Planned benefit cut may be more costly than expected.
Thanks largely to the fanfare surrounding superannuation changes announced in Budget 2016/17, a small change to the Energy Supplement went almost unnoticed. And while the battlefield is currently focused on the unemployed, those who are looking to receive the Age Pension or Disability Support Pension will also lose out.
Anyone planning to apply for social security benefits, including Newstart Allowance, the Age Pension and the Disability Support Pension after 20 September 2016, will receive between $4.40 and $7.05 less than those already receiving the payments.
The Energy Supplement was previously known as the Clean Energy Supplement and was introduced by the then Labor Government as compensation for the increased energy prices expected under the Carbon Tax reforms. And although indexation of the supplement ceased on 30 June 2014, the payment has provided a much-needed boost for those receiving meagre social security payments.
However, the Government’s plans to axe the supplement have come under fire from welfare groups, and now 34 prominent Australians have penned an open letter to Prime Minister Malcolm Turnbull asking him to reconsider. Former Liberal leader John Hewson, comedian Corinne Grant, economist David Morawetz and Uniting Church president Stuart McMillan are just some of the notable signatories.
Drafted by the Australia Institute think tank, the letter states that the cutting of Newstart is poor economic and social policy. "A government that plans to give more to the richest Australians while cutting support for people below the poverty line will only further entrench inequality in Australia," the letter stated.
"We urge the Prime Minister and all political leaders not to cut Newstart."
Announced in this year’s Budget, the cut is expected to save $1.4 billion over five years but goes against the advice of the Business Council of Australia, which claimed that Newstart Allowance "no longer meets a reasonable community standard of adequacy and may now be so low as to represent a barrier to employment". KPMG also recommended that Newstart Allowance be increased rather than cut.
While Opposition Leader Bill Shorten has acknowledged that Newstart Allowance is not adequate, he has not committed to opposing the cut when Parliament returns.
According to the March 2016 quarter poverty figures, now calculated by The Melbourne Institute of Applied Economic and Social Research, the poverty line for singles not in work amounts to $425.61 per week, when housing payments are considered. This means that Newstart Allowance is some $161.71 less than what is considered the poverty line. The Age Pension fares slightly better at $7.89 above the poverty line.
Read more at SMH.com.au
The loss of $4.40 per week may not seem much for to some, but to those on the Newstart Allowance – which is only $527.60 per fortnight for singles – it’s significant. And for those who receive an Age Pension after 20 September 2016, losing $14.10 per fortnight will only compound the impact of the asset threshold changes that will take place on 1 January 2017.
So, while the Government may have a valid point that the Energy Supplement is no longer required without the Carbon Tax, the predicament of those in need cannot be ignored.
The estimated $1.4 billion that the Government plans to receive in savings may well look great on paper but when you consider that $1.4 billion will be directly taken from our economy, all of a sudden there’s a flaw in the argument.
The reality is that for those living on Newstart Allowance or an Age Pension every cent counts and every cent is spent. It’s spent on bills and utilities, food, clothes and transport. There is no ability to squirrel money away for a rainy day – today is that rainy day. A sobering fact is that, according to the 2015 Global AgeWatch Index, 33 per cent of Australians over 60 live in poverty.
The Government’s refusal or inability to address the inadequacies our Age Pension and Newstart Allowance simply means that more older Australians will live out their lives in poverty.
What do you think? Should the Energy Supplement be stopped for new claimants of Newstart Allowance and the Age Pension? Would you notice the effect of $14.10 less per fortnight?