This Bill will cut unemployment payments back down to the old Newstart rate from 31 March 2021.
It is a missed opportunity for the government to deliver a permanent increase to the rate of JobSeeker Payment.
Labor Senators concur with the extensive evidence supporting a permanent increase in the rate of unemployment support. It would be the right thing for the government to do. It would help lift the most vulnerable people out of poverty, provide economic stimulus and support jobs.
The need for a permanent increase to the base rate of unemployment support has been thoroughly examined by this committee, including through the inquiry into the Adequacy of Newstart and related payments and alternative mechanisms to determine the level of income support payments in Australia, which reported earlier this year.
At the hearing into this bill, Professor Whiteford summarised the current situation:
…it is well recognised, including by previous Senate inquiries, that the rate of Newstart—as it was; now JobSeeker—is inadequate and has been realised as inadequate for a long period of time. I think the appropriate thing is not to maintain the supplement but to go for a permanent increase to make it more adequate.
Labor Senators have heard extensive evidence – in the context of this committee and directly from the community – about the positive impact of increased unemployment payments, since the Coronavirus Supplement was introduced.
Ms Stary, from Financial Counselling Victoria summarised the difference increased payment have made to the lives of those Australians under the greatest financial pressure:
I just want to highlight this: since the terrible impacts of coronavirus, we have seen the federal government's response with the coronavirus supplement, which has made a very positive impact to people that we work with. We have seen people able to pay for housing, electricity and gas; turn on heating during winter; pay for their water, telephone and internet bills; pay for medications; eat enough healthy food; pay for children's school activities; buy clothing and shoes for themselves and their kids; participate in activities; and even address outstanding debt. We have seen women able to re-establish their lives after leaving family violence with reduced anxiety as well as recover and regain confidence in establishing themselves into pathways of employment.
Mr Coonan from the Australian Unemployed Workers’ Union highlighted the impact on people’s mental health and questioned the government’s proposal, in this bill, to revert back to the old Newstart rate of payment in March 2021:
In response to the Productivity Commission's report on mental health, the Prime Minister acknowledged that financial hardship contributes to anxiety and depression, which people on unemployment payments experience at three times the rate of the wider community. Prime Minister, why is there such a gap between your words and actions?
On 31 March 2021, this bill proposes to end the additional social security support put in place in the context of the Coronavirus pandemic. This includes:
ending the Minister’s ability to continue paying the Coronavirus Supplement;
reinstating the Newly Arrived Residents Waiting Period;
reverting to the old Income Free Area, so people will start losing their payment sooner if they get part time or casual work; and
suddenly ending the changes to the Partner Income Test, which have helped families where one person has lost their job.
Labor Senators note that without the passage of this bill, the Minister would retain the ability to indefinitely extend the Coronavirus Supplement (except for recipients of Youth Allowance – Student). However, the Minister’s power to make beneficial changes, including to the Income Free Area and Partner Income Test, would lapse after 31 December 2020.
Labor Senators are of the view that the government should not be ending the Minister’s ability to provide additional Coronavirus support, without at least legislating for a permanent increase to the base rate of unemployment payments. Particularly as evidence provided to this committee at Senate Estimates indicated that 1.8 million people would be relying on unemployment payments at Christmas, more than double the number before the pandemic. At Senate Estimates, the Department of Social Services also indicated that the number of people relying on unemployment payments is expected to remain above pre-Coronavirus levels across the entire forward estimates.
Labor Senators share the concerns of Ms Chambers from Anglicare Australia that the timing of the changes in this bill will be particularly difficult for many Australians:
In Senate estimates a few weeks ago, we heard officials from the Department of Social Services talk about the kinds of numbers that they were expecting to see unemployed in April. They were predicting an increase from what we're seeing today. So, as to pulling these benefits back, we are arguing—I do need to be clear about this—for a permanent increase. In the meantime, it is clearly not the time to be pulling this back.
And not only that, but, as to the timing and the actual date that we're looking at this decrease coming in, we know, from decades of data, that, in emergency relief and in financial counselling services, January is always the peak for those services. It is an expensive time of year for families. There's preparation for the school year. There are increased costs in cooling their dwellings, especially in the last couple of summers we've had. There are Christmas peaks. There are all those kinds of things. So, even down to the month and the day, it is not the right time.
COTA Australia indicated to the Committee that they supported a permanent increase to unemployment payments and were very concerned about the government’s decision to re-introduce the Liquid Assets Waiting Period – as well as the government’s proposal to increase the Liquid Asset Waiting Period to 26 weeks. Mr Irlam, from COTA, told the committee:
We are terribly concerned that, when JobKeeper ceases in March, we will see, as we have through every other economic downturn period, greater numbers of older workers being retrenched. These people will be forced onto JobSeeker.
Professor Borland also told the Committee that the government’s response to Coronavirus has been a test-case for the interaction of payment rates and the labour market:
Even before COVID, I would have thought, as many others have expressed, that there were strong arguments for making a permanent increase in the Newstart, now JobSeeker, payment. As I explained in answer to your first question, what COVID has done is give us a stronger evidentiary base for thinking that you could make that permanent increase without having significant adverse effects on the incentives to find work.
Professor Borland summarised his analysis of the impact of the Coronavirus Supplement on the labour market as follows:
That research has a couple of main findings. One is that you could have a substantial increase in JobSeeker without adversely affecting incentives to take up paid work. Secondly, with the COVID-19 supplement to JobSeeker, we have had, in 2020, an experiment, if you like, on what the effect on incentives to find work would be of a higher rate of JobSeeker, and my evaluation of the evidence is that there is no evidence that the higher level of JobSeeker during 2020, with the COVID-19 supplement, has had any appreciable effect on incentives to take up paid work for the people who are receiving JobSeeker.
The broader economic impacts of this bill were also emphasised by Mr Zahra of the Australian Retailers Association:
Social security recipients spend an estimated 58 per cent of their payments on retail goods or services at supermarkets, convenience stores, pharmacies, essential merchandise stores and other local small businesses…
It is projected that the scheduled end of the JobSeeker payment will take the equivalent of $8½ billion per year from the retail sector. The equivalent of 130,000 Australian retail jobs are also on the line if we return the rate of the JobSeeker payment to its old base rate.
Conclusion
Labor Senators are deeply concerned that this bill – which cuts the rate of unemployment payments back to pre-pandemic levels – is a missed opportunity to lift people out of poverty, support the economy and protect local jobs.
Noting that increased expenditure can effectively only be proposed by the government in the House of Representatives, Labor Senators call on the government to amend the bill to:
deliver a permanent increase to the base rate of unemployment support; and
ensure continued beneficial support for people impacted by the Coronavirus pandemic and the recession.
Senator Malarndirri McCarthy
Senator Helen Polley