1

Australian Council

of Social Service

Surviving, not living: the (in)adequacy of

Newstart and related payments

Submission to Senate Community Affairs References

Committee

September 2019

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First published in 2019 by the Australian Council of Social Service Locked Bag 4777 Strawberry Hills, NSW, 2012 Australia Email: info@acoss.org.au Website: www.acoss.org.au ISSN: 1326 7124 ISBN: 978 0 85871 057 3 © Australian Council of Social Service This publication is copyright. Apart from fair dealing for the purpose of private study, research, criticism, or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission. Enquiries should be addressed to the Publications Officer, Australian Council of Social Service. Copies are available from the address above.

Who we are

ACOSS is the peak body of the community services and welfare sector and the national voice for the needs of

people affected by poverty and inequality.

Our vision is for a fair, inclusive and sustainable Australia where all individuals and communities can

participate in and benefit from social and economic life.

What we do

ACOSS leads and supports initiatives within the community services and welfare sector and acts as an

independent non-party political voice.

By drawing on the direct experiences of people affected by poverty and inequality and the expertise of its

diverse member base, ACOSS develops and promotes socially and economically responsible public policy and

action by government, community and business.

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Summary ‘Living on the dole is not living, it’s surviving.’ (Graham, Newstart Allowance)

This submission focusses on what we understand is the primary topic for this Inquiry, the inadequacy

of Newstart and related allowance payments for people of working age. We refer to supporting

material on the other terms of reference.

ACOSS recommends that the committee advocate, as a minimum, a $75 per week (pw) increase in

single rates of Newstart and related allowances including Youth Allowance for young people living

away from home and single parent rates. We also propose a number of improvements to other

supplementary payments including an increase in Rent Assistance and an increase in Family Tax

Benefit for single parents with older children.

These urgently-needed and overdue increases should be introduced as soon as possible, ahead of a

wider review of social security payment settings by an independent statutory social security advisory

commission. The urgent need to increase Newstart and related allowances is evident and clear; the

longer we wait to increase these payments, the further people receiving them will fall behind in our

community.

We hope that this Inquiry will hear from as many people as possible who are experiencing or have

experienced life on Newstart or another allowance. For too long the voices of people who are on

these payments have gone unheard. This Inquiry provides an excellent opportunity to hear from

those who are the experts on this issue: people who are looking for paid work, people who are

studying, single parents who are no longer eligible for Parenting Payment and people with an illness

or disability who do not qualify for the Disability Support Pension. We believe that our collective

failure to hear these voices has led to the situation we are in today.

We therefore encourage the committee to hold hearings in as many areas as possible around

Australia, especially in rural and regional parts of the country. It will be important for the committee

to hear from diverse communities considering that the low rates of Newstart affect each and every

community in the country.

This submission rejects any notion of delivering an increase to Newstart and other allowances on the

condition that people are placed under the cashless debit card or income management. These

policies are stigmatising, expensive to administer and impractical, and have no place in ensuring that

people who are unemployed, caring for children or studying have an adequate income to cover the

cost of essential goods and services.

We urge the government to immediately increase Newstart, Youth Allowance and related payments

by a minimum of $75pw. As one single parent on Newstart recently told us, such an increase would

mean:

‘I wouldn't feel like I was constantly chasing my tail. I would be able to afford the reading

support my son needs. I would feel less stressed; less mental health issues. I could afford

heating my house adequately. I wouldn't be constantly feeling like I should cease my study

and work full time instead of part time, even though the part-time study I do is an investment

in the future for my family as it will make me more employable. I would feel more respected

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and supported, as an Australian citizen, a mother who is doing as much as she possibly can

to provide a good life for her child.’

Recommendations

Urgent increases in payments for those at greatest risk of poverty

Recommendation 1

Maximum rates of Newstart, Youth Allowance and related payments (‘Allowance Payments’) for

all single people, including single parents, should be raised by an absolute minimum of at least $75

per week with indexation*.

This urgent catch up increase to the base rate should commence as soon as possible and apply to:

+ Newstart Allowance (including the single parent rate);

+ Youth Allowance (away-from-home rates);

+ Austudy Payment;

+ Abstudy Payment;

+ Sickness Allowance;

+ Special Benefit;

+ Widow Allowance;

+ Crisis Payment.

Cost: $3,300 million[1]

* Consistent with recommendation 2 below, the $75pw figure needs to be updated, based on wage and price movements since this target was first adopted using June 2016 figures.

Recommendation 2

The above allowance payments (for both singles and couples) should be indexed twice per year to

movements in a standard Australian Bureau of Statistics measure of wage levels (before tax), as

well as movements in the Consumer Price Index (whichever is highest).

Recommendation 3

Family Tax Benefits for single parent families should be increased:

[1] All costings are annual figures, based on the first full year of implementation.

The cost of this policy would be offset by significant economic benefits and increased tax revenue, reducing the net cost to less than $1.5

billion per annum by 2028/29 (Deloitte Access Economics (2018) ‘Analysis of the impact of raising benefit rates’ September,

https://www.acoss.org.au/wp-content/uploads/2018/09/DAE-Analysis-of-the-impact-of-raising-benefit-rates-FINAL-4-September-...-1.pdf

(p.8).

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(1) Family Tax Benefit Part B in respect of single parents should be redefined as a Single Parent

Supplement.

(2) The supplement would be designed to compensate for the extra costs of raising a child alone,

compared with the child-related costs facing couples with children.

(3) As a starting point, the supplement would be set at a level that brings total social security

payments for single parent families with children eight years or older at least up to the same level

as those with younger children (in conjunction with the proposed increase in Newstart and other

Allowance payments).

Cost: $630 million

Recommendation 4

Indexation of Family Tax Benefits to movements in the Consumer Price Index should be restored,

along with the link between the maximum rate of Family Tax Benefit Part A to pension rates and

wage growth.

Cost: $650 million

Recommendation 5

(1) Maximum rates of Rent Assistance should be increased by at least 30% (currently a $21

per week increase in the case of a single adult without children) as a first step, pending a

broader review of the supplement.

(2) A broader review of the adequacy of the supplement should be undertaken, including

payment rates and indexation arrangements, to ensure it significantly improves rental

affordability for those on low incomes, keeps pace with movements in rents and is

responsive to local housing market conditions.

Cost: $800 million

A Social Security Commission to advise Parliament on payment levels

Recommendation 6

(1) A Social Security Commission should be established by legislation to provide independent

expert advice to the Parliament about the setting of social security payment rates (including

income support, family payments, and other supplements) and cover adequacy, means test

settings, indexation, and accessibility (including waiting periods).

(2) The urgent, overdue, and justified payment increases proposed in this submission should

happen immediately and do not require establishment of the commission.

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(3) Building on these payment increases, the commission would advise the Parliament on the

development and updating of benchmarks for the adequacy of all social security payments, to

ensure equity and certainty for people receiving these payments.

(4) The benchmarks would be based on the principle that we are all entitled to the financial

resources we need to reach a minimum acceptable standard of living in accord with general

community expectations, and informed by the best-available research into poverty, deprivation of

essentials, and budget standards.

(5) The relationship between social security payments, wages and consumer prices would also be

considered.

(6) The benchmarks would be based on the financial needs of different groups (including different

family types), rather than ‘deservingness’, individual employment prospects, or age.

Cost: $4 million

Keep social security as cash payments

Recommendation 7

Social security payments should be paid (as they traditionally have) as cash entitlements without

restriction on how people spend the money; unless they volunteer to divert funds for a particular

purpose (such as paying rent).

(1) Compulsory income quarantining (including ‘cashless debit cards’) should be phased out as

quickly as possible in consultation with individuals and communities affected, giving people the

option to continue on a voluntary basis.

(2) Savings from the phasing out of these schemes should be redirected to local support programs

in accordance with the wishes of affected communities.

Saving: $100 million

1. Scope of this submission

This submission focusses on what we understand to be the primary topic for this inquiry, the

(in)adequacy of Newstart and related allowance payments for people of working age.

While we refer mainly to Newstart and Youth Allowance, the evidence we present applies equally to

other ‘allowance payments’ whose rates of payment are tied to Newstart Allowance or Youth

Allowance. They include Austudy, Abstudy, Sickness Allowance, Special Benefit, Widow Allowance

and Crisis Payment.

Other terms of reference are addressed in the context of the inadequacy of these payments.

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2. Newstart and poverty

Social security is a vital safety net for people facing changes in their circumstances such as

unemployment, illness, disability, and relationship breakdown. These challenges could happen to

any of us throughout our working lives. The core purpose of social security is to prevent people who

lack their own means of support from falling into poverty. If we allow this fundamental goal to be

compromised or diluted on an assumption that people can or should move quickly into paid work,

then we have failed.

Newstart (and related allowances) are the foundation stone of our income support system for

people of working-age lacking paid employment; it represents the last line of defence against serious

poverty and deprivation. It is both the lowest major income support payment for people of working

age and the default for people unable to qualify for others.

It is a telling indictment of public policy in Australia that for 25 years since its last ‘real’ increase,

governments have allowed this core social security payment to drift well below poverty levels.

Newstart has declined relative to pension payments, wages, and incomes across the community.

The maximum rate of Newstart for a single adult is just $278pw, plus a $4.40pw Energy Supplement.

These payments combined are $181pw less than equivalent pension payments, less than half the

full-time minimum wage after tax, and at least $75 below what rigorous research (discussed later)

defines as a minimum weekly budget to buy the basic essentials of life, after taking account of

housing costs.

The default payment for young people living away from their parents, Youth Allowance, is $52pw

lower than Newstart, at $231pw (including the Energy Supplement).

Table 1: Maximum rates of Newstart, Youth Allowance and supplementary payments ($pw March

2019)

Base rates of income

support $pw

Youth Allowance

(single, away from home)

Newstart Allowance

(single)

Newstart Allowance

(single, 1 child 8yrs)

Newstart Allowance

(couple, combined)

Newstart Allowance

(couple, 1 child 8yrs)

Income support*

231 283 473.50 501.7 674.57

Rent Assistance

69 69 81 65

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Total

300 352 554 567 766

* includes Newstart or Youth Allowance, Family Tax Benefit (where appropriate), and Energy Supplement.

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The low rate of Newstart Allowance causes widespread, deep poverty. In households whose head

receives Newstart Allowance, 55% of people were living below the poverty line in 2016.1 For Youth

Allowance the figure was 64%. Single parents who are unemployed face an especially high risk of

poverty (59%) due to a combination of low payments (especially Newstart Allowance) and the extra

costs of raising a child alone.

Figure 1: Rates of poverty among people in families headed by a person receiving a social security

payment (2016)

Source: Davidson, P., Saunders, P., Bradbury, B. and Wong, M. (2018), Poverty in Australia, 2018.

ACOSS/UNSW Poverty and Inequality Partnership Report No. 2, Sydney: ACOSS.

Another measure of financial hardship used in academic research is deprivation of essentials; that is,

lacking items considered by a majority of people as essential (e.g. a ‘decent and secure home’) due

to a lack of financial resources.

A recent national survey conducted by the Melbourne Institute (the HILDA survey) asked people

whether they considered items essential and whether they lacked them. The table below shows the

percentage of people in different types of household who lacked at least one of 22 essentials.

1 Davidson, P., Saunders, P., Bradbury, B. and Wong, M. (2018), Poverty in Australia, 2018. ACOSS/UNSW Poverty and Inequality

Partnership Report No. 2, Sydney: ACOSS.

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Table 2: Share of people deprived of one or more essentials (2014-15)

Status of household Per cent deprived

Labour force status

Employed full-time 16.1

Employed part-time 19.9

Unemployed 38.0

Not in labour force 24.6

Family type

Single male, under 65 26.6

Single female, under 65 29.3

Single male, under 65 26.6

Single male, 65 plus 16.5

Single female, 65 plus 20.1

Couples, no children, under 65 14.8

Couples, no children, 65 plus 9.0

Couples, with children, under 65 20.1

Lone parents 46.3

Housing tenure

Outright owner 8.9

Purchaser 16.3

Private renter 35.4

Public renter 62.9

Source: Saunders P & Naidoo Y (2018), Mapping the Australian Poverty Profile: A Multidimensional Deprivation Approach Australian Economic Review, vol. 51, no. 3, pp. 1–1.

This research confirms that unemployed people (38% of whom are deprived of essentials), along

with single parent families (46%) and people who rent their housing (35-63%), face an elevated risk

of deprivation, with more than one third experiencing deprivation.

When we compare Newstart Allowance with equivalent payments in other OECD countries, we find

that it is the equal-lowest unemployment payment (compared with the after-tax wage of a single

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adult production worker, including housing benefits) for people recently unemployed among the 33

OECD countries.2

Direct research reveals that inadequate maximum rates of Newstart and Youth Allowance have the

following effects3:

People are unable to properly feed themselves and their families:

o I eat 1 sachet of porridge, 1 tin of food, and 1 popper (for Vitamin C) a day.

Sometimes I can't afford the porridge

They are unable to cover the expenses associated in searching for paid work and must focus

their efforts on daily survival, reducing their employment prospects:

o Moved to a regional community for cheaper rent although there are fewer job

opportunities. Rarely leave the house to avoid spending money on meals, petrol, and

activities. Shower less often than I should to save on water and gas, and don't use

shampoo, conditioner or soap.

Full time students are unable to concentrate on their studies:

o I'm a student and with the combination of both Newstart and Rent Assistance; I have

only $8 a day to survive after I pay rent. My rent is $472 per fortnight and this is 90%

of my income. This amount is almost unliveable and there are many, many other

students in this same position.4

People’s health, both physical and mental, deteriorates, moving them still further from the

prospect of paid employment:

o [I] halve my dosages of medicines so they last longer. Don’t access mental health

services. Don’t make appointments for health issues.

People are more likely to become homeless, with latest data showing that the number of

people on Newstart accessing homelessness services increased 75% over six years5:

o Am homeless; live in a tent [in the] bush.

As people are pushed further from full social and economic participation, they are more

likely to have to rely on other government services including health, accommodation and

family support services; and more likely to become unemployed long-term.6

2 OECD Benefits and wages data base (2017). The other OECD country with the lowest rate is Greece. 3 ACOSS (2019) Survey of people on Newstart and Youth Allowance 4 Story shared with ACOSS, July 2019 5 Homelessness Australia (2019) ‘Clear connection between homelessness and inadequate Newstart payments, says Homelessness

Australia’ Media Release, 29 August https://chp.org.au/media-releases/clear-connection-between-homelessness-and-inadequate-

newstart-payments-says-homelessness-australia/ 6 Committee for Economic Development of Australia (2015), Addressing entrenched disadvantage in Australia. McLachlan R et al (2013) Deep and Persistent Disadvantage in Australia, Productivity Commission; ACOSS (2018), Faces of unemployment.

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At the local community level in the poorest regions, inadequate income support for large

numbers of people out of paid work contributes to a downward spiral in economic and social

well-being.7

Growing gaps between allowance and pension payments undermine the integrity of the

wider income support system, especially at a time when increasing numbers of people are

being pushed from higher pension payments to the much lower Newstart Allowance. For

example, income support for a single parent arbitrarily drops by $89pw when their youngest

child reaches 8 years and they lose access to Parenting Payment and must resort to applying

for Newstart:

o I go without a lot of things a normal mother would have just so my children can have

the appearance they are like other children and so they feel they are no different.

3. Newstart and jobs

The glib response to calls to increase Newstart that ‘the best form of welfare is a job’ is no answer at

all.

Assisting people on income support to secure paid employment is a key goal for public policy. ACOSS

has consistently argued for a full employment strategy, coupled with employment assistance and

training for the many people who will struggle to secure employment even if ‘full employment’ is

achieved.8

(1) There are not enough job vacancies

There is no magic wand that will quickly bring 794,000 people from Newstart and Youth Allowance

(Other) into full-time employment, while preventing school leavers, parents returning to paid work

and retrenched workers from joining the ranks of people who are already unemployed. The Reserve

Bank estimates that once unemployment reaches 4.5% (which now seems unlikely in the near

future) inflationary pressures will emerge.9 If unemployment fell to that level, then all things equal

there would still be more than 600,000 people unemployed, along with at least one and half times as

many who are under-employed (lacking the paid hours they need).10

7 Randolph W & Tice A (2014), Suburbanizing Disadvantage in Australian Cities, Journal of Urban Affairs, Vol 36, 2014; Jesuit Social Services

& Catholic Social Services Australia (2008), Dropping off the edge, ,mapping the distribution of disadvantage in Australia.

8 ACOSS (2019), Pre-election statement – employment.

9 Ellis, L (2018) ‘Three questions about the outlook,’ Presentation to the Australian Business Economists conference, Sydney 13 February

2018, Reserve Bank of Australia.

10 ABS Labour Force survey and ACOSS calculations

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It is not easy for people to obtain paid work, as the ACOSS/Jobs Australia ‘Faces of Unemployment’

report shows:11

- In March 2019, there were 794,000 people receiving Newstart and Youth Allowance (Other)

and 243,000 job vacancies (most of which would have been filled by people changing jobs).

There are eight people unemployed or under-employed for every vacancy, and when job-

changers are added in there is an average of 19 applicants for every job.12

- When people participating in the jobactive employment program do get a job, it is likely to

be part-time or casual, which means they are more likely to either remain on income

support or return to it soon afterwards.

- Of those jobactive participants who secured employment in 2016-17, 62% were part-time

and 38% were in casual jobs. This reflects a growing trend for entry-level jobs to be offered

on a part-time or casual basis. For example, 79% of hospitality jobs and 59% of labouring

jobs are casual positions.13

(2) A growing proportion of people on unemployment payments is unemployed long-term

- Two-thirds of people on Newstart and Youth Allowance have received these payments for

over a year.14

- Once a person is unemployed long-term, their confidence and skills diminish, their health

can deteriorate, and employers are less likely to take them on due to the gap in their

resume.

- The chances of securing employment within the next 12 months for people on Newstart and

Youth Allowance decline progressively from 55% within the first three months of

unemployment to 30% after 12 months and just 8% after 5 years’ unemployment.15

11 ACOSS and Jobs Australia (2018), ‘Faces of unemployment’.

12 Department of Employment, Skills and Small and Family Business (2019), ‘2018 survey of employer’s recruitment experiences’.

13 ACOSS and Jobs Australia (2018), ibid

14 Although most unemployed people leave Newstart or Youth Allowance payments within 3 months of claiming them, two thirds of

recipients at any point in time have received those payments for over 12 months. That is, many leave payments quickly but a substantial

number are stuck on them for a long time. 15 ACOSS & Jobs Australia (2018), ibid.

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Figure 2: Trends in the share of people receiving NSA-YAO long-term (% of all recipients)

Source: ACOSS & Jobs Australia (2018), Faces of Unemployment.

The profile of people receiving unemployment payments is disadvantaged in other ways:

- As at December 2018, 27% had a disability or illness, 49.5% were over 45 years old, 15%

were single parents, 11% were Aboriginal or Torres Strait Islander people, and 20% came

from culturally and linguistically diverse backgrounds.16

16 Department of Social Services (2018) ‘DSS Payment Demographic Data’ https://data.gov.au/data/dataset/dss-payment-demographic-

data

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Figure 3: Profile of people receiving Newstart and Youth Allowance (Other) (2018)

Source: ACOSS & Jobs Australia (2018), Faces of Unemployment.

One of the main reasons we have made few inroads into long-term unemployment is that our

government is not investing enough into employment services. Australia invests less than half the

average invested in employment services by other comparable wealthy countries (countries in the

OECD). Consultants in jobactive services have average caseloads of 140 and providers receive less

than $1,000 a year, on average, in Employment Fund credits to devote to training and paid work

experience for people disadvantaged in the labour market. This would typically pay for a few week’s

training at most.

Some argue that unemployment is mainly caused by ‘disincentives’ like access to income support to

undertake full-time employment. There is no evidence for this claim:

- A single unemployed adult receiving Newstart Allowance would more than double their

disposable income if they obtain full time employment at the minimum wage (and no longer

receive income support).17

- Those with dependent children retain their full rate of Family Tax Benefit if they secure a

fulltime job at the minimum wage.

This means there is considerable room to increase allowance payments, especially for single people

(including those with children), without diminishing rewards for paid work.

17 ACOSS (2019), Minimum wage submission.

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If the government’s answer to poverty among people out of paid work is to find them ongoing

employment quickly, we are entitled to ask: how will this be achieved, how soon, and for how

many?

ACOSS calls for a commitment to full employment, and major reform of employment services to

ensure that people unemployed long-term are not excluded from paid work.18

Our employment service reform proposals include:19

- Employment services based on individual agency and support more than compliance and

enforcement;

- An investment fund, topped up each year for people unemployed long-term, to finance

intensive services and activities to improve people’s skills and employment prospects;

- A career counselling and support service for young people entering the paid workforce

for the first time, people returning after caring for a child or family member with a

disability, and those over 40 years old who are struggling to renew their careers;

- Encouraging and financially backing local partnerships with employers and other health

and community services to assist people who have complex needs and communities

with high and entrenched levels of unemployment;

- A licensing system for employment service providers administered by an independent

statutory body charged with maintaining quality standards;

- Lower default job search requirements for people with barriers to employment including

people in regions with high unemployment, parents, people with disabilities and older

people.

4. Laying the foundations: how the proposed $75pw increase is

justified and calculated

The first step to ease the most severe poverty in Australia is to lift single rates of Newstart, Youth

Allowance and related payments by at least $75pw as soon as possible.

The figure is based on rigorous research into the minimum cost of the essentials of life for a single

person out of paid work, conducted by the Social Policy Research Centre at the University of New

South Wales in 2015.20

The researchers developed minimum ‘healthy living’ budgets by adding together the minimum costs

of food, housing, transport, clothing, health care and other essentials required to live a healthy life.

The budgets were frugal; for example all grocery prices were based on the cheapest of the major

stores (Aldi), most of the budgets did not include a car, people only had their hair cut once a quarter

despite the need to remain presentable for job interviews, and housing costs were based on the

18 ACOSS (2019), Policies for the next government: Employment; ACOSS (2018), Submission on Future Employment Services. 19 ACOSS (2018), Submission on future employment services. 20 Saunders, P & Bedford M (2017), New Minimum Income for Healthy Living Budget Standards for Low-Paid and Unemployed Australians. Social Policy Research Centre, UNSW Sydney.

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lowest quartile of rents in the three cities where most people live: Sydney, Melbourne and Brisbane

(which are similar to the equivalent national rent levels).

Table 3: Budget standards for unemployed households ($ pw in July 2016)

Budget Category

Family type

Single Adult Couple, no children

Couple with 1 child

Couple with 2 children

Single parent with 1 child

Food 58.71 117.42 148.41 190.87 85.02

Clothing and Footwear

5.13 10.25 15.52 21.67 10.24

Household Goods and Services

68.37 88.28 100.59 124.33 79.01

Transport 44.24 84.94 91.52 97.89 100.39

Health 6.08 11.94 17.00 21.86 11.47

Personal Care 12.86 25.22 29.87 34.18 18.89

Recreation 15.00 25.50 43.32 56.64 31.91

Education 0.00 0.00 23.79 52.93 41.54

Total (excluding housing)

210.38 363.55 470.04 600.37 378.48

Housing costs (rent)

223.30 296.70 296.70 340.00 296.70

Total (grossed-up, including housing)

433.68 660.25 766.74 940.37 675.18

Source: Saunders P & Bedford M (2017), New Budget Standards for Low-Paid and Unemployed Australians, UNSW Sydney.

The minimum ‘healthy’ budget standard for a single adult without children was $434pw, which was

$96pw more than the single rate of Newstart, Rent Assistance and the Energy Supplement in July

2016.21

We calculated that this ‘gap’ would be reduced by $20pw if our proposed 30% increase in maximum

rates of Rent Assistance was implemented, leaving a gap of $76pw, which we rounded down to

$75pw.

21 Note that the budgets were developed in 2013 and updated to July 2016, so the basket of goods and services used is now 6 years old.

17

Table 4: Minimum Budget for a single unemployed person compared with social security payments

for a single adult without children ($pw in July 2016)

Minimum budget excluding rent

210

Plus Rent

223

Equals budget including rent

434

Income of single person on Newstart who rents privately

Newstart + Rent Assistance + Energy Supplement

338

Gap (payments - budget)

96

Minus proposed Rent Assistance increase

-20

Equals gap (final)

76

Source: Saunders P & Bedford M (2017), ibid; and ACOSS calculations.

Recommendation 1

Maximum rates of Newstart, Youth Allowance and related payments (‘Allowance Payments’) for

all single people, including single parents, should be raised by an absolute minimum of at least $75

per week with indexation*.

This urgent catch up increase to the base rate should commence as soon as possible and apply to:

+ Newstart Allowance (including the single parent rate);

+ Youth Allowance (away-from-home rates);

+ Austudy Payment;

+ Abstudy Payment;

+ Sickness Allowance;

+ Special Benefit;

+ Widow Allowance;

+ Crisis Payment.

Cost: $3,300 million[1]

[1] All costings are annual figures, based on the first full year of implementation.

The cost of this policy would be offset by significant economic benefits and increased tax revenue, reducing the net cost to less than $1.5

billion - per annum by 2028/29 - Deloitte Access Economics (2018) ‘Analysis of the impact of raising benefit rates’ September,

https://www.acoss.org.au/wp-content/uploads/2018/09/DAE-Analysis-of-the-impact-of-raising-benefit-rates-FINAL-4-S –check, I get

$2.3Beptember-...-1.pdf

18

* Consistent with recommendation 2 below, the $75pw figure needs to be updated, based on wage and price movements since this target was first adopted using June 2016 figures. Recommendation 2 deals with the proposed indexation arrangements.

5. Indexation: bringing Newstart up to date and keeping it in touch

with community living standards

Newstart and other allowances are only indexed to movements in the CPI and have not been

increased beyond that for 25 years (much longer in the case of Youth Allowance). The lack of

indexation of allowances to wage movements (unlike pensions) is a major cause of the growing

impoverishment of people who have to rely on them.

Although indexation to the CPI in theory allows people to buy the same bundle of goods and services

over time, they are being left behind as community living standards and expectations rise. People

relying on allowances are stuck in a 1994 world (the year Newstart was last increased above CPI

movements – by $2.95pw). To put this in context, only a minority of people had mobile phones in

1994.

Pensions are indexed to wage movements a well as two consumer price indices (CPI and the

Pensioner and Beneficiary Living Cost Index), whichever is higher, so people receiving these

payments share in national productivity growth and rises in living standards. Indexation to wage

movements should apply to allowances as well.

As a result of these differences in indexation, the gaps between allowances and pensions and wages

have grown substantially. This inequity was exacerbated by the exclusion of allowances (together

with Parenting Payment Single) from the $32.50 pw increase in single pension rates in 2009

following the Pension Review.

19

Figure 4: Newstart Allowance has fallen behind pensions and wages ($2018pw)

ACOSS (2019), Minimum wage submission 2019. Available: https://www.acoss.org.au/wp-

content/uploads/2019/03/ACOSS-minimum-wage-submission-2019-FINAL_web.pdf

In order to prevent people in the deepest poverty (those receiving the maximum rates of

allowances, with no other income) from continuing to fall behind community living standards, these

payments should be indexed to movements in wages as well as prices, whichever yields the greater

increase (the same principle as applies to pensions).

We note that the Budget Standards and $75pw ‘gap’ described above have not been indexed since

July 2016. This gap would be larger if the budgets were based on current prices, and more so if our

proposed increase in Newstart and related payments was indexed since 2016 to wages to reflect

wider community living standards, as they should be.

The proposed $75pw increase is therefore a conservative estimate of the gap between the single

rate of Newstart and a minimum adequate living standard, and the bare minimum increase that is

urgently needed.

Recommendation 2

Allowances (for both singles and couples) should be indexed twice per year to movements

in a standard Australian Bureau of Statistics measure of wage levels (before tax), as well

as movements in the Consumer Price Index (whichever is higher).

20

6. Urgent increases in payments for those in greatest financial

hardship

We propose later in this submission that an independent advisory body, a statutory Social Security

Commission, be established to develop and update benchmarks for the adequacy of social security

payments generally.

Those facing the greatest hardship cannot wait for a Social Security Commission to undertake this

work. They need, and should receive, a substantial increase in their payments as soon as possible.

As explained below, the evidence is already in that single people relying on Newstart and related

allowances, including the away-from-home rates of Youth Allowance, need a substantial increase in

their payments now.

(1) A $75pw increase in maximum single and single parent rates of allowances

We prioritise an increase in single rates of allowances because people receiving single rates (with or

without children) have much lower average living standards than couples.

The main reason for this is that the single and partnered rates of the unemployment payment were

indexed in different ways in the 1970s and 1980s. In 1975, both the single and partnered rates of

Unemployment Benefit were equal to the equivalent pension payments. This arrangement

continued for the partnered rate until 1998, whereas by that time the single rate of Unemployment

Benefit had already been drifting below the single pension since 1976 (twenty years earlier). This

was due to policy decisions to remove indexation of the single rate of Unemployment Benefit to the

CPI (it was frozen in real terms) from 1976 to 1983, at a time when annual inflation exceeded 10%.

The ‘freezing’ of allowance payments impoverished people, and created a structural inequity in the

social security system since pension payments (and the partnered rate of Unemployment Benefit),

continued to be indexed to the CPI during that period.

Consequently, a single person on Newstart Allowance receives 61% of the equivalent social security

payments for a couple (including Rent Assistance), below the 64-67% recommended by the Harmer

Review (on pension adequacy) to ensure that single pensioners attain the same average living

standard as pensioner couples (see table below).22 Regrettably, that review excluded consideration

of the adequacy of Newstart and other allowances.

Similarly, social security payments for a single parent on Newstart with one child are 98% of the

equivalent payments for a couple without children, but the Budget Standards research implies that

this single parent requires 102% of the income of a couple without children to reach the same living

standard (see table below).

22 Harmer (2009), Pension Review Report, FAHCSIA, Canberra.

Single people generally need more than half the income of couples, due to diseconomies of scale (for example, couples usually share a

bedroom).

21

Table 5: Relativities between budget standards and social security payments for different family

types (June 2016)

single no children

single 1 child (6-8 yrs)

couple no children

couple 1 child (6-8 yrs)

Relativities in budget standards (compared with the budget for a couple without children) 0.66 1.02 1.0 1.16

Relativities proposed by the Pension Review (compared with pensions for a couple without children) 0.64-0.67 1.0 Relativities in present social security payments for people receiving Newstart (compared with the budget for a couple without children) 0.61 0.98 1.0 1.28

Sources: Saunders P & Bedford M (2017) ibid; Harmer J (2009) ibid.

Note: Budget standards are for a child aged 6 years; social security (Newstart and supplements) are for a child

aged 8 years. Budget standards and social security relativities include rents and Rent Assistance.

We therefore propose that single parents on Newstart receive the same minimum $75pw increase,

which we advocate for single people without children. This is justified partly on grounds of simplicity,

but mainly on the basis that, in addition to single people receiving Newstart Allowance without

children, single parents on Newstart face an elevated risk of poverty.

This is due to the extra costs of raising a child alone, caused by a combination of diseconomies of

scale compared with couples (for example, couples usually share a bedroom, saving on rent), time

constraints, and the priority parents and society give to preventing children from living in poverty

(including by sacrificing their own living standards, noting that single parents have less room to

economise than couples). Parents often sacrifice their own living standards so that their children do

not miss out on essentials. This is evidenced by the large gap ($132 pw in 2016) between the

‘minimum budget’ for a single parent with one child and the social security payments available

(including Newstart, Family Tax Benefit, Rent Assistance and Energy Supplement), compared with

the gap between the minimum budget and social security payments for a couple on Newstart with

one child (a gap of $58 pw in 2016).

Further, maximum income support payments for single parents drop by $89pw when their youngest

child turns 8 years and they transition from Parenting Payment to Newstart Allowance, despite costs

of children rising with age. We aim to eliminate this inequity through the $75 increase in Newstart

and creation of a Sole Parent Supplement, detailed below.23

23 The transfer 80,000 single parents from Parenting Payment Single to the lower Newstart Allowance in 2013, when ‘grandfathering

arrangements’ were removed for parents with children 8 years and over, subjected them to large reductions in their social security

payments.

22

Widow Allowance, Special Benefit and Crisis Payment for single people are set at the same rate as

Newstart Allowance, and the same arguments for lifting those payments by at least $75pw also

apply to these payments.

We also propose that single people and single parents receiving the maximum away-from-home rate

of Youth Allowance receive the same minimum $75pw increase. Along with single people receiving

Newstart, they face an elevated risk of poverty. Youth Allowance is $52pw lower than Newstart, at

$231pw (including the Energy Supplement). Yet the typical living costs of young people relying on

this payment are not lower. Food, clothing and other essentials are not discounted for young people.

Lower maximum rates for Youth Allowance are based on a false assumption that all those receiving

it can supplement their income with parental support or part-time employment. Not all people on

Youth Allowance have those opportunities, and in any case, personal or parental income tests take

these income sources into account by lowering the amount of Youth Allowance paid.

It is also argued that young people are more likely to save on rent by sharing accommodation, but

this is already taken into account through the lower ‘shared’ rate of Rent Assistance paid at 75% of

the maximum rate.

Maximum single rates of Austudy Payment for adult students and Abstudy Payment for Aboriginal

or Torres Strait Islander students are set at the lower Youth Allowance level for arbitrary historical

reasons. These should also be increased by at least $75pw. We note that unlike Newstart and

pensions, which are indexed twice per year, Youth Allowance and Austudy are only indexed once per

year, meaning that they rise more slowly than other payments and their value is further eroded over

time.

Social security payments for all groups facing a high risk of poverty should be increased as quickly as

possible. Our proposed minimum increase of $75pw for single people receiving Newstart and related

allowances targets the worst anomalies, and the severest poverty.

(2) Urgent improvements in Family Tax Benefit

In addition to income support payments such as Newstart Allowance, our social security system has

supplementary payments for families on low incomes that face additional costs such as the costs of

children (Family Tax Benefit) and the cost of renting privately (Rent Assistance).

These two payments are well below the minimum costs they are supposed to cover, and we propose

the following urgent, targeted increases to ease the most severe poverty.

Family Tax Benefit Part B supplements the incomes of single parents, to compensate them for the

extra costs of raising a child alone (discussed above). For parents whose youngest child is 5 years or

over, this payment is currently $64pw (including lump sum payments and Energy Supplement). This

is $24pw less than the equivalent payment for those with preschool age children, despite the costs

of children rising with age.

We propose that, in addition to increasing the maximum rates of Newstart and Youth Allowance for

single parents, Family Tax Benefit Part B for children aged 5 years and over should be increased to

eliminate this inequity. Together with the minimum $75pw increase in Newstart Allowance for single

parents, this would stop overall social security payments paid to single parents from falling when

their youngest child reaches 8 years of age (as discussed above).

23

Along with Newstart Allowance, Family Tax Benefit (Part A) – the basic family allowance for low-

income families – is only indexed to movements in the CPI. The link between this payment and wage

movements was removed in 2009, effectively reducing payments since then by $13 per week for

each younger child under 12 years and $17 per week for each older child.24 The removal of

indexation to wages practically guarantees that over time, poverty among low-income families with

children will increase.25

To make matters worse, maximum rates of Family Tax Benefit (Part A) for low-income families were

frozen in nominal terms from 2017 to July 2019.

In order to prevent child poverty from worsening, this payment should be indexed to both the CPI

and wage movements, whichever is greater.

Recommendation 3

Family Tax Benefits for single parent families should be urgently increased:

(1) Family Tax Benefit Part B in respect of single parents should be redefined as a Single Parent

Supplement.26

(2) The Supplement would be designed to compensate for the extra costs of raising a child alone,

compared with the child-related costs facing couples with children.

(3) As a starting point, the Supplement would be set at a level that brings total social security

payments for single parent families with children eight years or older at least up to the same level

as those with younger children (in conjunction with the proposed increase in Newstart and other

allowances).

Cost: $630 million

Recommendation 4

Indexation of Family Tax Benefits to movements in the Consumer Price Index (CPI) should be

restored, along with the link between the maximum rate of Family Tax Benefit Part A to pension

rates and wage growth.

Cost: $650 million

24 Whiteford, P et al (2019), It’s not just Newstart: Single parents are $271 per fortnight worse off, The Conversation, December 3, 2018. 25 Family payments for families with low incomes were linked to pension rates (so indirectly to wage movements) in 1989 precisely to

reduce child poverty among low-income families in or out of paid work. The 2009 decision to remove this link flies in the face of that anti-

poverty objective. 26 Single income couples would continue to receive the current Part B payment, subject to a wider review of family payments by the Social

Security Commission.

24

(3) Urgent improvements in Rent Assistance

The purpose of Rent Assistance is to ease rental stress for families with low incomes who rent

privately.

We face a worsening housing affordability crisis for people on low incomes in Australia. At least

116,000 people are homeless (lacking secure accommodation) on any given night, and 57% of all

private tenants with low incomes are paying more than 30% of their income in rent, putting them at

increased risk of homelessness.27 Many of those affected receive the lowest income support

payments including Newstart and Youth Allowances.

A contributing factor to this housing affordability crisis is that Rent Assistance is failing in its job.

Currently, the maximum rate of Rent Assistance for a single adult living alone is just $69pw. To

receive this amount, a person must pay at least $153pw in rent. Rents for one and two bedroom

flats are typically well above this amount.

For example, in September 2018:

the median rent for a two bedroom flat in Sydney was $545 per week;

the median rent for a two bedroom flat in Melbourne was $440 per week. 28

These rents are at least six times the maximum Rent Assistance for a single adult on Newstart

Allowance, and much more than total social security payments for a single person on Newstart of

$351pw.

Anglicare Australia’s latest Rental Affordability Snapshot found that Australia-wide, just two private

rental properties were affordable for someone on Newstart (costing 30% of less of income). There

were no affordable rentals in capital cities.29

ACOSS surveyed almost 500 people living on Newstart and found that more than half of respondents

(59%) had less than $100pw left over after paying for housing costs to cover everything else. 39%

were left with $50 or less a week after housing costs.30

Rent Assistance is somewhat higher for families with children. For example, a single parent with one

child may receive a maximum rate of $81pw if they pay more than $188pw in rent. Yet this is still

well below rents typically charged for two bedroom flats.

27 See Homeless Australia homelessness statistics at: https://www.homelessnessaustralia.org.au/about/homelessness-statistics and ABS data on housing affordability at: https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4130.0~2017-18~Main%20Features~Housing%20Affordability~5 28 Housing NSW (2019) Rent and Sales Report - Interactive dashboard Available:

https://public.tableau.com/profile/facs.statistics#!/vizhome/Rentandsales/Rent ; Department of Human Services Victoria (2018) Rental

Report, September quarter 2018 Available:

https://www.dhhs.vic.gov.au/sites/default/files/documents/201812/Rental%20Report%20September%202018.docx 29 Anglicare Australia (2019) Rental Affordability Snapshot https://www.anglicare.asn.au/docs/default-source/default-document-

library/final---rental-affordability-snapshota302da309d6962baacc1ff0000899bca.pdf?sfvrsn=4 30 ACOSS (2019) Survey of people on Newstart and Youth Allowance, Ibid.

25

Like Newstart, Rent Assistance is only indexed to the CPI, yet rents have increased at a much faster

rate. From the March quarter 2002 to December quarter 2016, average rents increased by 64%,

compared with an increase of 45% in the CPI.31

Further, Rent Assistance is paid at flat maximum rates regardless of rent levels in different parts of

Australia. This makes it much harder for people searching for paid to work to live in places it is most

likely to be found – especially in the major capital cities.

As with our proposed increase in Newstart and related allowance payments, we give priority to

those in the deepest hardship, by advocating an urgent 30% increase in maximum rates of Rent

Assistance for people with low incomes.

This increase would extend to all people with low incomes receiving Rent Assistance, including

people receiving Newstart Allowance, pensions, and low-income families.

ACOSS has developed a broader set of policies to improve housing affordability for people with low

incomes, including a new proposal to strengthen direct investment in social housing to both reduce

homelessness and boost sagging growth in incomes and jobs. 32

Recommendation 5

(1) Maximum rates of Rent Assistance should be increased by at least 30% (currently a

$21 per week increase in the case of a single adult without children) as a first step,

pending a broader review of the supplement.

(2) A broader review of the adequacy of the supplement should be undertaken,

including payment rates and indexation arrangements, to ensure it significantly

improves rental affordability for those on low incomes, keeps pace with

movements in rents and is responsive to local housing market conditions.

Cost: $800 million

7. Benchmarking future payments: an independent Social Security

Commission

To date, the setting of social security payment rates has largely been a political process. As

mentioned earlier, allowances and Parenting Payment were excluded from the Harmer review of

pension adequacy in 2009, despite allowances being paid at a lower rate. This was a political

31 Australian Bureau of Statistics (2017) Consumer Price Index, Australia, Dec 2016, Cat no 6401.0 and Wage Price Index, Australia, Dec

2016, Cat no. 6345.0 32 ACOSS (2019), Priorities for the next government: Housing and homelessness; ACOSS (2019), How to reduce homelessness and boost

incomes and jobs.

26

decision. Equally, where payments are cut, this is usually driven by a desire to make budget savings,

without an assessment of whether people receiving the payments can afford such a cut or what

impact the cut will have on payment relativities over the long term.

An independent body to advise the parliament on payment rates and other settings would enable a

fairer approach to social security design. It would ensure that evidence guides payment design and

reform. The commission would need to be sufficiently resourced to conduct and commission

ongoing research on payment adequacy, including budget standards work, and other research on

payment settings to ensure that its recommendations were based on latest findings.

Such a commission is not necessary to deliver the urgent, immediate increase to Newstart, Youth

Allowance and related allowances. Increasing allowances should happen as soon as possible.

However, the commission would advise the parliament on further increases required and other

settings around allowances (like means-testing, waiting periods, etc.). The commission would also

play an important role in benchmarking of payment rates, guided by the principle that everyone in

Australia, regardless of their circumstances, should have access to a minimum level of financial

resources to cover the essentials of life. This benchmark would not be based on perceived capacity

to gain employment or access other resources (e.g. the possibility that students might obtain part

time employment, whether or not they actually do so).

Recommendation 6

(1) A Social Security Commission should be established by legislation to provide independent

expert advice to the Parliament about the setting of social security payment rates (including

income support, family payments, and other supplements), covering adequacy, means test

settings, indexation, and accessibility (including waiting periods).

(2) The urgent, overdue, and justified payment increases proposed in this submission should

happen immediately and do not require establishment of the commission.

(3) Building on these payment increases, the commission would advise the Parliament on the

development and updating of benchmarks for the adequacy of all social security payments, to be

incorporated into social security legislation to ensure equity and certainty for people receiving

these payments.

(4) The benchmarks would be based on the principle that we are all entitled to the financial

resources we need to reach a minimum acceptable standard of living in accord with general

community expectations, and informed by the best-available research into poverty, deprivation of

essentials, and budget standards.

(5) The relationship between social security payments, wages and consumer prices would also be

considered.

(6) The benchmarks would be based on the financial needs of different groups (including different

family types), rather than ‘deservingness’, individual employment prospects, or age.

Cost: $4 million

27

8. Giving people control of their money so they can budget: pay

social security in cash

Income support payments should be paid as cash payments and not restricted to a card (e.g.

cashless debit or income management). People are best placed to make decisions about their own

budgets, especially when they are managing finite resources.

Income management and cashless debit have targeted people on the lowest incomes, with the vast

majority of people affected being Aboriginal and Torres Strait Islander people. These policies have

consistently been found to contravene people’s right to social security and non-discrimination. There

is no reliable evidence that these policies address their objectives – to reduce the incidence of

addiction to alcohol, illicit drugs and gambling – with two comprehensive evaluations of income

management showing there was no effect on these outcomes. The Social Policy Research Centre at

the University of NSW found that, after years of the policy being in place, there was no evidence that

compulsory income management helped generate community-wide behaviour change.33 The

Australian Government has also acknowledged that voluntary income quarantining delivered better

results than compulsory income quarantining.34 The cashless debit card evaluations provide no

credible evidence that cashless debit has reduced the incidence of addiction, as confirmed by the

Australian National Audit Office in its assessment of the evaluation.35

Compulsory income quarantining is stigmatising, impractical, expensive and unproven. It has no

place in our social security system and should be rejected by the Committee. Any limitations or

deductions from the cash incomes of people receiving income support should be the same as those

that apply to the broader community (for example, court imposed fines or garnishee arrangements).

Public policy should not be based on the demeaning and discriminatory assumption that just

because people have low incomes, they are no longer responsible members of the community.

Unemployment, illness, or family breakdown can happen to any one of us.

Recommendation 7

Social security payments should be paid (as they traditionally have) as cash entitlements without

restriction on how people spend the money; unless they volunteer to divert funds for a particular

purpose (such as paying rent).

(1) Compulsory income quarantining (including ‘cashless debit cards’) should be phased out as

quickly as possible in consultation with individuals and communities affected, giving people the

option to continue on a voluntary basis.

33 Bray, J. R., Gray, M., Hand, K., & Katz, I. (2014). ‘Evaluating New Income Management in the Northern Territory: Final Evaluation Report’

(SPRC Report 25/2014). Sydney: Social Policy Research Centre, UNSW Australia. 34 The Australian Government (2018) ‘Concluding observations on the fifth periodic report of Australia: Information received from

Australia on follow-up to the concluding observations’ Committee on Economic, Social and Cultural Rights 21 December,

https://tbinternet.ohchr.org/_layouts/treatybodyexternal/Download.aspx?symbolno=E%2fC.12%2fAUS%2fCO%2f5%2fAdd.1&Lang=en p.3 35 Australian National Audit Office (2018) The Implementation and Performance of the Cashless Debit Card Trial’ 17 July

https://www.anao.gov.au/work/performance-audit/implementation-and-performance-cashless-debit-card-trial

28

(2) Savings from the phasing out of these schemes should be redirected to local support programs

in accordance with the wishes of affected communities.

9. Economic benefits of a $75 pw increase in Newstart

According to Deloitte Access Economics, increasing Newstart, Youth Allowance and related

allowances by $75 per week would inject around $4 billion into the economy in the first year, with

rural and regional Australia receiving the biggest benefit. This economic stimulus would generate

12,000 new jobs and lift wages and profits by 0.2%.36 The Reserve Bank Governor Philip Lowe has

stated that in the short term, providing people on low incomes with a boost to their income would

be effective stimulus because such households will most likely spend the extra dollars.

Deloitte Access Economics notes the biggest benefit of an increase would be that of fairness; people

on the lowest incomes in Australia would receive the most.

Figure 5: Effect of $75pw allowance increase by level of relative advantage and disadvantage

(Deloitte Access Economics, 2018).

The money from increasing allowances would also most likely be spent in local communities,

because this is where most people on allowances spend their income.

When we asked people what they would do if Newstart or other allowances were increased by

$75pw, they said:

36 Deloitte Access Economics (2018) ‘Analysis of the impact of raising benefit rates’ https://www.acoss.org.au/wp-

content/uploads/2018/09/DAE-Analysis-of-the-impact-of-raising-benefit-rates-FINAL-4-September-...-1.pdf

29

“It would make my life bearable. I may be able to afford some decent clothes for an

interview. I would be able to eat healthy food.”

“I would not stress out fortnightly about electricity and covering the basics such as health,

dentist, petrol, food, etc. This would help my esteem and help my health due to less stress

and would make it easier to get a job as have better support to cover the basics.”

“I could eat and afford excursions for my child”.

“Help by getting me to the city for cancer treatment and buy better food.”37

10. Newstart Myths and Facts

ACOSS wishes to address some of the myths about people on Newstart and other allowances.

Myth 1: 99% of people on Newstart receive other payments (and therefore, their incomes are

adequate)

It is true that 99% of people on Newstart and other allowances receive supplementary payments;

but this is the Energy Supplement, which is $4pw for a single person on Newstart. This, combined

with Newstart, equates to $282pw or $40 a day.

The next supplement that most people receive is Rent Assistance, which 40% of single people on

Newstart get. The maximum rate of Rent Assistance is $69pw, providing the person spends at least

$153pw in rent.

Fewer than 20% of single people receiving Newstart receive Family Tax Benefit to help cover the cost

of children. Family Tax Benefit falls short of the cost of children, particularly as they get older, and

therefore does not help the parent to manage their own cost of living.

Generally, if someone receives a supplementary payment, it is because they face additional costs

(e.g. Carer Allowance is paid to someone who cares for someone with an illness or disability;

Pharmaceutical Allowance may be paid to someone with an illness or partial work capacity).

In short, even with supplementary payments, Newstart and other allowances are inadequate

because they do not cover the basic costs of living.

Myth 2: If you increase Newstart, people will not have an incentive to seek paid work.

If you increased the single rate of Newstart by $75pw, the payment would be less than half the full-

time minimum wage.38 People would be far better off in paid work, if they could get it. Our income

37 ACOSS (2019) Ibid 38 43% in March 2019.

30

support system also requires people to look for up to 20 jobs per month in order to receive

payments. Addressing the inadequacy of the payment won’t change this.39

A payment increase would also help people find a job. The Business Council of Australia supports an

increase to Newstart because Newstart is so low that it acts as a barrier to paid work. People on

Newstart end up in such deep states of financial deprivation that they cannot participate in their

community. They are unable to afford clothes for job interviews, a haircut, printing costs or

transport, which makes it extremely difficult to put your best foot forward for job interviews.

Myth 3: ‘If you have a go, you get a go’.

We speak to people on Newstart who have applied for hundreds of jobs and do not get an interview.

Large numbers of people on Newstart are disadvantaged in the labour market; there are more than

80,000 single parents on Newstart who struggle to get suitable paid work that fits in with caring for

children. Half of the Newstart population is aged 45 plus, and many face age discrimination in the

job market. Almost 30% of people on Newstart have a partial work capacity because of illness or

disability, and have great difficulty finding suitable paid work.

There is just one job available for every eight people who are looking for paid work or are

unemployed and looking for more hours. When people changing jobs are included in the total

number of applicants, this rises to 19 applicants per vacancy, on average.40 Youth unemployment is

typically higher than the national average, especially in rural and regional parts of Australia.

When people using jobactive services obtain employment, it is usually a part-time or casual job, so

they either remain on part-payments or are at risk of losing the job in the near future. This is due to

structural change in the market for entry level jobs, most of which are now casual or part-time.41

We know that people on Newstart and other allowances are doing their best to get paid work, care

for children and/or study. They are doing all they can to move forward with their lives. However,

they still require an adequate income to cover basic living costs while they retrain, study or raise

their children. Newstart and other allowances are so low that they limit people’s capacity to build

their lives because they cannot cover the cost of food and other essentials.

Myth 4: The government cannot afford to increase allowances

It would cost approximately $3.3 billion in the first year to increase all single rates of allowances by

$75 per week. This is less than one third of the cost of the tax cuts that will benefit high-income

earners legislated to take effect in 2024/25. This disparity shows that budgets are about choices, and

successive governments have chosen to not increase allowances.

39 However, there is broad consensus among employer groups and employment services that the current 20 jobs a month rule is too rigid

and should be reformed to provide greater flexibility. 40 Department of Employment (2019), 2018 survey of employer’s recruitment experiences. 41 ACOSS (2018), Faces of unemployment. https://www.acoss.org.au/wp-content/uploads/2018/09/ACOSS_JA_Faces-of-

Unemployment_14-September-2018_web.pdf

31

In Australia, payments to people who are unemployed comprise 6% of the total social security

budget.42 We spend less than the average spent by comparable countries on unemployment

payments.43

The question governments should ask is: can we afford not to increase allowances? It is clear that

policies to reduce poverty and inequality matter if we are to stimulate growth and ensure broad

participation in society. The head of the International Monetary Fund (IMF), Christine Lagarde,

recently called for social spending to be prioritised to reduce inequality, build trust and ensure

inclusive growth:

“While social spending is not the only lever in such a response, it is undoubtedly one of the

most important. It is no surprise that surveys indicate rising public support for income

redistribution policies in many countries.”44

People on Newstart now comprise almost half of the households in the lowest 5% of incomes

(47%).45 The longer allowances are kept at their current rates in real terms, the further people

receiving them fall behind the rest of the community.

42 Treasury (2019) Budget Paper 1 https://www.budget.gov.au/2019-20/content/bp1/download/bp1.pdf p. 5-22 43 OECD (2019) ‘Public unemployment spending’ https://data.oecd.org/socialexp/public-unemployment-spending.htm 44 Lagarde, Christine (2019) Forging a Stronger Social Contract—the IMF’s Approach to Social Spending

https://www.imf.org/en/News/Articles/2019/06/14/sp061419-md-social-spending 45 ACOSS & UNSW (2018) ‘Inequality in Australia 2018’ https://www.acoss.org.au/wp-content/uploads/2018/07/Inequality-in-Australia-

2018.pdf p.17

Australian Council of Social Service

www.acoss.org.au

@ACOSS