Newstart allowance boost needed, COTA chief says, following tax cuts and deeming rate changes

ABC News
July 15 2019


The Federal Government has announced tax cuts for workers and a cash boost for some pensioners, but concerns have been raised that one large group of Australians is being ignored.
Key points:

    The Government is hopeful recent tax cuts and a deeming rate reduction will see Australians spending extra money
    Advocates and economists want an increase to Newstart for a similar reason
    Josh Frydenberg recently ruled out increasing the allowance

The Council on the Ageing (COTA) successfully campaigned for a reduction in deeming rates to help older Australians, and now its chief executive, Ian Yates, wants the Government to focus on the unemployed.

"Newstart is very much in our sights and has been for a long time," he said.

A single person on Newstart can receive up to $555 dollars a fortnight, and COTA is one of dozens of organisations that wants it lifted by $75 a week.

The Federal Government has repeatedly said it will not change the rate, and in a recent interview on 7.30 Treasurer Josh Frydenberg outlined why.

"We're not changing Newstart and the reason why is Newstart recipients, 99 per cent of [them] receive other benefits, so it might be a parenting benefit or another benefit," he said.

"The other thing about Newstart is two-thirds of the people on Newstart move on to a job within 12 months."

The Coalition is now facing its own "retiree tax" debacle as it grapples with the thorny topic of deeming rates for the pension.

Mr Yates said the Government needed to take a closer look at the people relying on Newstart and what they were sacrificing to get by.

"Just blanket saying no on the basis that it is a short-term benefit is flying in the face of reality when people over the aged of 50, and particularly over the age of 60, are regularly staying on it for many years," he said.

"It is very difficult to live on Newstart, so for older unemployed people they run down their assets and they make decisions in terms of what they eat, medicines that they might have … that again is counterproductive because that ends up costing the Government more in the health system," he said.

Economist Nicki Hutley, a partner at Deloitte Access Economics, said the allowance was not keeping in line with expectations.

"Their standard of living relative to others has declined by some 40 per cent over the last 25 years because they are indexed to the CPI, not to wages," she said.

"So even relative to pensioners, they are far worse off."
Change 'the right thing' for people in need

The federal electorate of Fowler, in Sydney's west, is home to some of the poorest Australians.

Local member Chris Hayes said he was all too aware of the financial pressures facing not just his constituents but many people across the country.

Rate cuts vs spending splurge
As an economic slowdown looms, debate is mounting over whether the RBA should be cutting more or the government spending more.

"We are seeing the rise of poverty in our nation, in a first-world nation such as Australia, which is something [that] should be shameful for all of us," he told AM.

Labor promised a review into Newstart if it won the federal election, but Mr Hayes said his party should have offered more.

"Most of us understood the level of Newstart was inadequate prior to the last election. I don't need a review to tell me that now," he said.

"It probably would have been better for us to actually have moved and made a decision earlier as opposed to putting it off.

"This is not about winning votes. I think this is about doing the right thing for people in need."

He wants politicians to show "some compassion" and lift the rate, or to risk entrenching further poverty.

"If they can't afford to get their hair cut, if they can't afford to get their teeth fixed, if they can't afford to do all these other things as well as get themselves to an interview, it's certainly not helping people at this level to be gainfully employed," Mr Hayes said.
More money in the pockets of Australians

The Government is hopeful the recent tax cuts and the reduction in deeming rates will result in Australians spending the extra money, but Ms Hutley is not convinced.

"Household debt is at extremely high levels, and it is one of the reasons we are worried that when people get tax cuts that they are more likely to save it than spend it to pay down that level of debt, particularly when consumer confidence is very low," she said.
How to save on the big expenses

The ABS's latest survey shows we're spending more on the basics and are deeper in debt. Here's how to buck the trend.

ACOSS commissioned Deloitte Access Economics to look at the effects of raising Newstart last year and found it would create more jobs and even lift wages.

Some business groups have joined charities and welfare advocates in campaigning for a lift to unemployment benefits.

They'll need to make up their budget emergency revenue shortfall from somewhere...

Who's going to foot the bill?  Since it won't be the global economy lot, and it won't be the 'big boys'... and it won't be the middle earners ..... who will it be?

More borrowing so the future generations will pay it off?  Or are they expecting Downfall with China so we can repudiate all debts etc?

Funny how Japan is now invited to participate in WATO (Western Alliance Treaty Organisation) military exercises..... far from being 'The Old Enemy' in the Pacific - Japan is now the US' Western bulwark against Chinese expansionism... Manifest Destiny and Divine Mission meeting further and further West...

Quote:

Frydendud has made this kind of remark in interviews before. The interviewers have been far too soft on him by not asking difficult followup questions in the style of Alan Jones.

* How much is the base rate of Newstart?
* What are these "other benefits"? What are they for?
* How much do those benefits pay?
* How would you budget an income of $280 a week?

And so on, detailed questions that would catch the current Treasurer out if he's not prepared.

This would be very dangerous ground for the Treasurer. Either he would be forced to admit that he doesn't actually know the payment rates, or he would be forced to admit that the payment rates for all of these benefits are inadequate.

As an example of the inadequacy of the side benefits, one common payment is rent assistance. This is paid to people who rent their homes. For a single person, the minimum fortnightly rent before any rent assistance is payable is $122.40, the maximum payment is payable on a fortnightly rent of $305.33, and that maximum payment is $137.20 a fortnight. I have highlighted "fortnight" to make it clear that these are not based on weekly rents which is how rents are typically advertised by real estate agents.

A fortnightly rent of $305.33 is roughly $152.67 a week. There are very few places to rent in Australia with a rent of $152.67 a week or less that aren't just a room in a share house (sharing a house causes rent assistance to be reduced), and almost none with access to adequate employment opportunities. Any rent over that amount has to be paid for out of the rest of the Newstart or pension payment. Even if a place was somehow found for less than $152.67 a week, $84.06 of that has to be paid for out of the Newstart or pension payment.

Most rents for suitable housing are greater than this. All of this excess rent has to be paid for out of the base benefits.

Rent assistance is also indexed to CPI, which has increased over the last 25 years at about half the rate of housing costs. This is why rent assistance is only about 50% of what it should be if it was to be barely adequate.

The struggle is real.