Lift Newstart and the Age Pension

Calls for an immediate increase to the Newstart allowance have the potential to trigger a misleading and destructive welfare bunfight.

A wide range of reputable commentators and institutions, in particular Chris Richardson, from Access Economics, and Cassandra Goldie, Chief Executive of the Australian Council of Social Services (ACOSS), are seeking an increase in Newstart.

To qualify for the allowance, applicants must be between 22 and 65-67 (Age Pension age), be unemployed, meet the income and assets tests and prove they are looking for work.

The payments vary according to household and dependants, but the highest payment for Newstart recipients is $590 per fortnight, or about $42 per day.

Mr Richardson described the benefits as “unnecessarily cruel” and suggested they needed to be increased by $50 per week. Ms Goldie has said the research confirms the Newstart allowance is grossly inadequate.

“If you cannot get paid work and you are relying on income support, you’re living in poverty. You do not have enough to make ends meet, to cover even the basics,” she said.

She, too, is calling for an increase to the Newstart allowance rather than tax cuts.

The Newstart allowance is not indexed as is the Age Pension, so in real terms, it has not kept pace with cost-of-living increases. By comparison, it is claimed that, over the past two decades, the Age Pension has doubled.

To add fuel to the fire, the debate took off on ABC Radio in Melbourne when Liberal backbencher Julia Collins maintained that she could live on $40 per day. Talkback callers were highly sceptical of her claim.


Opinion: It shouldn’t be young versus old

Here we go again. One group of welfare recipients pitted against another, to the detriment of all. Why does the debate always end up in an ‘either/or’ barney, when the fact is that Australians on Newstart and on the Age Pension are all living in poverty?

Yes, there are degrees of poverty. When your basic allowance is about half the regular rental prices in your suburb, you are well and truly struggling. And then there is the scrimping and saving type of poverty where you just manage to make do until the next Centrelink payment.

Let’s start with the unavoidable truth. The Newstart allowance is a disgrace – it seems to be a ‘punishment’ for those who find themselves out of work – linked to the notion of ‘dole bludgers’.

Have you ever been retrenched through circumstances beyond your control? Such as your employer going broke, or the car industry shutting down, or an office relocation? These things happen.

And then there are the school-leavers and university graduates who are educated but find that their newly acquired knowledge is not wanted. 

Australia’s unemployment rate is officially 5.6 per cent, but according to Roy Morgan research, the real rate of underemployment in January this year was 9.1 per cent.

This means 2.6 million Australians cannot currently support themselves. And the notion that $40 per day will help them, particularly if they have dependents, is beyond farcical. So yes, the Newstart allowance is far too low and needs to be increased urgently.

But assuming that this means older Australians, by comparison, are well off is factually incorrect and feeds into an intergenerational bunfight to the detriment of all welfare recipients.

Some points to ponder
Not all Newstart recipients are young. As the Age Pension entitlement age moves from 65 to 67 (by 2023, with the current Government planning to move it to 70), many older people who find themselves out of work are also forced to live on the Newstart pittance.

And those aged 55 or over take the longest to get back into work. Ageism is alive and well, despite token statements to the contrary. In fact, it takes more than 12 months for older Australians to get back into the workforce.

God only knows how they pay a mortgage on Newstart – or do they simply increase debt? And if so, how do they do this if they have no salary receipts to share with the lender?

We asked former senator Susan Ryan AO who, from 2011 to 2016, was Age Discrimination Commissioner within the Australian Human Rights Commission, about her thoughts on lifting Newstart. 

“A significant increase in the rate of Newstart is crucial. The current low level prevents this payment from achieving its policy purpose of keeping unemployed individuals going while they look for a job. It is so low that the recipient quickly slides into poverty, loses their accommodation, often develops health problems from the stress and, as a result, becomes less and less employable. Benefits and programs aimed at supporting unemployed people should actually do that. It is in everyone’s  interest, and the budget’s, that the payment to the unemployed is at a level that maximises their chance of finding a job, and as soon as possible,” said Ms Ryan.

While the Age Pension is indexed twice yearly and increases do occur, the quarterly YourLifeChoicesRetirement Affordability Index, which measures actual retiree expenditure as opposed to ‘comfortable’ aspirational retirement living standards, reveals how tough life is on a full pension if you rent.

The ‘Cash-Strapped’ retirement tribes (singles or couples) who live on a full Age Pension and do not own their own homes are doing it very tough. Their income, including supplements, is $23,254 for singles, with expenditure estimated at $22,593. Couples receive $35,058 and are estimated to spend $35,594. And the typical expenditure for both couple and single pensioner renters rarely includes holidays, meals out or other luxuries most other Australians now consider ‘essentials’. Forget the daily latte – cash-strapped retirees cannot afford this treat.

The above numbers make it fair to argue for an increase in the base rate of the Age Pension, in addition to an increase in Newstart. The last such pension increase – $30 per week – was given as a ‘catch-up’ by the Rudd Government in 2009. Indexing was also made more relevant to actual retirement expenditure at this time. While this certainly lifted pensioners out of abject poverty, the current full Age Pension is insufficient for a productive or dignified retirement.

It is debatable if the proposed company tax cuts really will deliver wage increases for the masses, with many companies indicating this would not be a high priority, but when governments give money to the poorest groups in society, they can be guaranteed it will boost the economy immediately.

So, let’s not have a Newstart vs Age Pension welfare war. Surely forgoing expensive corporate and PAYG income tax cuts will free up enough money to share with all members of society who need it the most.

“The Age Pension has a different policy purpose from Newstart and it is not helpful to create social hostility by comparing them inappropriately,” said Ms Ryan.

“The unemployed person we hope can be assisted back into employment. The age pensioner has finished their working life and is entitled to receive a public benefit adequate to provide security and basic living costs. In this budget I would like to see a considerable increase in the rent allowance for those age pensioners who do not own a home and are forced onto an impossible rental market. The increase should be enough to give them access to adequate and secure accommodation.”

What do you think? Are you in favour of a Newstart increase? And/or an increase to the Age Pension? What do you believe will constitute a fair share of our economic pie in Federal Budget 2018?

Related articles:
Newstart rates and thresholds
Pension rises fail vulnerable
The lowdown on deeming rates

Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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