Reform Agenda Must Include Increase in Newstart – Corporate Report

Global professional services firm KPMG has again called for a significant increase to the youth jobs allowance Newstart of $50 a week in its latest report called Reform Agenda for Australia, released on Tuesday.

KPMG said the report delivered a practical eight-point reform agenda for Australia including mending the social safety net through an increase in the Newstart Allowance, budget repair, a lift in productivity-raising infrastructure investment, further education reform, agreed changes to the enterprise bargaining framework, reforming the tax and retirement income systems, more effective action on climate change and Indigenous economic empowerment.

KPMG also proposed that the National Reform Summit of 2015 be reconvened in the first part of 2017 in an effort to find common ground on a set of reforms.

KPMG said its proposed eight-item reform agenda would be one input into such a summit.

“The other summit participants – business groups, the trade union movement and civil society organisations – would have their own ideas to bring to the table,” the report said.

The report said although Australia was recognised as having one of the most effective social safety nets in the developed world, it contained a number of holes, the largest of which was the inadequacy of Newstart.

“At just $40.85 per day, the Business Council of Australia has described Newstart as ‘a barrier to employment’ that ‘risks entrenching poverty’. The OECD has expressed concern about the effectiveness of Newstart in ‘enabling someone to look for a suitable job’,” the report said.

“While identifying potential savings to help remove the structural deficit, KPMG has advocated a $50 per week increase in Newstart. Although the inadequacy of Newstart is probably the largest failing of the social safety net, problems exist for other types of households such as age pensioners renting privately.”

KPMG national managing partner and report co-author John Somerville said improving Newstart to mitigate health and wellbeing issues, and improve the chances of employment, made long-term economic sense.

“Consensus could be possible if the changes were considered at the same time as measures to repair the budget,” Somerville said.

“If we want rational economic reform in the great Australian tradition to triumph over regressive emotion-based policy we cannot wait for a more placid parliament. This may be the new normal.”

KPMG’s chief economist Brendan Rynne told Pro Bono Australia News that the call for an increase to Newstart should be seen in the context of the eight-point reform package.

“We know Newstart is too low and it acts as a barrier to employment. An increase of $50 per week is an appropriate amount to reduce that barrier.”

Rynne said while there was some community outrage about paying people to be on the dole, the move “would not make people rich by giving them an extra $50 per week”.

“[The increase] is an effective, fair and responsible way to enable them to look for and find work and over time the number of people requiring Newstart will fall,” Rynne said.

Welfare peak body ACOSS has supported the KPMG reform agenda.

ACOSS CEO Dr Cassandra Goldie said if the biggest priority for the government was jobs, then it should heed the calls of the business, union and community sectors and increase Newstart to reduce barriers to work and reduce the incidence of poverty.

“In the lead up to the Mid-Year Economic and Fiscal Outlook, government should scrap the $5 billion in zombie social security cuts still before the parliament that include reducing the incomes of people locked out of paid work and sole parents by at least $50 per week,” Goldie said.

“Infrastructure investment is another priority area for reform and ACOSS calls for affordable housing to be at the top of the list.

“While KPMG identified investment in public housing as an economic stimulus option in the event of another financial crisis, Australia cannot wait for a financial crisis for adequate investment in affordable housing. We need an affordable housing investment strategy if we are to meet demand for social housing, reduce homelessness and ensure people are not living in housing stress.

“KPMG backs the National Reform Summit agreement that addressing the budget position of the country requires both spending and revenue reforms, and should focus on redesign of major expenditure programs that are growing in real terms and tax concessions which are no longer fit for purpose. In our view, this highlights the importance of staying with reforms in health and the retirement income system, and tackling tax breaks such as negative gearing and capital gains discounts, which are just some areas where there is a compelling case for reform.

“A well-designed package could deliver improvements to equity, efficiency, productivity and the budget bottom line.”

The KPMG recommendation to increase Newstart was also welcomed by the Australian Greens.

“Stakeholders, the Greens and major tax firm KPMG have pointed to evidence that increasing the payment will help pull people out of poverty, will better support people as they search for a job, and will boost the economy,” Greens Senator Rachel Siewert said.

“Over the years the payment has fallen even further behind an acceptable amount. This alone should send a signal that the payment is well overdue for an increase.

“Just last week we heard that oil and gas companies may be incorrectly claiming up to $5 billion in tax deductions. Imagine if some of that money went to our most vulnerable who would inject it straight back into the local community to pay for essential goods and services.

“It is time the federal government stopped putting this increase in the too-hard basket, it’s time they stopped trying to justify why an increase isn’t needed and it’s time to help Australians who are living below the poverty line.”

Earlier, the federal government said indexation increases would benefit some welfare payments across Australia, but not Newstart, in the new year.

The government said about one million welfare recipients would see an increase to their payments from 1 January 2017 following the 1 per cent rise in the Consumer Price Index (CPI) for the 12 months to June 2016.

Minister for Social Services Christian Porter said people receiving Austudy, Youth Allowance, Carer Allowance and younger people on the Disability Support Pension would receive the increase in their payments from January.

Students and young jobseekers on Youth Allowance will receive an increase of between $2.40 and $5.70, depending on their personal circumstances.

Students on Austudy will receive an increase of between $4.30 and $5.70 a fortnight, including supplements. Recipients of Austudy and Youth Allowance students will benefit from increases to the parental income test free areas.

Single people aged under 21 on the Disability Support Pension (DSP) without dependents will receive an increase of between $3.60 and $5.50 a fortnight, including supplements.

Recipients will also benefit from increases to the income and assets limit.

“These recipients along with those of Austudy and Youth Allowance will also benefit from an increase to their personal income limits,” Porter said.

Carer Allowance will increase to $124.70 a fortnight. Mobility Allowance and the Double Orphan Pension will also increase. Additional child amounts (paid under some social security agreements) and permissible child earnings limits will also be adjusted from 1 January 2017.

The full details of new rates and thresholds can be found here.