New study calls for massive welfare reform via tax tweaks

One of Australia’s biggest charities has called on the next government to make radical changes to the welfare system.

The St Vincent de Paul Society says that through a series of tax tweaks, Commonwealth Rent Assistance – described by many agencies as woefully inadequate – should get a major bump and JobSeeker increased by at least $150 and as much as $436 per fortnight. Such changes would lift as many as one million Australians above the poverty line, St Vincent de Paul says.

A report commissioned by the society and produced by Australian National University’s Centre for Social Research and Methods, examines three options to help families and individuals at risk of deep poverty and financial stress.

All three options advocate an increase of 50 per cent to Commonwealth Rent Assistance, and varying degrees of increase to JobSeeker, Disability Support and Carer Pensions. St Vincent says the proposed changes would have only a marginal effect on the most well off and have no net impact on the nation’s budgetary position.

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A 2019 Grattan Institute report said poverty among over-65s in Australia was higher than in many other OECD countries after accounting for housing costs. “The 8 per cent of older Australians in poverty after housing are likely to be maximum-rate pensioners in the private rental market,” it said.

About 14 per cent of pensioners who don’t own their home say they have suffered financial hardship: they skipped meals, did not heat their home, failed to pay utility bills and car registration on time. The figure for home-owning pensioners is only 4 per cent.

The report notes that rental stress among pensioners in the private rental market has worsened.

“First, Commonwealth Rent Assistance, which provides financial support to low-income renters, is indexed to CPI,” the report said. “But rents have been growing faster than CPI for a long time. Between June 2003 and June 2016, CPI increased by about 38 per cent, while average rents increased by about 62 per cent.”

Associate Professor Ben Phillips, key author of the St Vincent de Paul report, A Fairer Tax and Welfare System, says the ANU modelling highlights strategies to reduce poverty without running up national debt or requiring anyone to make significant sacrifices.

“Our modelling shows you could make a massive difference to the lives of the bottom 20 per cent of income earners while only making a minimal change to the earnings of the top 20 per cent,” Prof. Phillips said.

Endorsing the report, St Vincent’s national president Claire Victory said: “The society strongly supports the ‘high’ option identified in the ANU report.”

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The three options proposed in the report are classified as ‘high’, ‘medium’ and ‘low’:

  • The ‘low’ option increases JobSeeker by $150 per fortnight.
  • The ‘medium’ option increases JobSeeker, Disability Support and Carer Pensions by $200 per fortnight, and increases the Parenting Payment (single) to a new JobSeeker rate for single parents ($886 per fortnight).
  • The ‘high’ option increases JobSeeker by $436 per fortnight, Disability Support and Carer Pensions by $200 per fortnight, Parenting Payment to the new JobSeeker rate and Family Tax Benefit Part A by 20 per cent ($40 per fortnight for children under 13 years).

Ms Victory said the ‘high’ option would help to lift one million people out of poverty, restore their dignity, and help many to move towards re-entering the workforce.

“Far too many Australians are struggling to put food on the table, pay the rent in often unsuitable housing, and ensure that their children get the start in life they deserve,” she said. “Increasing social security improves health, wellbeing and social outcomes, and also benefits the economy – so it’s an all-round win-win.”

Read: Age Pension, super and tax reforms sought in policy overhaul

Tackling the issue of potential tax changes to higher income earners, Prof. Phillips said: “Our modelling shows you could make a massive difference to the lives of the bottom 20 per cent of income earners while only making a minimal change to the earnings of the top 20 per cent. Under our proposed changes the highest income earners would still retire with very healthy superannuation savings and continue to benefit strongly from their other investments.”

St Vincent de Paul will present its suite of election policy papers to sitting MPs and the half Senate, as well as other candidates when they are announced.

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Written by Andrew Gigacz