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The case for raising Newstart

Aug 1, 2019 • 13m42s

As the campaign to raise Newstart intensifies, details emerge of who is actually living on the payment and for how long.

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The case for raising Newstart

48 • Aug 1, 2019

The case for raising Newstart

[Theme starts]

ELIZABETH:

From Schwartz Media. I’m Elizabeth Kulas. This is 7am.

As the campaign to raise Newstart intensifies, the economic case for an increase is also becoming clearer. Mike Seccombe on why the prime minister still calls this “unfunded empathy”.

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[Music starts]

Archival tape — Scott Morrison:

“...payments over and above Newstart, Mr. Speaker. But what I tell you what I won’t do when it comes to Newstart in this place, Mr. Speaker, I will not engage in the unfunded empathy of the Labor Party, Mr. Speaker, I will not go out…”

ELIZABETH:

Mike, there's a significant and a persistent conversation happening right now around raising Newstart. But before we get there, I’m wondering if you can describe who is actually on the payment?

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MIKE:

Well let me start by describing the cliched stereotype of the average unemployed person, you know, which is the work-shy young bludger, the government surfer who is quite happy to be living on a sub poverty level government benefit -- but that's entirely wrong.

ELIZABETH:

Mike Seccombe is national correspondent for The Saturday Paper.

MIKE:

The average age of a person on Newstart now is 45, which is actually eight years older than the average age of Australians in general. The largest and the fastest growing cohort of people on Newstart is those in the 55- to 64-year age group. As of last December, there were 173,000 of those, which is close to a quarter of the total. And their ranks are growing fast like some 10,000 a year. Furthermore, they tend to stay on Newstart for a very long time, 190 weeks on average, which is almost four years. So you know, when the government says it's just a temporary benefit to tide people over jobs, well that's not right. When you look at the overall picture, about half of the people are on Newstart for a year, and more than a third are on it for more than 2 years, so it is definitely not, as we keep being told, a very short term measure.

ELIZABETH:

And how much is the payment that people on Newstart are getting on average?

MIKE:

For a single person, which is probably the easiest one to go to, it's about a $282 a week and it hasn't been increased in real terms for 25 years. The relative value of Newstart compared with average wages has declined by 40 per cent relative to average wages since it was last increased in 1994, and the aged pension has actually doubled in real terms since 2000. Newstart has barely budged.

ELIZABETH:

Mike in this reporting you talked to someone in this older age group that you've just described who is currently receiving Newstart. Tell me about Judy.

MIKE:

Um, Judy is 64 and a half years old. She thinks of herself as a hardworking Australian. She was once married and she and her husband bought a house in suburban Melbourne but then they divorced and she was left with the house and the mortgage and the care of two children, then aged 6 and 2, and one of them was severely disabled and in need of almost constant care. She studied, she worked, but as she described it, she wasn't able to have a meaningful career but still she managed to keep up the payments on the mortgage and she even managed to build up a little bit of superannuation. That was until 9 years ago. Her son, her disabled son, passed away at age 25. She says that after his death she had a breakdown. She took a year off from any kind of work. She just sat on the couch basically for a year in deep grief. Slowly, she overcame it. She was able to get back into part time work for 6 or 7 years. But then, she hit another rough patch. And so, there she was last year in her 60s living alone in a house that she still hadn't quite paid off and on Newstart, which wasn't enough to meet her costs. And so, she started digging into her accrued savings in super and that's all gone now.

ELIZABETH:

So she finds herself, as you say, last year, she's in her 60s and she's on Newstart. What kind of benefit issue receiving through Newstart?

MIKE:

Because she was over 60 she received a little more than the standard Newstart. Once you're over 60 and you've been on Newstart for nine months or more, you get $300 a week. So that was when she was on it full time. But while she was on Newstart full time she did do some volunteer work that morphed into a part time job. So now, she's working 10 hours a week, at a little not-for-profit organisation, for which she's paid $300. Which is exactly the same of course as she would have received had she remained unemployed and on Newstart. And on top of that she gets $80 in a partial Newstart benefit. Centrelink, on the other hand, wanted her to work more. You have to do 15 hours paid work, otherwise, as she explained that she has to do the whole thing of going into Centrelink, signing up with a job recruitment agency looking for more work. She did get a 3 month medical exemption, that's lapsed now and she's told that they won't be doing that for her again. She's left in this sort of odd Catch-22, which is that because she has mental health problems she can't work more hours, but because she can't work more hours, she has to go through this regime of anxiety-inducing reporting requirements.

ELIZABETH:

And what do you think is likely to happen for Judy, who’s stuck in this kind of Catch-22 between what Centrelink wants her to do and her current situation?

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MIKE:

In the longer term, she's 18 months away from retirement. At age 66, she becomes a pensioner, which, for a start will lift her income substantially. The single pension is $463 a week, which is $180 more a week than the single rate of Newstart. But, more important to her is the fact that it will relieve her of the constant pressure of having to satisfy the requirements of Centrelink and the suspicion that she is a bludger. The thing that she said to me was, well, I've got 18 months to go and I am so looking forward to that birthday, when she becomes, in the eyes of the government, a deserving welfare recipient rather than undeserving welfare recipient.

ELIZABETH:

We'll be right back.

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ELIZABETH:

Mike, Newstart’s become a controversial welfare program because the payment is so low but also because there's an increasing number of people on Newstart. Why are people being shifted onto that payment who traditionally wouldn’t have been covered by the Newstart category?

MIKE:

Well, there's a number of reasons why we're getting more and more older people on Newstart. For one, there have been changes in how other welfare payments have been managed. The government has been trying to shift people off higher cost welfare onto lower cost, like Newstart. So the former Labor government, actually, tightened the criteria for the disability support pension. And those new criteria have been very, very enthusiastically applied by the new government. So that's moved a large number of people, many of them people of relatively mature years, who are on disability support, has moved them across to Newstart. So about 1 in 4 Newstart recipients now have a disability. Sole parents also are being moved from parenting payment onto Newstart, which is really just another money-saving measure. The other thing that's happened is just that the number of older people is growing because there's this demographic bump of baby boomers. A third factor is that the government is progressively lifting the retirement age, which is why Judy has to be 66, and in future people will have to be 77 before they can retire and get the pension. And, the final thing is that employers just prefer younger workers. You know, when you look at companies making cost savings and restructuring, the quite common practice is to make older employees redundant and then hire younger and cheaper workers.

ELIZABETH:

One proposal that’s gaining traction at the moment is for Newstart to be raised by $75 a week, where did that figure come from?

MIKE:

Well, this is the number that the Australian Council of Social Service seized upon. There has been a lot of study put into this and a lot of reports done and some suggest that 75 is really the bare minimum to make it even remotely liveable. I've seen others that suggest up around 98, $100 dollars a week. But anyway, 75 seems to be the one that people have substantially agreed upon and that's what the various seniors groups are pushing for, it's what ACOSS is pushing for. Actually, there's there's an enormous groundswell of support in favour of this measure. The only problem being the politics of it, which is that our current government is apparently ideologically opposed and it's a very difficult sell in political terms generally because it's so easy to mount a negative campaign about why you're giving money to dole bludgers.

ELIZABETH:

It’s sort of like a strange bedfellows situation, all of these voices that don't usually speak in concert seem to be saying this isn't a bad idea we need to be thinking about an increase and that included the governor of the Reserve Bank.

MIKE:

That's right. The governor of the Reserve Bank, who’s worried about the fact that the Australian economy is slowing so much, has been lowering interest rates. He also welcomed the government's first stage of its tax changes which would inject a little more money to low income earners. He said that would be a good thing for boosting consumption. But he also said that it would actually be a good thing if unemployment benefits were lifted. So did a report from Deloitte Access Economics late last year which looked at the economics of increasing the Newstart benefit by $75 a week. It found that the reform would cost the government about $3.3 billion but it estimated that then there would be this prosperity dividend that would flow down the track, and that the overall economy would actually grow by about $4 billion and would generate extra employment, increase, by a little bit, overall wages and would ultimately boost state and federal tax receipts as a result of taxes that would be paid on those extra wages. So quite apart from the sort of social justice aspect of increasing Newstart, there are clear economic benefits to doing so as well.

ELIZABETH:

And the Nationals haven't been quiet on this either because there has been support for it because it would particularly bring some benefit to regional economies.

MIKE:

Yeah that's right. Many of the seats in the country with the highest rates of unemployment are held by the National Party. So, there is definitely attention there at the moment in politics between the Liberals, who represent high-income, low unemployment seats, and the Nationals, who tend to represent low-income, high unemployment seats.

ELIZABETH:

So for all that, why is it that the government isn't really open to having a serious conversation about raising the payment at the moment?

MIKE:

Well, I think it goes back to sort of a conservative mindset and ideology because they essentially believe the stereotype about the dole bludger, they have this belief that you have to have low welfare payments in order to force these people to find a job. This has been the case for a long period of time. There have been arguments about increasing Newstart for many years and 3 years ago at the National Press Club, Christian Porter said in answer to a question about why he did not want to see Newstart increased, he said:

Archival tape — Christian Porter:

“I would actually put to you that the fact that people who find it challenging to subsist off Newstart do so for short periods of time, might actually speak to the fact that that’s one of the design points of the system that's working okay because the encouragement is there to move off those payments very quickly.”

MIKE:

I mean he used nice words, but essentially what he was saying was: it's not just ideological, it's part of the design of the system.

ELIZABETH:

And if the payment were any higher that would be a disincentive to going out to find work essentially.

MIKE:

Well yes, it relies on the assumption that these people don't want to work. And I mean, apart from anything else, when you look at the statistics of the number of available jobs and the number of unemployed, there are currently at the moment in Australia about 3 times as many unemployed people as there are available jobs. That's not counting the fact that a lot of those jobs require specific skills that a lot of the unemployed don't have. It's not so much a case of not wanting to work as being, for one reason or another, shut out of the workforce.

ELIZABETH:

Mike, thank you so much.

MIKE:

No worries.

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ELIZABETH:

Elsewhere in the news:

The federal vice-president of the Liberal Party, Karina Okotel, has committed to pushing for a code of conduct after what she says are "absolutely horrific" accounts of sexual assault within the party. Two former staffers have said they were assaulted by colleagues while working for the Liberal party, and say their complaints were ignored by the people they reported them to.

And documents have been filed in the High Court, contesting the electoral wins of Liberals Josh Frydenberg and Gladys Liu. The challenge, mounted by Kooyong candidates Oliver Yates and a voter from Liu's seat of Chisholm, centres on Liberal Party signs that appeared to be from the Australian Electoral Commission and stated in Mandarin that the "correct way to vote" was by placing a 1 next to the Liberal candidate. The challenge says the posters were misleading and deceptive, and as such breached electoral laws, making the vote in both seats invalid.

This is 7am. I'm Elizabeth Kulas. See you Friday.

[Theme ends]

As the campaign to raise Newstart intensifies, details emerge of who is actually living on the payment and for how long. The economic case for an increase is also becoming clearer. Mike Seccombe on why the prime minister still calls this “unfunded empathy”.

Guest: National correspondent for The Saturday Paper, Mike Seccombe.

Background reading:

Newstart: Thaw in senate may end 25-year freeze in The Saturday Paper
The Saturday Paper
The Monthly

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7am is hosted by Elizabeth Kulas. The show is produced by Emile Klein, Ruby Schwartz and Atticus Bastow. Our editor is Erik Jensen. Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

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48: The case for raising Newstart