Opinion

'Utterly inadequate' Newstart rate must be lifted

Instead of a safety net, Newstart has become a poverty trap, writes BSL executive director Conny Lenneberg

By Conny Lenneberg

November 13 2019 

"I’m starting to think that living in my car might be a cheaper option, but not very safe. This has been quite a journey. Still hoping to find a decent job which will turn things around.”

This is a raw testimony from Sandra, a jobseeker aged in her 50s.

Australia’s unemployment benefit is known as Newstart, yet the level of support offered today is so low that far too many people can’t make a start on their job search, and struggle for housing and to put food on the table.

This is deeply concerning.

Living as we do in one of the richest countries in the world it poses as a moral – and economic – challenge for everyone in the community, although the burden is borne by unemployed people struggling to subsist.

I come across many stark Newstart stories in my work, and I want to share some more of the harsh realities faced by Sandra. A single mother on the allowance, she moved to regional Victoria when her son left home. She is now covering rent and expenses on her own in an “old house with lots of maintenance issues”.

“This is all I can afford. I pay $240 per week for a really old house,” she says. “The house has no insulation. When it rains the back part of the house leaks so I have towels everywhere to catch the drips. The house is freezing! I hate putting on the heater because I know that means no food.”

After she pays the rent, she says she has about $180 a fortnight to live on. “Then I have a phone so I can be contacted for jobs etc and after that it is a competition to see what utility bills come in.”

Sandra hopes to find a decent job but has faced a testing situation. She has been on and off Newstart as she juggles part time and casual jobs. She is part of a new narrative in the community, one of insecure work.

At the Brotherhood of St Laurence, we hear too many such stories. As little as $39.93 a day for a single unemployed person, the Newstart rate is utterly inadequate to live on, even accounting for a top up of modest rent assistance for some people of up to $68.60 a week, and for most people an energy supplement of $4.40 a week.

Newstart is so meagre that it is having the unintended consequence of being a barrier to finding work. It also hurts people’s ability to secure proper housing and, broadly, to live with dignity.

The unemployment benefit we know today was designed for a different era, when secure jobs and affordable homes were often taken for granted. However, what policy reformers in the 1940s intended as a short-term stopgap has increasingly become a long-term payment.

For context, the proportion of unemployed people who are long-term unemployed has almost doubled in a decade, from 13.2 per cent in 2009 (in the wake of the global financial crisis) to 23.5 per cent in 2019. So one in four people on Newstart today are out of work for extended periods, often exhausting any savings they might have, and relying on favours and assistance from friends and relatives.

If you struggle to keep a roof over your head, and, as is becoming more frequent, have to resort to a food bank or charity to supplement your food budget, it’s tough to embark on job search. Then there are other barriers: how do you find money for public transport to attend interviews? How do you maintain business attire to put your best face forward to a potential employer? Or, pay for a haircut?

Newstart is the second-lowest unemployment payment in the OECD group of developed nations. When rent assistance is included, compared to other nations’ housing benefits, Newstart plunges to the lowest payment.

Calls for the rate to be boosted by the Federal Government come not only from social justice organisations like the Brotherhood, but groups as disparate as the Country Women’s Association and the Australian Industry Group. Accounting firms such as KPMG and Deloitte are also telling us it would serve as an economic stimulus to increase Newstart. Recently, the Governor of the Reserve Bank Philip Lowe acknowledged an increase in income support would help the economy.

As a priority, the Brotherhood has been calling for the Newstart rate to be determined by an independent body which determines what is the right balance between an incentive to seek work and the capacity to meet basic needs.

The Brotherhood’s own research demonstrates that, far from being a safety net, Newstart has evolved into a poverty trap, particularly for highly disadvantaged jobseekers.

Single parents, for example, are transferred to Newstart from the more generous Parenting Payment when the youngest child turns eight, resulting in a drop of around $90 a week. Mostly mothers, they find it hard to get steady employment that also enables them to meet their family responsibilities, instead cycling in and out of short-term or casual jobs. The low rate not only affects these parents, but also harms their children.

Sandra, whose story started this column, is among the older women who has paid a “care penalty” for unpaid and part-time work and interrupted work histories. Women in this position have little or no financial buffer if they can’t get work. This is another harsh reality that informs the fact that, between the 2011 and 2016 Census, the number of women aged 55 or more who were homeless rose by almost a third.

We know from our practical work with unemployed people that intensive, tailored help makes a big difference. We work with employers to find the suitable positions – and with jobseekers to assist them to be ready and skilled for available jobs.

But the other side of the equation is that we also need to act urgently and boost the Newstart rate so it doesn’t remain a blocker to finding work – or eating a square meal.