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As the upper house this week backs an inquiry into raising Newstart, analysis shows it is Australian seniors who are most likely to be living on just $38 a day. By Mike Seccombe.

Newstart: Thaw in senate may end 25-year freeze

Judy is 64-and-a-half years old and thinks of herself as a hardworking Australian. Even though, apparently, she does not fit the Morrison government’s definition of one.

She was married once, and bought a house with her husband. But then came a divorce, leaving her to care for two children, then aged six and two, one of them with severe disability and in need of near-constant care.

“Because of that,” she tells The Saturday Paper, “I wasn’t able to do what a lot of people are able to do, and have a meaningful career during that time.

“I did study, and did go back to work for a while, and had some full-time employment.”

With tight budgeting, she was able to keep up the mortgage payments on her home in the Melbourne suburb of Oakleigh, and slowly built a small nest egg of superannuation.

Then, nine years ago, her son passed away, aged 25.

“I had a complete breakdown. I stopped work. I wasn’t capable. I just sat on the couch for a whole year, doing nothing. I was just in desperate grief,” she says.

Judy has struggled since with her mental health.

“I think I had PTSD, as a result of all the caring issues,” she says. “It took a long time to overcome. I went back into part-time employment again for six or seven years. Then something triggered me again; I’m not sure what. I had some bullying at work.”

And so Judy found herself in her 60s, living alone in a house she had not quite paid off, and back on the Newstart unemployment allowance. She found it wasn’t enough to live on.

“So, I dug into my little bit of superannuation that I’d accrued,” she says. “That’s all gone.”

Judy repeatedly describes herself as lucky. Lucky to have had good money management skills through her life, to have a house whose value has grown over the past 30-odd years: “A thing that I have that others may not, which I could sell, as a last resort.” Lucky to have again found a little work this year.

“During that time when I was sick last year I did some voluntary work … and through that I gained some paid employment.

“I am now working 10 hours a week, for a little not-for-profit organisation. I never seem to get all my work done in that time, so I’m actually doing more hours than I’m paid for,” she says.

Not that she’s complaining. She is paid $300 a week for her work – exactly what she would have received had she remained unemployed. The general rate for a single person on Newstart is about $282 a week. But people aged 60 or over, who have received Newstart for nine months or more, get a slightly higher rate of $300 a week.

On top of her wage, Judy continues to receive $80 in partial Newstart benefits and is “battling” with the government agency, Centrelink, over that.

Centrelink wants her to work more. But her medical advice is that longer hours would exacerbate her anxiety, potentially meaning she could not work at all and would again become entirely reliant on unemployment benefits.

“The requirement is you have to do 15 hours [of paid work] before you don’t have to report to the job recruitment agency,” Judy says.

“I’ve just come off a three-month medical exemption, but that’s all they will do. They won’t recognise ongoing anxiety issues, even though my psychologist has written a letter for me.”

It’s a catch-22: because of her mental health problems, Judy can’t work more hours, but because she can’t work more, she is stuck with a regime of anxiety-inducing reporting requirements.

“I come out of those appointments quite upset,” she says. “I feel like they think I’m trying to rort the system in some way, and I’m not. I have capabilities, but I know I have restrictions as well. I don’t feel I’ve been acknowledged for all the hard work I’ve done over the years.”

She again acknowledges her relative good fortune, a realisation driven home when she goes for appointments with Centrelink.

“I often go in and see lots of other older people sitting in the office,” she says. “It’s a very sad-looking group you see there. Then I hear Scott Morrison saying their goal is to get people back into the workforce. Really? At almost 65? Really? There are not many jobs for people my age, certainly not career-type jobs. That’s the soul-destroying part of it.”

Judy takes comfort in the knowledge her life will become a bit easier in 18 months, when she reaches the pension age of 66.

For a start, her income will increase substantially. The single pension is $463 a week, about $180 more than the single rate of Newstart, and about $80 more than she currently gets, even working 10 hours a week.

More importantly, it will remove the constant pressure of having to satisfy the requirements and suspicions of Centrelink. On her 66th birthday Judy will change her social status, graduating to the ranks of those viewed as deserving welfare recipients.

“Eighteen months to go. I am so looking forward to that day,” she says.

We all know the stereotype of the unemployed: the young “government surfer”, the bludger who would rather live off the taxpayer than take an available job. Such perceptions are encouraged by the tabloids, shock jocks and right-wing politicians.

But it’s a misleading cliché. The average age of a person on Newstart is now 45, eight years older than the average Australian. A detailed analysis of the demographics of unemployment by Australia’s peak welfare body, the Australian Council of Social Service (ACOSS), shows that last year only 17 per cent of those on Newstart were under 25 years old. Meanwhile 38 per cent were aged 25-44, and 43 per cent were over 45.

And, as reported here last week, data from National Seniors Australia shows the largest and fastest-growing cohort of people receiving Newstart was those aged 55 to 64. As of December 2018, there were 173,000 of them – close to a quarter of the total – and their ranks were growing by some 10,000 a year. Furthermore, this cohort stays on the benefit for an average of 190 weeks, almost four years.

The number of older unemployed is growing for a variety of reasons. As Ian Henschke, chief advocate for National Seniors, points out, employers prefer younger workers. When they are looking for cost savings, they commonly make older employees redundant and hire younger, cheaper labour.

Also, as ACOSS notes, a large number of people have been moved from the Disability Support Pension to Newstart. The former Labor government tightened the eligibility criteria for disability support, and the current government has vigorously applied them. In 2010, about 60 per cent of claims for a DSP were successful. It’s now about 30 per cent. In just one year, to July 2016, the Coalition government boasted of having set a record by shifting more than 31,000 off the DSP.

As a consequence, the number of people assessed as having a partial capacity to work has increased dramatically. Now, according to ACOSS, about one in four Newstart recipients has a disability. Among those aged over 45, the proportion rises to 29 per cent.

A third reason behind the ageing of the unemployed is that the retirement age is being progressively lifted. Finally, there are simply more people in this age group as the demographic lump of baby boomers approaches and enters retirement.

The government also has moved a large number of people from Parenting Payments to the less generous Newstart under its so-called “Welfare to Work” policies. Some 13 per cent of recipients, mostly sole parents, now are on Newstart.

All of which belies the stereotypes. It’s people like Judy who are now more representative of Australia’s unemployed.

The cruel corollary of the stereotype is a belief that subpoverty-line welfare payments are necessary to force the unemployed to find a job.

In a speech to the National Press Club three years ago, the then social services minister, Christian Porter, said as much.

Defending his refusal to increase Newstart from $38 a day, as advocated by a broad coalition of business, unions and welfare organisations, Porter said:

“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 quickly.”

When he uttered those words, Newstart had not been increased in real terms for 22 years. It’s now 25.

But the ranks of those calling for an increase is growing. Last month, the governor of the Reserve Bank, Philip Lowe, suggested a benefit increase would be a good thing for a worryingly flat economy.

“Anything at the moment that can boost income growth is good for the economy,” he said. He mentioned the RBA’s cuts to interest rates and the low- and middle-income tax rebates being pushed by the government – although not the cuts for high-income earners, perhaps because they won’t come into effect for five years. He continued:

“And perhaps, in time, stronger support payments for unemployed people will help as well, but that’s up to the government.”

In political terms, it was a pretty daring statement. In economic terms though, it was simply a statement of the obvious.

There is abundant evidence, including the former Labor government’s successful response to the global financial crisis, showing that governments get the biggest bang for their stimulatory buck by providing money to people lower on the income scale. This is because they will spend it on local goods and services, unlike those in higher tax brackets, who are more likely to save the stimulus payment or spend it on imports or overseas travel.

Lowe’s contention that lifting unemployment benefits would be good for the broader economy was elaborated in greater detail last September in a report by Deloitte Access Economics, commissioned by ACOSS. It found a $75-a-week increase in Newstart and related payments including Youth Allowance would initially cost the government some $3.3 billion a year.

However, this would deliver a “prosperity dividend” as the money is spent and respent and grow the economy by $4 billion. Deloitte estimated this boost would generate 12,000 extra jobs by 2020-21, increase overall wages by 0.2 per cent and boost state and federal tax receipts by $1.25 billion, among other positive effects. It would particularly benefit regional economies.

Various employer organisations, such as the Business Council of Australia, also argue that more generous treatment of the poorest Australians would be good for the economy. But economic growth is really only a means to an end. Gross domestic product does not, of itself, create a fair and inclusive society. Just look at the United States, where the richest 1 per cent of the population now holds more wealth than the bottom 90 per cent.

And as the Deloitte analysis highlighted, the unemployed have largely been left out of Australia’s growing prosperity. “The gap between the living standards of average Australians and those who are on these allowances has widened sharply over the past quarter of a century. And it continues to widen,” it said. “That wasn’t an accident: it was what policy has been geared to do.”

Since 1994, Deloitte calculated, the value of Newstart has declined by 40 per cent relative to wages. And just since 2000, the age pension has “doubled in real terms” while Newstart has “barely budged”.

Scott Morrison asserts that “Newstart goes up on the indexation that has been in place for many a year and will continue to do that”.

But there is a trick of indexation. Newstart is indexed to prices, rather than wages, as the age pension is. This means that while the rest of the country – including the “worthy” welfare recipients past retirement age – has grown wealthier, those on Newstart have not.

According to analysis of OECD data by ACOSS, Australian unemployment benefits now are the second lowest of any of the 34 developed nations, compared with average wages.

Releasing the Deloitte Access Economics report, senior partner Chris Richardson – generally an advocate of fiscal discipline – called the failure to increase Newstart payments “our standout failure as a nation”.

He went on: “I’m a longstanding campaigner for budget repair, but I would rank it behind the need to lift unemployment benefits in Australia.”

The country did not have a “dole bludger problem”, Richardson continued, “what we have is a society that is unnecessarily cruel”.

The chorus calling for change grows louder. Even John Howard, who once pronounced himself the most conservative leader ever of the Liberal Party, has recently advocated publicly for a real increase.

It also appears something close to a majority in federal parliament also supports a rise. The Labor opposition does, although it has not specified how much the payment should be lifted, and insists there should be an inquiry first. The Greens have produced a bill that would lift benefits by the $75 minimum ACOSS says is necessary. Centre Alliance, which has two crucial votes in the senate and one in the house of representatives, also supports a $75 raise. Another swing voter, Jacqui Lambie, has previously said she supports raising Newstart but has not specified an amount.

On Thursday, Labor, the Greens and crossbench senators – bar Cory Bernardi – united to establish an inquiry into raising Newstart, which will report back by March next year.

As for the Liberals, Dean Smith and Russell Broadbent support an increase, as does Queensland LNP member Andrew Wallace, who has indicated conditional support if it could be shown the current level is impeding people seeking work.

There is stronger support among the Nationals, which is understandable given 29 per cent of Newstart recipients live outside metropolitan areas. Former Nationals leader Barnaby Joyce and Queensland senator Matt Canavan have both made public calls for greater assistance, a position reportedly backed by a majority in the Nats’ party room meeting on Tuesday.

News came this week that a bipartisan parliamentary inquiry set up last year and chaired by Broadbent – the select committee on intergenerational welfare dependence – recommended an increase in Newstart in its draft report.

But this was dropped from the final report, just before the election, after the intervention of the then social services minister, Paul Fletcher.

The government’s executive, though, continues to push against the rising tide. Its most commonly cited argument is that “99 per cent of people on Newstart also receive other payments”. This is a reference to an energy supplement, which works out to 67 cents a day.

Another common refrain was repeated on ABC Radio this week by the finance minister, Mathias Cormann: “Most Australians who are on Newstart allowance are on that payment for a very short period.”

In fact, 64 per cent of people, according to ACOSS and Deloitte, are on Newstart for more than a year, and 44 per cent for more than two years.

The Nationals leader, Michael McCormack, this week trotted out another – that there are plenty of jobs available, if only people would move themselves to get them.

Bureau of Statistics data show there were 243,000 job vacancies in Australia in May, and some 697,000 unemployed. And, of course, employers often require specific skills that unemployed people may not have.

Despite all evidence of need, Scott Morrison remains implacably opposed to further assisting Australia’s most needy citizens. He this week told his troops to give up the cause, saying government was “not a blank cheque”.

However, we already have a good idea of what it would cost – about $3.3 billion. Any amount looks small, when compared with the promissory note the government just signed with $158 billion in tax cuts for high-income earners.

It all makes the Reverend Tim Costello wonder about Morrison’s frequent assertions of Christian faith.

“The context of all Jesus’ ministry starts with his first sermon … quoting from the prophet Isaiah: ‘The spirit of the Lord is upon me to preach the good news. Liberty for the captives, sight for the blind, the poor given hope’,” Costello says. “The signature of almost everything Jesus talked about was good news for the poor.”

The Baptist minister suggests Morrison has perhaps misunderstood what Christ meant when he said, “The poor you will have with you always.”

It was not simple fatalism or an invitation to accept the inevitability of poverty, Costello says. “He was saying to his disciples … you cannot follow me without having the poor always in your heart. You’ll always be working for them.”

It’s not a cheap shot at Morrison’s faith, Costello says, for “having been so open about his faith” Morrison has invited “a three-year discussion about what Christianity really teaches”.

And it is not the prosperity gospel. Rather it is compassion. 

This article was first published in the print edition of The Saturday Paper on Jul 27, 2019 as "Newstart: Thaw in senate may end 25-year freeze". Subscribe here.

Mike Seccombe
is The Saturday Paper’s national correspondent.