Ebony Bennett | The policies the federal government must change to help cut the gap between Australia's rich and poor

The federal government is currently pursuing a number of policies that directly target cost-of-living, but it is also pursuing a number of policies that would permanently entrench the gap between rich and poor in Australia, instead of reducing it.

The best example of this is its determination to keep the stage three income tax cuts for the rich while rejecting calls to increase JobSeeker payment above the poverty line.

The economic reasons to tackle inequality are significant; it harms economic growth, which harms all of us.

But the other reasons for reducing the gap between rich and poor are even more compelling. More equal societies tend to be happier, healthier and more prosperous, while inequality destabilises the social bonds between us all, causing stress, anxiety and health problems and limiting the potential of millions of Australians.

Firstly, the issue of JobSeeker payments, which are so low they trap people in poverty, forcing them skip meals and avoid trips to the doctor in order to make ends meet.

This week the government ignored calls from its expert economic inclusion advisory committee (the creation of the committee was secured by ACT senator David Pocock as part of negotiations to pass IR laws), to lift the JobSeeker rate, which it described as "seriously inadequate" and a "barrier to finding paid work".

The committee found that increasing the unemployment benefit to around 90 per cent of the aged pension would be the best way to combat poverty experienced by those Australians who require this assistance and estimated that raising the current rate would cost the government $24 billion over four years.

In everyday terms, this could mean the difference between two meals a day or three. It's certainly far cheaper and fairer than the stage three income tax cuts.

It's not just the committee and welfare groups that think the JobSeeker rate needs to be increased, even the Business Council of Australia supports permanently increasing it, with CEO Jennifer Westacott saying it's important to ensure people can enjoy a "dignified life". When the stingy unemployment payment is one of the serious barriers to getting a job, something is seriously wrong.

And we know it can be done because the Coalition government already did it. For a brief moment in time, the Morrison government instantly lifted 425,000 Australians out of poverty by effectively doubling the Jobseeker rate during the pandemic, providing a temporary coronavirus supplement of $550 a fortnight.

The supplement tapered off and then ceased, plunging hundreds of thousands of Australians back below the poverty line.

But, as Treasurer Jim Chalmers correctly says, "we can't fund every good idea." That is certainly true.

But the trouble is the government can fund so many bad ideas, chief among them, the stage three income tax cuts, which come in at a whopping cost of a quarter of trillion dollars and will make inequality worse. The stage three tax cuts are unfair to women, young people and those on low and middle incomes, with the benefits mainly going to high-income earning men.

The Australia Institute recently released research showing the stage three tax cuts will entrench a big divide between regional Australia and inner city electorates as well. The stage three tax cuts will worsen economic inequality between the city and the bush while reducing revenue for essential rural health, education and community programs at the same time. It's lose, lose.

Low and middle-income earners are much more likely to live in the bush and the regions, which means the lion's share of benefits from the quarter of a trillion-dollar stage three package will flow to high-income inner-city electorates.

Five of the bottom 10 biggest losers from the stage three tax cuts by federal electorate are National Party-held electorates (who supported the tax cuts), while four of the bottom 10 electorates are located in Tasmania alone. Regional areas face the double whammy of largely missing out on the tax cuts, while simultaneously having less revenue for the services they rely upon.

Every dollar spent giving a $9000 a year tax cut to CEOs, politicians and surgeons earning $200k a year is a dollar that can't be spent on fixing aged care or lifting people out of poverty. That's a tough sell come the next election.

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And let's not forget the stage three tax cuts were passed in dramatically different economic circumstances, way before any of us had ever heard of coronavirus or social distancing. Hell, even the IMF urged the government to reconsider the stage three tax cuts as part of its annual review.

For all the criticism of the stage three tax cuts, there are many policies the government is implementing to address the cost-of-living crisis that are right on the money.

Health Minister Mark Butler's announcement this week that the government will allow millions of Australians to buy two months' worth of medicine for the price of a single prescription, making hundreds of common medicines cheaper, is very welcome.

This sensible policy announcement made the head of the Pharmacy Guild cry, but the Health Minister wisely ignored the emotional outburst to put the public interest first. Policies to make medicines cheaper, along with policies to make early childhood education and care cheaper, are exactly the kind of cost-of-living measures that directly help millions of Australians.

They are much more targeted than the RBA's blunt instrument of increasing interest rates.

Millions of Australians are really struggling to make ends meet at the moment. If the government can prioritise ways to close the gap between rich and poor, instead of permanently entrenching that gap, we'll have a much healthier economy, but more importantly we'll be a much happier, healthier society where everyone gets a fair go and no one gets left behind.

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