 Australians – get the reasonable and necessary supports they need. Not only that, they will be able to plan their care and support to meet their needs, goals and aspirations. DisabilityCare Australia will work with individuals to develop a plan that meets their needs over their lifetime.
DisabilityCare will also enable people to access support from a range of community groups, NGOs, specialist disability service providers and state and local governments. The types of support available for participants will range from advice, information and referral right through to home and vehicle modifications, individualised personal care, and respite and domestic help. Crucially, once rolled out nationally, the support that participants receive will be portable, so that people won’t lose access to services or go to the back of a queue because they move states.
Delivering a secure and enduring funding stream for DisabilityCare Australia
When you look at a system that’s failing people day in and day out, and how much better it will be once DisabilityCare is in place, it becomes pretty obvious that we should all do what we can to make it happen. Not only for the here and now, but built into our enduring social safety net in a sustainable way. That’s why we decided that a modest increase in the Medicare levy was the best way to make sure DisabilityCare was established on secure financial foundations. People with a disability, and their families and carers, deserve no less.
From 1 July 2014, the Medicare levy will increase by half a percentage point to 2 per cent of taxable income. All the money raised from the increase in the Medicare levy will be placed into a fund which will only be spent on the creation and delivery of care and support services by DisabilityCare Australia. From that fund, billions of dollars will be made available to the states and territories to help them meet their commitments to DisabilityCare over the next decade.
In making this decision, we’re asking the community to make a small contribution to a scheme that will make an enormous difference. To give one example to put this into perspective, someone earning $70,000 will pay less than a dollar a day towards the scheme. This is a small price to pay to help a person with a disability lead a life of dignity, participation and fulfilment, with access to many things in life that most of us would take for granted.
Challenges facing the Budget
In a bit over one week I will be delivering my sixth Budget. As the Prime Minister and I have been pointing out for some time, this is a Budget being put together in very challenging fiscal circumstances. The fact is, revenues have taken a huge whack since our last budget update in the latter part of last year. That’s why the PM and I both gave speeches this week providing a detailed analysis of what has happened to our revenue base in recent times and what the implications are.
Although commodity prices have improved from their low levels in late 2012, we face the unusual situation of a stubbornly high dollar in the face of a lower terms of trade. This combination has put more acute and widespread pressure on company profits than we previously expected, and has contributed to subdued price growth across the board. Not only have mining profits been hit, but the high dollar is putting enduring pressure on profits across non‑mining sectors, with firms absorbing costs rather than passing them onto consumers. So while the real economy has remained resilient, nominal GDP growth – which reflects the dollar value of goods and services in the economy – has been unusually weak. These developments have weighed heavily on government revenues, with Treasury estimating that revenues this financial year will be about $12 billion lower than expected at MYEFO.
We’ve been very clear that we won’t be making savage cuts to offset this dramatic downgrade in revenue in the near term, as it would come at a significant cost to jobs and growth – something this Government will never accept. But we will need to continue to put in place responsible savings, to set the budget on a pathway to surplus while making room for the smart investments for the future.
A fairer Australia is a stronger Australia
Getting the big calls right during the toughest global economic conditions in 80 years really pays off when you think that by the end of this Parliament we should have in place DisabilityCare Australia – the National Disability Insurance Scheme. This has been a long and detailed process – a policy reform the scale of Medicare – but it simply would have been a pipedream had Australia been wading its way through the rubble of recession like so many of our peers around the world. So this is big reform in the truest Labor tradition, of which we’re deeply proud.
Deputy Prime Minister and Treasurer
Sunday 5 May 2013