Executive Summary
The current state of the labour market in Australia is forcing more people to rely on unemployment benefits.
The income support payments to the unemployed, such as Newstart and related payments, are inadequate and do not allow people to maintain an acceptable standard of living.
Moreover, the current rates of Newstart and related payments are so low that they make it more difficult for recipients to search for work and to re-enter the workforce.
There is significant economic cost to continuing the payments at these insufficient rates, and significant economic benefits to increasing them.
Any increase in the rates of Newstart and related payments should not be tied to the cashless welfare card or any other form of involuntary income management.
The direct cost of increasing Newstart and related payments by $75 per week is 0.66% of Australia’s GDP and, in net terms, is revenue neutral, as modelled by Deloitte Access Economics.
An increase in Newstart and related payments would improve the bargaining power of labour, and likely lead to wage growth across the economy, estimated by Deloitte Access Economics at 0.5%.
In future, the approach to setting the rate of Newstart should be brought into line with that used for the Age Pension, IE: indexed to wages rather than the Consumer Price Index (CPI).
The Federal Government should implement policies to achieve full employment, at a similar rate (around two percent) as achieved in the three decades following World War II. This will involve direct government intervention to create jobs and invest in active labour market programs to support young people and those trapped in long term unemployment to find secure, meaningful jobs that provide a living wage.
NB: throughout this submission, where we refer solely to the rate of “Newstart”, this should be read as inclusive of related payments unless specified otherwise.
