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A sad and sorry history of Newstart


Tuesday, 19th November 2019 at 8:00 am
Luke Michael
Much has been made of the fact federal government unemployment benefits haven’t increased in real terms since 1994. But why has the freeze gone on so long? We look back at the history of Newstart and the long-running battle to raise the rate.


Tuesday, 19th November 2019
at 8:00 am
Luke Michael


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A sad and sorry history of Newstart
Tuesday, 19th November 2019 at 8:00 am

Much has been made of the fact federal government unemployment benefits haven’t increased in real terms since 1994. But why has the freeze gone on so long? We look back at the history of Newstart and the long-running battle to raise the rate. 

It wasn’t meant to be this way. 

Newstart was meant to be – if not a panacea – then at least a new start for tackling entrenched disadvantage in Australia. 

The unemployment benefit (or dole) had been in effect since its introduction in 1945, when World War II and memories of the Great Depression were fresh in the nation’s consciousness. It was the brainchild of Prime Minister John Curtin who was inspired to create a post-war world free from deprivation and discrimination. 

This benefits scheme was designed for a labour market where full-time employment for a male-dominated workforce was the norm and unemployment was only seen as a short-term issue.

The legislation survived mostly untouched until the 1970s, when periods of recession caused an upsurge of people going on – and staying on – the dole.

By the early 1990s, it was clear a fresh approach was needed. No longer was unemployment “a short-term aberration,” as parliamentary researcher Geoff Winter noted, with unemployed Australians now stuck out of work for extended periods. 

Back in 1973, 37,000 people (0.5 per cent of the working age population) were on unemployment benefits. By June 1993, this had blown out to 914,000 people – or 8 per cent of working age people.

Unemployment was now to be seen as a fact of Australian life. 

A new hope

So in February 1990, the Hawke government laid out its new template to help the unemployed. The aim was to build on existing employment and training programs while placing greater emphasis on preparing unemployed people for work. 

Newstart – the Active Employment Strategy – was born on 1 July 1991. This more “active” method was designed so the longer a person was unemployed, the more help the government would offer to get them back to work.

All good in theory. Except that in its resolve to get people working, the government now decided to apply increasingly strict rules to encourage job seekers to seek jobs. 

And enforcing these rules was outsourced to a new network of private job providers with little accountability

Somewhere along the way, the whole idea of a world free from deprivation and discrimination began to fray.

In March 1994, the Keating government increased Newstart by $2.95 a week above the rate of inflation. 

No one knew back then, but this would be the last time Newstart was raised in real terms. 

Cassandra Goldie

Photo credit: ACOSS.

The big freeze

In 1997, the Howard government decided instead to tie the payment to inflation (unlike the pension which is tied to wages). This effectively froze the payment permanently.

And with wages now rising more quickly than inflation, the gap between the age pension and Newstart began to grow. And grow. In the mid-1990s, Newstart was around 90 per cent of the pension. This proportion has now fallen to around 60 per cent. To give you a sense of what that actually means, if unemployment payments in Australia had been tied to inflation back in 1945, Newstart’s current weekly rate of $280 would today only be $90.

At the same time, the obligations for welfare recipients have slowly become more onerous.

Fast forward to July 2006. The Howard government introduced new Welfare to Work laws. Suddenly, people with disability deemed to have some ability to work were no longer eligible to apply for the Disability Support Pension (DSP). Instead, they were pushed onto the lower Newstart rate – and forced to seek at least 15 hours a week of work. 

“Somewhere along the way, the whole idea of a world free from deprivation and discrimination began to fray.”

Jobseekers were also targets. Now three “participation failures” within a year (failing to show at a job interview, for instance, or keep an appointment with your “job provider”) could mean losing your payments for eight weeks. 

By the late noughties, both sides of politics seemed mired in apathy on the whole topic. Then…

In came Kevin07

Kevin Rudd swept to power in 2007 after more than a decade of conservative government, promising hope and change. But when it came to Newstart, officially or otherwise he continued a bipartisan strategy of pretty much ignoring people on the benefit. 

In September 2009 his government announced one of the largest age pension increases in Australian history, raising the payment by $30 a week. Newstart recipients got nothing

Ditto for Rudd’s Household Stimulus Package in 2009, which helped boost people on the age and disability pensions, carer payments and family tax benefit – while Newstart recipients were again overlooked. 

The backlash begins

The first major report to call for an increase to Newstart came in 2010, when then Treasury secretary Ken Henry released the Henry Tax Review. 

Henry was concerned about the growing gap between the pension and Newstart.

The report said unless the rules were changed, it was likely that by 2040 a single pensioner would be paid more than twice as much as a single unemployed person. By 2050, Newstart would shrink to just one-third of the pension.

Henry called for the government to boost Newstart by about $50 a week (equivalent to around $63 a week today).

This never eventuated. 

By now, Australia’s tough approach to welfare was causing murmurs overseas. 

In November 2010, the OECD said the current level of Newstart “raised concerns about its adequacy” as an income-support payment. 

By 2011, even the Business Council of Australia was calling for an increase. In a submission to a Senate inquiry the following year, the council stated that the payment “no longer meets a reasonable community standard of adequacy and may now be so low as to represent a barrier to employment”.

Business as usual

The Labor government, now under Prime Minister Julia Gillard, responded by announcing plans in 2012 to move single unemployed parents onto Newstart once their children turned eight. 

It was actually the Howard government’s Welfare to Work laws in 2006 that pushed new parenting payment applicants onto Newstart – but Gillard’s changes meant even those receiving the benefit before 1 July 2006 were no longer eligible.

The move – part of a plan to save the government about $700 million over four years – affected up to 100,000 people and helps explain why single parents (most of them women), are now three times more likely than other householders to live below the poverty line.

It was the Gillard government that in 2012 also introduced tougher eligibility requirements for the DSP. The changes had their intended effect. The number of new DSP participants fell from a peak of almost 89,000 in 2009-10 to around 32,000 in 2016-17. Most applicants were forced onto Newstart – and $170 less a week. These days, 42 per cent of Newstart recipients have an illness or disability preventing them from working full-time – up from 25 per cent in 2014.

In 2015, there was ANOTHER review calling for action on Newstart.

Patrick McClure’s Review of Australia’s Welfare System noted a surge of Newstart recipients with little or no capacity to work full-time, which left people on the payment for longer. McClure said a panel of experts should meet every four years to review the level of income support payments – including Newstart – against changing community living standards. The panel would then recommend a payment adjustment to government. 

This never eventuated. 

The following year, a study by The Australia Institute showed the level of financial support for the unemployed now sat 30 per cent below the poverty line. By the end of 2016 even global professional services firm KPMG would be calling for a $50 a week increase to Newstart (this demand has since risen to $90).

Why hasn’t Newstart been increased?

For the record, here are some of the reasons successive governments have given for not raising the rate:

  • It’s possible to live on the payment – In 2013, Labor Social Services Minister Jenny Macklin said she could live on the $38 a day that Newstart recipients received (even though she’d reportedly spent $1,577 a day on travel, comcars and hotel rooms the previous year).
  • The payment is transitional – “Most Australians who are on Newstart allowance are on that payment for a very short period,” Finance Minister Cormann has said. But according to data cited by ACOSS, two thirds of people on Newstart are on the payment for a year or longer.
  • “The best form of welfare is a job” – This has been a key Coalition talking point, especially since Scott Morrison became prime minister. Not everyone is convinced. Comedian Shaun Micallef countered: “Welfare is what you get when you don’t have a job. It’s the complete opposite of a job. The best form of something can’t be the opposite of it, you’re conflating two things that don’t coexist.”
  • 99 per cent of people on Newstart get other forms of welfare – While this is correct, others point out this is only because recipients also receive the Energy Supplement, which only adds $4.40 a week.

Back on the see-saw

Still in 2016, the Coalition government outlined budget plans to scrap the Energy Supplement for new recipients of Newstart. That would have meant an extra $4.40 a week gone, and would have taken Australia’s support for the unemployed a further 2 per cent below the poverty line. Those cuts failed to go through after being opposed by Labor, the Greens and the Nick Xenophon Team.

Undeterred, the Turnbull government tried a different tack in the 2017 budget, announcing changes to the welfare system including plans to establish a drug testing trial for 5,000 new recipients of Newstart and Youth Allowance. 

And when the Greens introduced legislation in 2017 to increase Newstart and Youth Allowance by $110 a fortnight, Labor voted with the Coalition to ensure the bill failed.

Around this time, the Australian Council of Social Service (ACOSS) launched its “Raise the Rate” campaign. 

The peak welfare group demanded that the federal government immediately lift the single rate of Newstart, Youth Allowance and other related payments by at least $75 per week, and index allowances to wages. 

The campaign has so far garnered the support of close to 100 community organisations across Australia – as well as that of less obvious backers.
“These days, 42 per cent of Newstart recipients have an illness or disability preventing them from working full-time – up from 25 per cent in 2014.”In May 2018, Deloitte economist Chris Richardson said the Turnbull government was now in a strong budget position and should turn its attention to struggling Newstart recipients. He urged the government to remedy “embarrassingly inadequate unemployment benefits” by indexing Newstart to wages and immediately boosting the payment by $50 a week. 

“That would be $3 billion well spent,” Richardson said.

(Spoiler alert: the 2018 budget did not raise Newstart. Rather it outlined plans to deduct up to 15 per cent of welfare payments for recipients with unpaid court fines – supposedly to help people “stay out of jail”).

The campaign to raise Newstart then gained an unlikely ally in former Prime Minister John Howard – the man who started the Newstart freeze all the way back in 1997. 

“I think the freeze has probably gone on too long,” Howard admitted in May 2018

The Salvation Army agreed. Later that month, they published research that revealed the average Newstart recipient was living on just $17 a day after accommodation expenses.

In June 2018, an Essential Poll found that 68 per cent of Australians backed an increase to Newstart. By April the next year, this had risen to 72 per cent

A Deloitte report in September 2018 presented an economic case for reform, finding that a $75 a week increase to Newstart and Youth Allowance would cost the budget $3.3 billion a year, but create 12,000 new jobs by 2020-21 and lift wages.

Raise the Rate campaigners

Photo credit: ACOSS.

The rumblings continue

Labor – which had failed to raise Newstart during its six years in government from 2007 to 2013 – now faced pressure to commit to an immediate payment increase if it won the 2019 election. 

But in December 2018, opposition leader Bill Shorten told Labor’s national conference that the ALP would review, rather than immediately raise, the rate of Newstart if elected. Maybe they would have gone on to increase the $40-a-day payment, but they weren’t elected.

Instead, in May 2019, the Coalition government won what many believed was an “unwinnable” federal election. 

Still the rumblings continued, even in government ranks. Liberal Senator Dean Smith, former deputy PM Barnaby Joyce, Liberal Senator Arthur Sinodinos and Nationals Senator Matthew Canavan all publicly called for an increase. Even One Nation leader Pauline Hanson and Katter’s Australian Party leader Bob Katter pledged their support for raising the payment.

By July, there was enough public pressure for the Senate to launch an inquiry into the rate of Newstart. Harrowing stories have emerged of Newstart recipients losing homes, skipping meals, self-harming, and rationing their insulin. The inquiry report is due in March 2020.

But the Coalition government is standing firm. In October, Social Services Minister Anne Ruston stated that raising Newstart would simply “give drug dealers more money and give pubs more money”

Australian unemployment payments meanwhile remain the second lowest in the OECD. And every Newstart recipient seeking an entry-level role must compete with more than five other people for the same job. 


Luke Michael  |  Journalist  |  @luke_michael96

Luke Michael is a journalist at Pro Bono News covering the social sector.


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8 Comments

  • Lauren says:

    A very well written article. As a single mother of four intiially on Newstart and now a mental health worker working in Melbourne. I believe that every politician should live on Newstart for a minimum of 12 months. Every politician should navigate the treacherous humiliating soul-destroying journey of receiving Newstart. Every politician should go out and visit those living with mental health issues and speak to these people and their families listen to their stories about their experiences…and listen. Because people with needs need listening not judgment and ignorance. We are a society- our role our ground zero is to care for others…this starts with listening. Isnt that the role of politicians? And if their role does not involve listening why are they there? Walk-in one’s shoes or accept that you walk in your own ignorance. Thank you for writing this. More need to write about reality.

  • Avatar lyn Dundon says:

    excellent summary analysis of the issues and both labor and liberal governments complicit behaviour of entrenching inter-generational poverty in Australia

  • Avatar Monica McSween says:

    An excellent article indeed and a very scary one, in many ways. I am currently on Carer Payment (my son is on DSP). He is pretty determined to leave home and doesn’t want to stay on DSP once he does (even though I KNOW he would struggle financially, especially since he wants to live in Melbourne – not the cheapest place to live). He wants to study in Melbourne, I can’t blame him for that.

    I am terrified at the thought of going onto Newstart when he leaves. I am 55, renting privately at $315 per week (my rent has only just been raised for the first time in the 8 years I have been living in this house, my landlords are lovely), even moving to a smaller house won’t make much difference and I still have to come up with removalist costs, cleaning (I have two artificial knees, osteoarthritis and anxiety and depression) etc. I have done the sums, backwards and forwards, and I just can’t see how I can survive. I apply for jobs all the time but I missed out a job the other day which SEEK told me 81 other people applied for. What hope have I got, really? I am getting to that unemployable age now. And I can’t expect my son (who is 24) to live with me until I hit age pension age (which, for me, is 69.5 years). So, the next 15 years are going to be horrendous. I don’t have a clue as to what I am going to do, honestly. I apply for every job I possibly can but I am getting more and more depressed and I feel hopeless about the future. I have a degree and post-graduate qualifications but physically cannot work full-time.

    I have heard that you need to spend 30% or less of your income on accommodation costs in order to have a good balance. What if you spend something like 95%? That will be me. I have to choose between eating or rent. Rent has to come first, I cannot be homeless. I already use the heater as little as I can but in a house that is poorly insulated and living in Tasmania, I don’t have much of a choice. I layer up in the winter and have been known to go to bed early, just so I can warm up with my electric blanket. My electricity provider tells me that it is far cheaper to run my electric blanket than the heater.

    What a way to live, though.

  • Avatar tony scott says:

    I like your ‘job providers’ – note quotation marks. NOT once did the ‘job provider’ I was assigned to find / suggest / help / assist me to get a job. Not once in over 1.5 years. Instead I was forced to drive 100km round trip every 2 weeks to have an hour long meeting with (some others) and the ‘job provider’ where nothing of any benefit to me was said or imparted. They actually said to me that finding me a job was secondary to their need for monitor adherence to the social security requirements! Furthermore they did not differentiate between my personal circumstances (over 60 and very well educated) and other younger recipients (who were just starting out on the educational journey). I did eventually get a job but only because I sought it out and was luck enough to have previous relationships that also offered me a position.

  • Helen says:

    Good article . BUT a few glitches with the timelines. Mutual Obligation was a concept the LNP dreamt up . During the Hawke era . Probably stolen from Thatcher . There’s an article in the Govt archives that describes the concept ( if you google MO & look for the DHS reference it should take you there otherwise I’ll send you the link) . Howard sat on the concept and put it into full force when he won Govt. Plus the article infers that Hawke privatized is he JN’s . No Howard did that too ! I worked for DSS from 1982 until I retired in 2012

  • K K says:

    I doubt even the most cynical right wing politicians now could really believe their own claims of newstart being a transitional payment. The brutal reality now is that no one can have any realistic hope of finding meaningful employment on $40 a day without significant support which is non existent. You can’t have the highest minimum wage in the world and a crippling low unemployment payment and then kick people for not “complying”. All it has done is create an industry in itself of all of these so called “job service providers” that make their money off the backs of the most disadvantaged in society. There needs to be some sort of middle ground approach adopted but unfortunately whilst the current LNP bunch are in power it will never happen. I have never believed in the concept “free money”, but at the same time you do have to acknowledge that there are both personal and structural barriers that make things difficult for many different people. In basic terms you can’t pull yourself up by the bootstraps if you can’t afford the boots.

  • Martin says:

    A very good article, and great to see a group like this supporting such an important social support.
    The really sad thing about all this is that keeping Newstart so low is completely political and has no economic merits at all.
    In fact if Newstart WAS raised, there would be a little more economic activity around the country, including regional areas.
    The federal government wants to have a surplus, and this is adding to other ideological pressures on all welfare payments.
    But our federal governments have delivered deficits for almost 80% of the time since Federation, It is quite normal and no cause for any alarm.
    They are in fact a currency issuer, as opposed to the people, business and state and local government – they create our currency.
    Check out the writing of Professor Bill Mitchell Of Newcastle University at http://bilbo.economicoutlook.net/
    Getup is using this approach as part of its Future to FIght For campaign, with input from Dr Steven Hail of Adelaide University
    Prof Randall Wray in the USA: https://www.youtube.com/watch?v=yofpo88ipmo&fbclid=IwAR0wC9YDaeIM_joq7Nj6__yqmI6J37eb49p63zRuirzZ_n_ythIAvCwVt_w
    This is also the economic approach behind the Green New Deal in the USA, promoted by Bernie Sanders and Alexandra Ocasio-Cortez
    The people of Australia need to learn about this to counter the austerity-type programs being forced onto us.
    Happy to supply other links and information

  • Anne says:

    The Coalition’s cuts to staffing, as well as outsourcing compliance to JSP services, have placed enormous stress on individuals who need to interact with the system. They seem to have perfected the art of passing the buck from Centrelink to JSP and nack again. I have been asking for a new JCA for 18 months, and each says it is the other party’s responsibility. Meanwhile, they are relying on a prediction that was made in my last JCA (February 2017) that my working capacity would increase, despite the fact that a) it has decreased and b) their own documentation states that a JCA is valid for 12 months only. This has resulted in me being currently rated as being able to work 25 hours per week as opposed to 8 hours at the time of the JCA.

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