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Increasing Newstart would be good for our local economy

By Rebecca Vassarotti 27 September 2018 11
Raising the rate of Newstart will not spell the end of poverty in the ACT- but it can certainly help.

Raising the rate of Newstart will not spell the end of poverty in the ACT- but it can certainly help.

Could you live on $39 a day?

I am not talking about for a short period of time, but week upon week, month upon month? Not just to pay for rent, food and transport, but also to pay for doctor’s bills, medications, shoes and clothes, and a haircut once in a while.

The unemployment benefit Newstart has been designed as a safety net for people who are out of the workforce for a short period of time. The economic reality means, however, that often unemployment lasts longer than a few weeks. A lack of jobs means that no matter how motivated or skilled you are, you may be unlucky enough to be out of work for an extended period of time. Sometimes life events such as an illness or injury, new technology or changes in workplaces mean you may be out of work. While few people want to be on these payments long term, the statistics suggest that just under half of Newstart recipients are on the payment for more than two years.

I regularly engage with people in financial stress and know that no matter how good you are at budgeting or how frugal you are, you can’t live on this poverty payment. It’s made all the more difficult in a community like Canberra. We live in a community with high rents, high costs of living and a climate that drives high utility. This means that people on very low incomes are forced to make impossible choices such as having to choose between paying rent or feeding their family. Many of these people rely on Newstart as a key source of income. A key reason this creates so much stress is the current Newstart allowance that is still sitting at the same rate in real terms as it was in 1994.

There is no doubt that we should raise the rate of Newstart, and other working-age social security payments that have not kept up with the costs of living (including Youth and Sickness Allowances) because it is the right thing to do. The community recognises this and is supportive of the calls to raise the rate. This was highlighted in a recent Essential poll that found that more than two-thirds of Australians believe that the Newstart rate should be raised.

There are other compelling reasons for raising the rate of Newstart. For a number of years, the calls to raise Newstart and other key payments have been backed by business – including the Business Council of Australia and the Australian Industry Group. A recent analysis conducted by Deloitte Economics gives us an indication of why these businesses support the initiative. As outlined in this report, business has recognised that raising the rate of Newstart is not only good for individuals and households – it is also good for the economy via retail spending, jobs growth and revenue to the government.

Internationally, there is a growing awareness of the negative effect of inequality on economies. Nations with greater levels of inequality tend to have lower economic growth over time, and shorter spells of high economic growth. Inadequate income support payments do drive inequality and create a divide between the haves and have-nots.

The recent Deloitte report quantified the economic benefits of raising the rate on our local community. As highlighted by the ACT Council of Service Service last week, the report details how raising the rate of this payment would result in an increase in total disposable income of $30.51 million. Because this income goes to people on the very lowest incomes we know that this goes straight back into the economy – to purchase essential goods and services including food, housing, heating and transport. As such, consumption would increase by $42.81 million and economic output would increase by $18.67 million. ACTCOSS calls it a ‘social and prosperity dividend for Canberra’, with everyone benefiting from an increase in the payment.

Raising Newstart is a Federal Government decision, and it was good to see the Chief Minister be the first state or territory leader to back this call in his budget speech this year. While it’s not in the ACT Government’s power to raise the rate of Newstart, there are things we can do here in Canberra to make life a bit more manageable for people living on very low incomes. There are some good concessions programs that make it a little easier, such as energy bill concessions. But there are also barriers, such as the surcharge put on people who only purchase three or six months of car registration. The ACT Government has made millions on this charge, even though it was identified in 2012 as something that was unfairly targeting low-income households. This is a small change that could be made to ease the pressure on low-income families in Canberra.

I think we need to do all we can to reduce the level of inequality in Canberra. What do you think we should do to make Canberra a more equal community?

What’s Your opinion?


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10 Responses to
Increasing Newstart would be good for our local economy
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g210 12:17 pm 28 Sep 18

“how about stop increasing cost to make it more affordable for everyone?”
If only… however that just isn’t the ‘Barr’ way of doing things.

bj_ACT 11:51 am 28 Sep 18

Newstart is way too low and private enterprise support for Unemployed is ineffective.

Time for government to insource Employment Services. The poor in Canberra get a stiff deal by all levels of government.

chewy14 11:28 am 28 Sep 18

Newstart should definitely be increased (perhaps not as much as the author would like) but the whole unemployment benefits area needs reform.

We should enact a superannuation style unemployment benefit account where a few % of people’s working income is held.

If you become unemployed, you would initially draw on this account at a set % of your previous wage which would reduce over time.

When this account is exhausted, you would then receive Newstart which also be higher initially depending on how many years you’d been in the workforce and how often you’d previously accessed the payment.

From there it would reduce to the base amount.

This would help people adjust to unemployment as well as aiding them find new work. The vast majority of people find another job within a year, so this would provide a good transition.

Long term unemployed people would still be on a relatively low rate to encourage them to find work.

Stef Qu 8:40 am 28 Sep 18

As a person who works full time, I have nothing left to live on after bills and rent , food, petrol, childcare, an occasional chocolate bar everything is expensive. What can we do? Do u think a few dollars of Newstart will improve economy?? Really? Cost of living is high, rego fees go up.. how about stop increasing cost to make it more affordable for everyone?

justin heywood 10:57 am 27 Sep 18

the statistics suggest that just under half of Newstart recipients are on the payment for more than two years

Is the OP arguing that increasing the unemployment benefit will reduce these long-term unemployed? Or is she saying that we should accept that some people will never work so that we should make their lives more comfortable? I’m not sure which argument she is making, but I don’t agree with either.

The OP has failed to mention the other subsidies that apply once an individual falls into the welfare trap – Health Care card, transport, training/education, rent and utility subsidies and a myriad of others. This doesn’t make life on Newstart comfortable, but many people struggle with their basic financial committments even though they get up and go to work every day.

I work (volunteer) with welfare recipients, many DSP, but some on Newstart. I would estimate that at least half of the people I work with are rorting the system in one or several ways and have no serious intention ever leaving the welfare system (it’s the other half that keep me motivated).

Increasing welfare payments may be a vote-winner amongst certain demographics, but it won’t, by itself, improve the lives of welfare recipients. In fact, for many, it may make things worse – in that they have even less motivation to get off welfare.

What is needed, in my opinion, is more motivation for people to get out of the welfare cycle and become productive contributors. Particular attention should be given to supporting second generation welfare recipients (i.e. the children of welfare recipients), not by throwing more money at them (or their parents), but in increasing the incentive to undertake (and complete) relevant training and getting employment.

    pink little birdie 4:16 pm 28 Sep 18

    If you know people are rorting the system why aren’t you reporting them? Lots of people say they know someone rorting it but they never seem to report them.

    And the people who want to remain on Newstart and not work who do you think will employ them? Or do you want businesses to constantly churn through them (which is a high cost activity).
    I actually support 2 levels of Newstart – a higher one for those seeking work (75% of minimum wage) and a lower obligation free one (50% of minimum wage)

    Considering that even the Business Council of Australia is saying that the level of NewStart actually hinders people getting a job it should be raised.

    Vindalu 8:05 am 30 Sep 18

    Justin, as a volunteer I would suggest that you only have a limited and superficial understanding of the reasons most people are on Newstart payments. To assert that about half are rorting the system is an emotive and unsubstantiated statement. As an educator working on labour market programs some years ago I came in contact with the majority of working age unemployed. In any class of thirty there were usually one or maybe two attendants who when properly assessed, interviewed and observed really did not want to work in any way shape or form. That is not half.

    knuckles 7:22 pm 01 Oct 18

    I work as a health professional who attends people in their homes, and I agree with Justin. There is a significant number of people in our community who are happy to be on newstart and have no intention of ever getting a job. People who want a sick certificate for some generic, minor illness, rolling around in “pain” ( the pain and the rolling around stops every time they get a text message) telling me they can’t possibly got to the job interview that was organised for them as they feel like shit, and seeing as your here, I’d like some drugs for the pain as well. By the way, here’s my health care card so I don’t get a bill. To think that these people don’t exist is putting your head in the sand. The question should be, should people who work be forced to support these people who choose not to?

Mick Nicholls 8:20 am 27 Sep 18

Aged pensioners dont live on much more than this

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