Finance Federal Budget Government under pressure to lift Newstart amid troubling economic times

Government under pressure to lift Newstart amid troubling economic times

Society is urging Canberra to increase Newstart as single parents miss out on $700 million a year in welfare payments. Photo: TND
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Pressure is mounting on the federal government to lift Australia’s unemployment benefit amid signs the economy is doing worse than anticipated.

A broad coalition of politicians and economists argue that increasing Newstart payments would not only make life a little easier for jobless Australians but also boost the economy by lifting consumer spending.

Increased household consumption could feed into higher wages and stronger jobs creation at a time when more than three million Australians are living in poverty.

Greens MP Adam Bandt and Nationals MP Pat Conaghan were the latest politicians to call for an increase – echoing previous calls from Barnaby Joyce, Matt Canavan, welfare advocates and business groups.

The urgent pleas come after a string of weak economic data supported the need for more stimulus.

ABS revealed this week that the value of construction work done over the December quarter fell 3 per cent and the level of business investment over the same period dropped 2.8 per cent.

Both suggest next week’s GDP growth figures, released on Wednesday, will be worse than expected.

Meanwhile, the unemployment rate increased to 5.3 per cent in January and wages growth stalled at 2.2 per cent, well below the historical average of 3 to 4 per cent.

And last year the national accounts showed household spending over the September quarter dropped to its slowest pace since the GFC.

Pressure is mounting

Dr Bandt seized on the weak results by declaring that Australia was on the brink of recession.

The newly minted Greens leader wrote a letter to Prime Minister Scott Morrison on Wednesday urging him to lift Newstart and the Youth Allowance by $95 a week to tackle inequality.

He said this would stimulate the sluggish economy as people on such low incomes would “put every cent back into local economies”.

Mr Conaghan made a similar point on Thursday, telling the ABC that the government should prioritise people and poverty above the budget surplus “any day of the week”.

“I would urge my colleagues from both sides of the floor to have a real discussion. Not just throw it up in the air and punch the ball around,” Mr Conaghan said.

“This is something that I think should be at the top of my priority list because you’ve got kids that are going to school without food.”

The Business Council of Australia, the Committee for Economic Development, KPMG and the Australian Industry Group have all called on the government to lift Newstart.

But the unemployment benefit has not increased in real terms since 1994 – even though Deloitte Access Economics found that a $75 boost to the weekly Newstart rate would create an extra 12,000 jobs in 2020-2021.

The unemployment benefit (plus Rent Assistance and Energy Supplement) is now $117 lower than Australia’s poverty line – defined as 50 per cent of the median income before housing costs ($457 a week).

More than three million Australians now live below that line, according to a joint report by UNSW and the Australian Council of Social Service (ACOSS).

Of those three million, 774,000 are children under the age of 15.

Single mums hit the hardest

Rachel Siewert, family and community service spokeswoman for the Greens, told The New Daily a major driver of the increase in child poverty was a series of legislative changes that forced single parents off the parenting payment and onto Newstart.

New Parliamentary Budget Office analysis requested by Ms Siewert found the federal government had saved more than $5 billion over 13 years by making it harder for single parents to access child support.

Where single parents could once claim the parenting benefit until their youngest child turned 16, now they can only claim it until their youngest turns eight.

Since July 1, 2006, many lone parents have consequently been pushed off the parenting payment and onto Newstart, which pays much less.

Although the policy was introduced under the guise of encouraging people to enter the workforce, Ms Siewert said it was “a false economy” as it drove people into poverty, reduced people’s productive capacity, and led to higher welfare costs down the track.

“We said at the time that this would hurt single parents, that it was about saving money, not about helping single parents and encouraging them to find work,” Ms Siewert said.

“And we can see what effect that’s had – because if you look at the poverty rates of single parents, it has significantly gone up as a result of the changes.”

The changes mean single parents missed out on $700 million in welfare payments this year alone, ACOSS said.

Terese Edwards, chief executive of the National Council of Single Mothers and their Children, said the changes came at the expense of society’s most vulnerable people and were passed without prior modelling or consultation. 

She told The New Daily the removal of such critical resources had forced single mothers to go without food to make ends meet.

“It was purely a [political] statement. It was forced upon women, and the disaster continues,” Ms Edwards said of the changes.

“There is food insecurity as a result.

“I have spoken to so many mums who pretend with their child that they have already eaten, that they’ve had their lunch when it comes to tea time, because it just doesn’t stretch that extra bit.”

Asked whether the government would consider lifting the Newstart rate to stimulate the economy and help the increasing number of jobless Australians, a spokesperson for the Minister for Social Services said the government was focused on “policies like increasing productivity and moving people from welfare into work”. 

Welfare is not stimulus. It is a safety net to support Australians doing it tough,” they said.

“Our policies like record infrastructure investment, tax relief and investment in schools and hospitals are creating the conditions for jobs growth across the economy and delivering services Australians rely on.”

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