Comments by the Governor of the Reserve Bank of Australia today confirm the importance of increasing Newstart in order to boost growth in the economy.
In response to a question about the Newstart Allowance at a CEDA event in Adelaide today, Mr Lowe said that household income growth is soft and the upside risk of inflation is currently low. So policies that boost income growth, including interest rate cuts, are good for the economy. While an issue for government policy, there are a number of ways this could be done, including through payments such as Newstart.
ACOSS CEO Cassandra Goldie said:
“We know that raising the rate of Newstart is the most effective way to reduce the persistent rates of poverty in our wealthy country.
“The Reserve Bank Governor’s comments today confirm that increasing Newstart would boost growth in incomes and the economy.
“In fact, raising Newstart is a far more effective way to grow the economy than the Government’s high-end tax cuts in 2022 and 2024, which mostly go to high-income earners, who will likely save much of the extra income they receive. The highest 20% of households by income save one third of their income, because, unlike people on much lower incomes, they can.
“People on Newstart, on the other hand, have no choice but to spend everything they have in order to get by – they simply can’t save any money or even afford to pay off debts.
“If you ask someone on Newstart what they’d spend an increase on and you ask a high-income earner what they’d spend a tax cut on, you get very different answers. People on Newstart have to spend on the basics like food and rent straight away in order to survive, while people on high incomes are likely to save extra income or use it to pay off any debts, which won’t help the current state of the economy.
“Politicians are leaving people on Newstart out of the economic debate, even though an increase in that payment would be more effective than tax cuts at stimulating the economy and they are really struggling to get through tough times, after 25 years without a real increase to Newstart,” Dr Goldie said.