Australia is a comparatively low taxing and low spending country, with the most tightly targeted income support system in the OECD. We are facing a medium term budget challenge, which must be addressed in a way that supports both economic growth and equity and gives people confidence that funding for vital services is secure into the future. This requires action to reform wasteful or poorly targeted tax and direct expenditures, investment to address gaps in the safety net and a fiscal commitment to fund health, education and social services through and beyond the forward estimates.

The 2016-17 Budget will be the first budget handed down by the current Treasurer under the leadership of the Prime Minister Turnbull. It will take place in a federal election year, in the context of major reform processes of taxation and federation arrangements and against the backdrop of a broader debate about economic reform. Key stakeholders have worked hard to build some common ground in this debate, including on the need to achieve structural budget balance progressively through a staged reform process over a ten year period. Business, union and community groups have also agreed that this should be achieved through a combination of tax and expenditure reforms, while creating space to address some serious holes in the social safety net including an increase to the unemployment benefit.

At the same time, there is a growing disconnect between the dominant political narrative about the challenges we face as a nation and what the community actually wants from our nation’s leaders. As Ipsos research found in 2015, the public is yearning for leaders with long-term vision and plans to address the nation’s social and economic issues and invest in Australia’s future. Blame for Australia’s economic woes has been attributed to “short-term thinking, corporate greed and political and economic mismanagement”.

Reflecting deep-seated concern at the emergence of ‘two Australias’, the community wants governments to plan for our future. Meanwhile, job security and underemployment feature among people’s biggest worries, especially for young families with large mortgages, people approaching retirement age and those living in rural areas where employment options are particularly limited.

To set a path to achieve budget balance fairly, in the 2016-17 Budget the Government should:

1. Set a path towards structural reform of the tax system that delivers increased revenue fairly and efficiently, supports economic growth and encourages investment in productive economic activity. This must include major reforms to superannuation and housing tax concessions to ensure these concessions fulfil a legitimate purpose;
2. Invest in the capacity, health and wellbeing of people who are unemployed by delivering a modest increase to the unemployment benefit. This should be complemented by investment in effective programs to equip people who are unemployed long term to return to paid work;
3. Invest in a new national affordable housing strategy through a capital injection, creation of a new rental investment incentive, establishment of a new financing mechanism to attract institutional investment at scale, a boost to Rent Assistance and appropriate indexation of housing and homelessness funding. Action to relieve housing stress cannot be deferred for another year;
4. Redirect wasteful expenditure in the health system to improve the quality and accessibility of health services, including oral and preventive health services, for people on low incomes; and, finally
5. Abandon proposed cuts to income support that would adversely affect people on low and moderate incomes, which have not yet passed the Parliament. These have now been on the budget books for two years, undermining budget transparency, and include:

• Reducing Family Tax Benefit Part B to single parent families and abolishing end of year supplements, without offsetting measures;
• Freezing family payment rates;
• Change to the age of eligibility for the Newstart Allowance, which would require unemployed young people to survive on the lower youth payment for longer;
• The introduction of waiting periods to access income support;
• And a range of other measures.