Lift the 18-year freeze on Newstart payments: ACOSS call to Senate inquiry

22 August 2012

The Australian Council of Social Service, ACOSS, is urging the Commonwealth Government to raise low paying Allowances such as Newstart, which hasn’t been increased in nearly 20 years, in-order to reduce worsening poverty and improve work incentives and the job prospects of unemployed people in Australia.

The call comes in the peak body’s submission to a Senate Inquiry into the adequacy of ‘allowance’ payments – ‘Surviving, not living’ (Download here >>).

“The idea that unemployment payments have to be kept at $35 a day as a workforce incentive is a fallacy. Our submission shows that a single adult on Newstart more than doubles their after tax income if they obtain a fulltime job paid at the minimum wage,” said Dr Cassandra Goldie, CEO, ACOSS.

“Newstart has been frozen at the same level in real terms since 1994, and it’s time to bring the living standards of people who are unemployed, raising a child alone or studying with no other means of support, out of the freezer. They all missed out on the $32 increase to other social security payments including age pensions in 2008. Single people on Newstart now receive $133 per week less than the pension, and on current trends, by 2040 the single Newstart rate will be just half the pension.

“We’ve carefully assessed the living standards of people on allowance payments and by any measure they live in the deepest poverty. Less than one in five people on Newstart own their home so most have faced steep rent increases in the last five years. Over 40% could not afford to pay a utility bill on time in the last 12 months.

“The Henry Review Panel which included the then Secretaries of Treasury and the Families and Community Services department and a senior business leader recommended what amounts today to a $50 increase in the single rate of allowance payments. They would not have done so if there was a risk it would weaken work incentives. In fact the proposed increase would do little more than restore the payment’s former value relative to minimum wages back in 1994 when it was last increased.

“Compared to a low paid fulltime job, the single rate of Newstart including Rent Assistance is the lowest unemployment payment in the OECD.

“Keeping payments for unemployed people below the poverty line won’t improve their employment prospects or enable them to move to places where jobs are available. Instead, concerted policy action is needed to lift people’s skills and address barriers such as lack of affordable housing, child care and flexible work.

“The evidence is clear, and that’s why groups as diverse as the Business Council of Australia, the Australian Council of Trade Unions, senior academics and politicians have joined Australia’s community sector in the call for this modest increase.

“This Senate Inquiry represents an opportunity to deal with the unfinished business of the 2008 Pension Review and the 2009 Henry Review by endorsing the Henry Report’s recommendation to raise Allowance payments for single people, as was done for pensioners.

“We also call for the Senate Committee to endorse the Henry Report recommendation to index Allowances to wages so the gap between allowances and pensions does not keep growing; and to simplify the income test for Newstart Allowance.

“ACOSS also recommends improvements in Job Services Australia assistance for the 60% of people on Newstart Allowance who are unemployed long-term, including an increase in the $500 the providers receive to assist them with training and work experience and expansion of the wage subsidy scheme for people unemployed over 2 years. People want to move from Newstart Allowance to paid work but they are not getting the help they need to do so.

“We welcome Employment and Workplace Relations Minister Bill Shorten’s recent acknowledgement that $35 a day is not enough for people to live on, and look forward to a positive response from Government to the calls from a wide spectrum of the community to increase these payments,” Dr Goldie said.

Media Contact: Fernando de Freitas 0419 626 155

See ACOSS submission: ‘Surviving, not living’
Senate Employment Committee on the adequacy of ‘allowance’ payments. Find out more >>