There is much to be celebrated in the Rudd Government's first Budget, but also many questions left to be answered.
The Budget papers are densely packed with references to 'Working Families'. In many cases these references relate to initiatives that are aimed squarely at low and middle income earners, such as direct assistance in the form of tax breaks and child care, but also indirect programs to increase training and other opportunities for the future.
'Working Families' means different things to different people. Some 'working families' are made up of single parents on low incomes and their children. They will benefit from changes to taxation arrangements and the child care rebate, but will still be under pressure to return to work quickly rather than provide direct care for their children or undertake significant re-training to improve their long-term employment prospects.
Some working families comprise two working parents on high incomes. These families, too, will benefit from tax cuts and the child care rebate, but will also continue to enjoy the massive taxation and superannuation benefits that are available to high income earners, but not to low income earners.
Tax cuts look set to deliver the greatest benefits to people on the lowest incomes. This is an important first step in sharing Australia's wealth more equitably. In order to pay for some of these programs we have seen a new focus on means testing. Family tax benefits will be withdrawn from high income households. This is a welcome shift in policy.
If government spending must be constrained in order to defend against inflationary pressures in the economy, then it makes sense for spending to be better targeted. Targeting households earning less than $150,000 still covers a very large proportion of the voting population.
We need means testing, to ensure we are not spending resources where they are not needed. But during such buoyant times, we must also do more needs testing — ensuring those on low income and benefits have the resources they need to provide food, shelter and dignity for themselves and their families.
For those 400,000 or more Australians who are unemployed, tax cuts are of little value. While the cuts may provide increased incentive for some to return to work, they are of little use to those who lack the skills and capacity to re-enter the workforce without substantial assistance.
For this group we see an emphasis on