Economist Says Raising Welfare Should be a Top Budget Priority

The Turnbull government should utilise Australia’s improved budget position to remedy “embarrassingly inadequate unemployment benefits”, a prominent economic expert believes.

Economist Chris Richardson leads Deloitte Access Economics’ forecasting and policy unit, and authored Deloitte’s latest Budget Monitor report released on Monday.

Richardson said the “rivers of gold” were running in Australia again, leading to a substantial improvement in the budget.  

The Treasurer laughed off suggestion he’d be Santa Claus on Budget night. Yet he has every reason to be happy. Budget Monitor: https://t.co/4Ex7Ouctbd #ausecon #auspol

— Deloitte Access Economics (@D_AccessEcon) April 30, 2018

Deloitte has forecast overall revenues to grow by 9.8 per cent in 2017-18 – the strongest increase in 17 years – to be followed by a further 5.7 per cent increase in 2018-19.

“We therefore see total revenue in 2017-18 beating the official forecasts issued just ahead of last Christmas by $7.6 billion. That’s followed up by a similarly happy 2018-19, with revenues set to outperform those official forecasts by an additional $6.7 billion,” Richardson said.

Given this strong position, Richardson has called on the Turnbull government to address the “single standout fairness failure in Australia in 2018” – inadequate unemployment benefits – on federal budget night next Tuesday.

“Newstart hasn’t kept up with national living standards for more than a quarter of a century, shrinking sharply as a share of average and minimum wages, and relative to the age pension. And it’s set to shrink even further, as it is indexed to prices rather than wages,” he said.

“That’s why the Henry Review specifically called out the collapsing ratio between Newstart and the age pension.

“We should add $50 a week to these payments, and immediately index them to wages. That would be $3 billion well spent.”

Richardson said Deloitte remained “huge fans” of budget repair, but noted the importance of balancing this with fairness.

“On [this] front, if we had to nominate the single standout fairness failure in Australia in 2018, it is undoubtedly our embarrassingly inadequate unemployment benefits,” he said.

“As a nation, we can and should do better. History will judge us harshly if we don’t.”

This recommendation has been welcomed by welfare advocates, who have used it to renew calls to raise Newstart and Youth Allowance.

Australian Council of Social Service CEO Dr Cassandra Goldie said people locked out of paid work simply could not survive on unemployment payments of $538.80 a fortnight.

“The single most effective way for the government to relieve the worst poverty is to raise the lowest social security payment,” Goldie said.

“ACOSS shares Deloitte’s concern about the sustainability of the budget if the next election becomes a race to the bottom on tax. Recent polls show that most people would be underwhelmed by another round of income tax cuts.

“Most people give higher priority to improving our health system, creating jobs and reducing unemployment, investing in quality education, affordable homes, and a decent safety net for people who fall on hard times. This is of more lasting value for people than a ‘half a sandwich and half a milkshake’ tax cut.”

Time to #RaiseTheRate. https://t.co/6XkJySxD21

— ACOSS (@ACOSS) May 2, 2018

Greens Senator Rachel Siewert said the report highlighted the need for Newstart and Youth Allowance to be raised by $75 a week in the budget.

“There is a growing consensus on the need for Newstart to be increased, ranging from economic and tax firms like Deloitte and KPMG to social service organisations. The payment needs to be increased by $75 a week,” Siewert said.

“The government has spent years vilifying people on income support, this needs to stop and in this budget they need to recognise that payments need to increase. Keeping those without a job living below the poverty is unconscionable.

“Increasing Newstart and Youth Allowance also makes economic sense. Money spent supporting jobseekers will go straight back into the economy on much needed goods and services, and will also mean that struggling Australians are better supported to find employment.”

The Australian Catholic Social Justice Council has issued a pastoral letter echoing these calls to raise welfare payments.

Written by Bishop Vincent Long van Nguyen, the letter states that Australia is facing a wage crisis that needs to be addressed.

“650,000 people on the Newstart Allowance are trying to survive, many on just $40 a day. Around 70 per cent have been stuck on the allowance for more than a year and more than half are in poverty,” the letter said.

“Catholic Social Services Australia and the community sector are calling for an increase in allowance payments to protect unemployed workers and increase their capacity for work.”

In wake of these calls, Labor leader Bill Shorten has called for a review of welfare payment levels – noting that no politician would be capable of living on $40 a day.

“I do think that there is a real problem for the government payments to people at the very bottom of our society,” Shorten told reporters on Wednesday.

“That is why Labor has proposed having a root and branch review of our government payments system on Newstart and like-minded allowances and payments.

“There’s no doubt that there is a problem with the payment level, and what we need to do, is we need to review it to see what is appropriate.”

In response to claims that $40 a day for welfare recipients was “cruel”, Minister for Jobs Michaelia Cash told reporters the government’s focus was on getting people off welfare and into work.

“The best form of welfare is a job,” Cash said.

“It is there to provide a basic safety net for those who are looking for work who are on welfare.”

Our 2018 budget coverage is brought to you by Community Sector Banking.