Accounting giant KPMG says the government should raise Newstart by $100 a week, or else risk tearing apart “our inclusive social contract”.

Not only would such a raise help people meet their material needs, such as eating to a healthy standard, keeping a roof over their heads, maintaining clothes for interviews and travelling to Centrelink appointments, says KPMG, but an increase would benefit the economy by stimulating spending, particularly in regional areas, because Newstart recipients “spend, rather than save, almost all they receive”. 

KPMG said the government should raise Newstart to 50 per cent of the minimum wage and 80 per cent of the Age Pension, or risk a “socially damaging state of affairs”.

“Based on this, Newstart should increase to $370 per week for a single person with no dependents,” said KPMG.

The KPMG proposal put the cost of a $100 a week increase to Newstart at $3b to $3.5b per year, arguing such a rise would “still allow room for a significant financial incentive for moving into even the lowest-paid work for three or more days per week”.

KPMG said that Newstart was currently 37.5 per cent of the pre-tax national minimum wage and was therefore “inadequate and damaging”.

“There is an optimal level for Newstart which involves balancing meeting material and psychological needs and providing incentives for work. That balance is not being met,” said the submission.

“An inadequate Newstart tears at our inclusive social contract, given our society does not guarantee work and thus should ensure that there is an adequate living standard for those that cannot obtain work.”

The Morrison government claims that Newstart does not need a boost because it already increases twice a year with inflation. But KPMG said the consumer price index was an “inappropriate” benchmark and that Age Pension payments are indexed to wages, which have risen more quickly and led to an increasing gap between the age pension and the dole.

“If the unemployment benefit set after the second world war of £1 5s was simply adjusted for inflation it would be equivalent to around $90 per week currently,” said KPMG.

“This is less than a third of the current level and about a quarter of what we believe to be adequate. This demonstrates the inadequacy of using CPI as a basis for adjustment.

“The mixture of expenses likely to be experienced by those unemployed will evolve over time and should not be fixed to a period which is decades old. Thus the cost of a mobile phone would not have been included when the current level of Newstart was evaluated more than 20 years ago (now adjusted for inflation).”

What do you think of KPMG’s calculations?