A cost of living budget? Not for young people
While the increase to YouthAllowance and Austudy will be of significance for the payments’ recipients, young people should not lose sight of the government’s distorted approach to welfare increases across the board.
The government is selling this as a cost of living budget. Jim Chalmers opened his Budget with a discussion of the range of cost of living measures the government has announced. These measures will be disappointing for most young people. With JobSeeker increases targeted at older Australians and a lack of investment in housing, the Budget has decidedly deprioritised the issues facing young people in regards to the cost of living.
Welfare and Wages
In opposition, Labor was vocal about the inadequacy of JobSeeker payments. In April 2020, when Scott Morrison briefly lifted the rate of welfare payments, Anthony Albanese said “if it wasn’t enough to live on two months ago … why will it be enough in six months time?” After months of speculation, the government announced last week that it would be increasing the rate of JobSeeker for people aged 55 and over by $92 a fortnight.
In today’s Budget, the government announced it is lifting the rate of Youth Allowance, Austudy and other income support by $40 a fortnight, with JobSeeker recipients aged under 55 also receiving this increase. The first of the increased payments will be paid in September, meaning a three month wait before those on the payments will see the increase.
Chalmers justified this by saying “Until now, people aged 60 and over and on payments for a long time have received a higher rate, in recognition of the additional barriers they face finding work. But the truth is, it gets more difficult earlier than that.” Just as Albanese asked Morrison in 2020 at what time the paltry rate of JobSeeker became enough again, Honi would ask Chalmers: at what point does it get more difficult to be on JobSeeker or Youth Allowance? Do young people not pay the same bills, the same rent, buy the same food and take the same transport as those over 55?
Chalmers and Albanese likely do not have meaningful answers to these questions. Youth Allowance and JobSeeker is currently below the poverty line, no matter how that is measured. In fact, the average person on Youth Allowance is currently $390 a week under the poverty line. With the Youth Allowance increase, the average young people on the payment will thus be living $370 a week below the poverty line.
The timing of the announcement appears cynically political. With the prior announcement that older Australians would receive increased payments, Chalmers readied young people for disappointment, before announcing a minimal increase as a budget bonus. While the increase will be of significance for the payments’ recipients, young people should not lose sight of the government’s distorted approach to welfare increases across the board. A failure to deliver welfare benefits for all weakens the rationale that welfare payments are a universal right and cannot be a platform for meaningful and universal welfare increases in the future.
The government announced no changes to the “age of independence” — the age at which students’ eligibility for the payments is not tied to their parents’ financial situation — for Youth Allowance, currently 22. A 2022 report by the National Union of Students found that a lack of access to YouthAllowance was a cause of suffering for many people unable to live at home or receive the payment. The report also found that the mechanisms for people under the age of independence, but who lack support from parents or come from unsafe home environments, to get access to the payments are traumatic at best or broken at worst.
The increases fell short of those recommended by a Treasury Committee established by the government to examine the rate of JobSeeker and related payments like Youth Allowance.
In its Budget announcement, the government said that it has “recommended the Fair Work Commission ensures the real wages of low-paid workers do not go backwards in this year’s Annual Wage Review.” Although, in its submission to the Commission, the government stopped short of recommending that wages actually rise in line with inflation, resulting in an ultimately confusing stance.
Lia Perkins, President of the USyd Students’ Representative Council said “The cost of living crisis is hitting students hard. It is disappointing to see the government prioritise creating a surplus, cutting taxes on the wealthy and minor relief measures.
“This budget will worsen the divide between the wealthy few who are making profits while everyone else struggles to get by.”
This is indicative of the Budget’s approach to cost of living: offering some welcome relief to students, but lacking the vision of taxation and more wholehearted welfare and wage increases that would improve the lives of young people and support the wider economy.
What has been announced
With a gripping housing crisis facing the young and vulnerable, housing policy received comparatively little attention in this year’s Budget. The government announced four new initiatives, with the Budget mainly revolving around Labor’s existing announcements regarding its upcoming Housing Accord and Future Fund (which is yet to pass Parliament). The announced changes will be pleasing for those in community housing and receiving Commonwealth Rent Assistance, but are in total deeply unambitious.
The flagship proposal in the Budget was an increase of the cap of Commonwealth Rent Assistance by fifteen per cent, the equivalent of $31 dollars a fortnight. Just over one million people will be eligible for the assistance, this includes people on the private housing market receiving applicable welfare payments (including Youth Allowance) and those living in community housing. The government forecasts that this will cost $2.7 billion over five years, saying it is the largest increase to Rent Assistance in the last 30 years.
The other new announcement pertains to the government’s National Housing Finance and Investment Corporation (NHFIC). The government is increasing the “liability cap” of the NHFIC by $2 billion. Chalmers claimed in his speech that this would “support more lending to community housing providers.” The way it does this, according to Minister for Housing Julie Collins, is by providing “lower cost and longer term finance to community housing providers.”
Put in more accessible terms, the NHFIC is the body that provides loans to community housing providers. Because the government “backs” these loans, they are the institution that determines how much the NHFIC can loan to community housing providers, as determined by the liability cap. The NHFIC will not have to loan the additional two billion dollars to providers. Moreover, the Treasury told Honi that the loans must be paid back in full, although just at lower rates and over longer time periods than required by private lenders. Crucially, community housing providers may these loans back using, at least in part, the rent paid by community housing tenants, differentiating this funding from more full-blooded funding to public housing.
The government is announcing tax breaks for so-called “build-to-rent” projects, reducing the taxation rate on investment funds attributed to these projects from 30% to 15%. The government celebrates this, saying “industry estimates this could unlock 150,000 rental properties over 10 years.” These changes will come into effect for the 2025-2026 Budget, costing ten million dollars in the first year, growing to twenty million the next. (Cost estimates in subsequent years were not available to Honi).
The government also quietly announced just over one hundred million dollars for a one-year partnership with the Northern Territory to “accelerate building of new remote housing.”
The new announcements come in addition to two key proposals by the Albanese government. In a press release, Collins touted the government’s expansion of the First Home Guarantee Scheme. This scheme sees the government guarantee up to fifteen per cent of the purchase price of a home, allowing home buyers to put down deposits as low as five per cent. Whereas previously to be eligible for the regime, two people must have been Australian citizens and spouses or de facto couples, the Albanese government has expanded the eligibility for the scheme to any two people, provided they are Australian permanent residents or citizens.
What does this mean for young people?
It appears from these changes that the government considers its work on housing to be, for all intents-and-purposes, confined to its flagship Housing Accord and Future Fund. The measures announced in today’s Budget will themselves do little to ease housing pressures facing young people.
The government has focussed its efforts primarily on people in “community housing”. This explains the increased funding for the NHFIC and a portion of its Rent Assistance increase. While these changes are targeted to some of the worst affected by the housing crisis, the contributions are not substantial enough in the face of high inflation. A fifteen per cent rent assistance increase is welcome, but in the face of rental prices which have outrun inflation (let alone wages) for decades, the fifteen per cent increase loses its shine. The question is, with a surplus of $4.2 billion, why didn’t the government do more.
The other glaring problem with the government’s focus on community housing is that it represents an abrogation of its responsibility to those in social housing. Governments at the State and Federal level have overseen a dramatic shift away from social housing — operated by State governments — to community housing — operated by private providers, including charities and NGOs — for decades. They do so for the purposes of cutting the direct cost of affordable housing to the budget bottomline, but in the process, they reject the government’s obligation to provide housing to all people.
As students reading this will understand, the government’s increased funding to these areas will do next to nothing for the vast majority of young people not receiving Rent Assistance or living in community housing. While the Greens have called for a national rent freeze, the government is yet to agree to such a proposal. However, it has offered nothing in its place.
The government’s failure to provide immediate relief to renters, or invest further in public and social housing is arguably not the worst part of this budget for students. Rather, two of the government’s key reforms suggest its ongoing subscription to a logic which sees tax breaks for investors, and home buyer assistance as part of the solution, not problem.
A key driver of the housing crisis is the substantial amount of tax breaks on offer with regards to housing. Instead of increasing taxation on areas of the housing market — by introducing land taxes for example — Labor has increased the tax assistance given to housing investors. While the merits of this are yet to be seen, seeing property investors and their rental properties as the solution, rather than the cause, of the housing crisis is flawed at best. The same logic goes to its expansion of its Home Buyer schemes. Subsidies for home buying only serve to drive up the cost of housing by giving potential owners more money to bid with. The expansion of these policies is then more a political move to be seen as increasing home ownership than a meaningful measure to increase housing affordability.
Students will be rightfully angry that, as much as Labor didn’t offer in terms of housing, they have again refrained from implementing the taxes necessary to drive down housing prices and provide funding for construction projects along the way. Negative gearing — a tax concession for investors who operate their property at a loss — will cost taxpayers $244 billion over the next ten years. Given that the tax discount drives up the cost of housing by increasing the bidding power of investors, Labor’s failure to remove negative gearing will only exacerbate the crisis. At the same time, the government has rejected the Greens’ calls to invest $5 billion a year into building public and social housing. Reducing negative gearing by only a fifth would pay for this policy, which puts into question Labor’s commitment to meaningfully reducing housing costs and homelessness.
For Honi’s Budget 2023 summary and more analysis, click here.