Monday, August 22, 2011

Try living on NewStart. It's getting harder. ABS figures show so.

$237.45 per week and not keeping pace

The buying power of Australia’s unemployment benefit is shrinking.

New figures compiled by The Age show in the past ten years the purchasing power of the fortnightly Newstart allowance has slipped $22 at a time when the buying power of the fortnightly pension has soared $175.

The difference is because of a large one-off jump in the pension in 2009 and because the pension increases in line with average male earnings while Newstart increases in step with the lower consumer price index.

The single unemployment benefit is now just $474.90 per fortnight. The single pension - once identical to the unemployment benefit - is now a much higher $729.30 per fortnight.

Projections prepared for the Henry Review show Newstart shrinking to a mere third of the pension by 2050 unless the rules are changed.

Cost of living figures released by the Bureau of Statistics show Newstart recipients even more disadvantaged than the comparison suggests.

Living costs for Australians on allowances other than the age pension climbed 4.6 per cent during the past financial year at a time when the consumer price index climbed 3.6 per cent... Living costs for Australians on allowances have outpaced the official rate of inflation in all but two of the past ten financial years.

The cumulative effect means the buying power of the unemployment benefit is falling, despite the claim on the Centrelink website that Newstart is adjusted “in line with increases in the cost of living”.

False advertising from Centrelink
“It is galling and simply appalling that the government publishes data on the cost of living for benefit recipients, and then fails to take note of the results and raise payments to job seekers,” said Gerard Thomas of the Welfare Rights Centre.

“The last time the rate of unemployment benefit was raised beyond the consumer price index Clinton was President of the United States, the internet was just an idea and mobile phones were rare and the size of bricks.”

Tougher rules due to start in January will cut the number of Australians assessed as eligible for the disability support pension by around 40 per cent pushing more Australians onto Newstart.

The Organisation for Economic Co-operation and Development warned in November that the single rate of Newstart had fallen below the poverty line, raising “issues about its effectiveness in providing sufficient support for those experiencing job loss or enabling someone to look for a suitable job”.

The Australian Council of Social Service wants the size of NewStart discussed at the October tax summit.

A spokesman for employment minister Chris Evans said the Government recognised being on Newstart was “no easy ride”.

“That’s why our first priority is to help people get a paid job,” the spokesman said.

While the budget had left the single Newstart formula unchanged it had eased the income test for principle carer parents on Newstart.

Published in today's SMH and Age

The OECD on Newstart

Related Posts

. The CPI does not measure changes in the cost of living

. Unemployment is about to become more painful. The minister doesn't seem to care.

. Don't borrow, don't save, don't spend. Advice for the stretched.

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Anonymous said...

Nice article Peter. I predict the government will do absolutely nothing about this as there are no votes in it. They'd be worried about the opposition claiming that they are supporting dole-bludgers if they did.

The Lorax said...

A thousand more people on Newstart today.

Some great quotes...

"There is an absolute risk that we could well and truly find ourselves in a hollowed-out economy that was living on the mining boom," Mr Kraehe said in an interview with Dow Jones Newswires.

"If you look at the 1970s and 1950s, Australia had terms of trade that were right up high. Those booms ended in recession and this one is a bigger and longer boom," he added.

-- Graham Kraehe

BTW, thank Christ he's on the RBA board and not another mining boom cheerleader.

"This is a matter for business as well. And I think there is a responsibility on the mining industry the Gina Rineharts, the Clive Palmers, the Twiggy Forests, the BHPs, the Rio Tintos to actually stop lining their wallets and start making an investment in manufacturing jobs in this country."
-- Doug Cameron

The Reserve Bank and Treasury have been warning for some time that manufacturing is going to have to quote 'make way' for the mining boom. But if this is the pain that is going to be part of this adjustment, I suspect it is more acute than most people thought because I think they actually thought the income boom that the resources boom would generate would be much more widespread and consumers would be much more confident, so we'd get demand in other areas.

It is just not happening.

-- Heather Ridout

Hear hear! The income boom just isn't happening. Its staying in Gina, Twiggy and Clive's pockets while the rest of us get screwed.

Well its pretty bloody obvious now people are fed up with this so-called "boom" and are getting angry, and that means big political headaches ahead for both the ALP and Coalition.

The Lorax said...

Merrill Lynch: 100,000 job losses in the pipeline

100,000 people "making room" for the mining boom and "freeing up" their labour. How many people does resources employ again? A bit over 100,000?

Merrill Lynch forecasts RBA rate cut as 100,000 jobs face axe

Following other banks recently forecasting RBA rate cuts, Merrill Lynch strategist Tim Rocks today told clients their are "100,000 job losses in the pipeline" and forecast the RBA to cut rates by November at the latest.

The RBA's official cash rate has been at 4.75 per cent since November, but a string of poor data - including a spike in the jobless rate last month to 5.1 per cent from 4.9 per cent, and volatile markets - has seen banks tip the RBA to cut rates in coming months.

On Merrill's numbers, about 50,000 job losses are consistent with another 0.5 per cent jump in the unemployment rate, which Mr Rocks said "would make an irresistible case for a rate cut".

"Anecdotes suggest that official employment data is lagging a material change in labour market conditions," said Mr Rocks. "We have tallied 7000 announced job losses since June, which are unlikely to be in the official numbers yet. This would be a subset of total losses since not all layoffs are announced.

"The RBA would ease rates once it becomes aware of this new trend in the labour market - we expect this by its November meeting but financial dislocation could force a more immediate response."

Bluescope today said it would cut 1000 jobs due to the high Australian dollar and soaring materials costs, as it became the latest in a string of companies to announce job cuts in recent weeks, including Coca-Cola Amatil, Westpac, Premier Investments and Ten Network.

Mr Rocks said more job losses are "inevitable" in the retail and construction sectors and the jobless rate could rise to 6 per cent by March.

Job creation would also slow in the booming mining sector as global growth concerns linger, said Mr Rocks.

Along with cutting rates, Mr Rocks said the "deteriorating conditions" could also see a broader response from the government, including bringing forward payments of up to $300 to pensioners and low-income earners as part of its compensation plans for the proposed carbon tax.

Combined with the RBA cutting rates by 50 basis points and petrol prices falling 25 per cent in Australian-dollar terms, $4 billion could be added to family budgets in the fourth quarter of 2011, he said.

"Investors should position for RBA easing and the potential for a broader policy response," he said

Evie said...

Thanks for your interest in this Peter. The inequities between Newstart and the pension are far greater than the difference between the base payments.

Pensioners are entitled to a wide range of concessions, supplementary payments and discounts that unemployed people do not receive. In Queensland, you can’t even get a concession on public transport if you are unemployed (apparently you can in all other states).

It gets worse. One of the nastiest policies, not applied to other welfare recipients, is the liquid assets test, a real kick in the guts for a newly unemployed person who has saved for a rainy day. Ken Henry recommended this be abolished, but the government ignored that. If you are a single person, for every $500 you have over $3000 you have to wait a week for Newstart, on top of a one week general waiting period, up to a maximum of 13 weeks, which means you can be forced to wait 14 weeks to receive Newstart. A person could easily run out of savings before the Newstart even starts.

Another bizarre and unjustifiable policy is the low thresholds of the ‘income test’ which applies when you are receiving Newstart. Say you are unemployed and you get five hours of work a week cleaning or something. You can earn $31 (less than 2 hours at the minimum wage) a week without the Newstart being affected, but for every dollar after that you lose 50c in the dollar of Newstart. This applies to up to $250 of earned income, after which you lose 60c in the dollar. Incredibly, the government announced in the Budget a Work Bonus for pensioners that allows them to earn up to $250 a week without it affecting their pension. Go figure! You’d think they would want to create incentives for unemployed people to be earning extra income rather than pensioners.

Things are going to get even worse for unemployed people when the government extends blanket welfare quarantining, which involves Centrelink withholding half of Newstart so they can approve how you intend to spend it. People think this only applies to dysfunctional families, but it will be applied in a blanket way to all people who have been receiving Newstart for a certain period of time. It doesn’t matter if you’ve been working in manufacturing for 40 years and paying taxes all your life. Lose your job, fail to get another one and you will be treated like a criminal by the Australian government, irrespective of which party is in office. Sad but true.

Peter Martin said...

Thank you.

I knew about the liquid assets test.

I wrote about it here:

I didn't know about some of the other stuff.

This is useful.

Kind regards,

derrida derider said...

Wait, there's more. Eg - the ordinary Assets Test gradually lowers your pension rate as you have more and more assets over the threshold. But it's all or nothing for your Newstart payment -a single dollar over the threshold loses you the lot. This can be a killer for some people getting compensation payouts (often paid in recognition that the accident has has left them less employable).

The position of those who are not quite badly enough disabled to get Disability Support Pension is especially invidious; the most common such cases are those with intermittent mental health issues (many psychiatric diseases are very episodic). Such people make up a big proportion of those on the dole long-term.

Anonymous said...

Try living on Austudy - it's LESS than newstart and you get even less support. No free petrol vouchers, bus tickets, brand new $300 suits or courses being paid for for the students. I personally received all of those things when I was on Newstart AND I received more in my fortnightly payments. In addition to that, I didn't have to buy thousands of dollars worth of books each year. In my attempt to upgrade my qualifications, thus get a good job, contribute to society and most likely pay a higher rate of income tax, I'm accruing a huge debt and (since I had to leave my casual job due to injury) literally not eating a couple of days each week so that my daughter is fed, clothed and housed properly. Forget pensioners, they've got it soft. Newstart recipients don't have it easy, but adult students are getting screwed the most of all - and paying for it!

Charlene said...

If you think the Newstart rates are bad, check out Austudy.... No wonder full-time students survive on 2-minute noodles! It is practically impossible to be a full-time student without a part-time job.

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