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Labor closes door on Newstart review

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The Australian Labor Party has backed away from a promise to review Newstart benefits, saying the Australian public should pressure the Coalition government instead.

Shadow treasurer Jim Chalmers told the National Press Club today that a Labor review into the benefits job-seekers receive would be unlikely to make any major difference to Coalition policy.

Labor had previously promised to review Newstart if it won the election in May, following lobbying from welfare groups.

As it stands, single Australians without children receive $555.70 a fortnight under Newstart, after increasing $5.50 in March.

But in the wake of an election wipe-out, the Labor party is uncertain a review would be a worthy use of time, Chalmers said in Canberra today, calling on Australians to continue the push.

"I don't think a review at the start of that from the opposition would necessarily shift the needle on Newstart,” he said

"If people want to see a boost to Newstart, then they have to convince the government.

"One of the things that does get you down is that we aren't able to implement some of those policies and plans that we think would have made a real difference, particularly to vulnerable people in Australia."

Support growing for Newstart increase

Chalmers’ comments come as the Reserve Bank of Australia (RBA) moves to address a sluggish economy and slowing wage growth.

Speaking in Adelaide last week, RBA governor Philip Lowe said that while he believed an increase to Newstart could help boost the economy, the decision wasn’t in his hands.

“Anything at the moment that can boost income growth is good for the economy,” he said.

“So the interest rate cuts will boost household disposable income because people pay a lot of interest, and I hope the tax rebates get through the parliament and that will boost income.

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

The Australian Council of Social Services is currently calling on the government to increase Newstart by $75 a week, noting that the current payment levels are less than half the minimum wage.

“More must be done to or spur a slow economy, and the most effective way is to raise the incomes of low income earners,” ACOSS director of policy Jacqui Phillips said.

“As with a pay rise for low paid workers, an increase to Newstart will go straight back into struggling local economies as people on low incomes spend the money on basics like food and rent.

“Raising Newstart is a more effective and less expensive way to deal with economic downturn than the government’s high-end tax cut package.”

It’s a sentiment echoed by the Committee for Economic Development of Australia (CEDA), which said “punitive” welfare rates act as a barrier to reentering the workforce.

“While the gap between the Pension and Newstart payments was relatively narrow in the 90s, the gap widened through the 2000s and Newstart today is only 61 per cent of the Pension, or approximately $175 less per week,” CEDA chief executive, Melinda Cilento said in 2018.

“Inadequate Newstart payments entrench poverty and the cycle of disadvantage.”

A 2018 report prepared by Deloitte Access Economics also found that increasing Newstart by $75 a week would boost consumer spending, increase wages and create 10,000 jobs. However this would come at a cost of $3.3 billion a year.

Speaking to Yahoo Finance, Professor Hal Pawson from the University of New South Wales City Futures Research Centre said Australia needs to ask itself some big questions when it comes to addressing disadvantage and homelessness risk.

“There is a big debate to be had about whether Australia needs major changes to social security benefit rates (especially Newstart and Rent Assistance) that have fallen so low that tens of thousands of claimants are put at risk,” he said.

However, Prime Minister Scott Morrison has rejected pushes to increase the welfare payment.

In the lead-up to the election, Morrison said Australia has one of the best social safety nets in the world.

"That safety net is not just Newstart, it is the myriad of other income supports that are provided ... rent assistance, Medicare, support through affordable medicines," Morrison said.

"The way you keep that system in place is that you ensure you get more people into work, so the budget that supports those payments is not coming under the stress it otherwise might be."

  • With AAP.

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