Economic stimulus to fight poverty

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On Friday 21 February, part one of Poverty in Australia 2020, a joint study by the Australian Council of Social Services (ACOSS) and University of New South Wales (UNSW) was released. After taking account of housing costs, it is estimated that 3.24 million people, equating to more than one in eight people, are estimated to be living below the poverty line in Australia. For children, it is estimated to be one in six. The subsequent parts of the report detailing the profiles of those in poverty and trends in poverty among these groups will be released during this year.

Centrelink sign (Getty Images)

The data, from 2017-18, defines the poverty line (50 per cent of median income, before deducting housing costs) for a single adult as $457 per week, also stipulating figures for couples, sole parents with two children and couples with two children. The report also highlighted that in Australia, there is no plan in place to reduce poverty, nor is there an agreed definition on what poverty is at the national level.

According to the study, in March 2018, Newstart and Youth Allowance (for students and the unemployed up to the age of twenty-one) were respectively $117 per week and $186 per week below the poverty line. Thanks to the increase in 2009, those receiving the age pension, disability support pension and carer payment were found to be relatively better off at $10 per week below the poverty line.

The Australian poverty figures sit above the OECD average level and are high despite being among the wealthier OECD nations.

The study found that the twenty-five-year freeze on Newstart Allowance (after inflation) along with the transfer of many sole parents to Newstart from 2007 increased poverty and the depth of poverty among the population receiving those payments. The payment has remained the same despite considerable rises in the cost of living, including housing costs by an average of four per cent per year between 2007 and 2017.

The transfer of sole parents to Newstart Allowance from 2007, meaning they did not benefit from the 2009 increase in the pensions, was found to be a contributor to the increase in child poverty. Further, family tax benefits for low income families were indexed to consumer prices rather than the movement in wages, effectively countering the Hawke government’s policy to reduce child poverty. In fact, the consistently noted problem with Newstart, Youth and Austudy allowances has been the indexing to consumer prices rather than wages, leading to greater disadvantage.

 

'In effect, decontextualised budget surplus is nothing more than rhetoric and not in itself indicative of a successful economy, despite it being constantly put forward by the government to the public as the deciding factor.'

 

The need to raise the rate of these allowances is paramount. While sceptics argue that increasing Newstart Allowance will decrease incentives for the unemployed to look for a job, research has found that in fact, the current low rate itself is a barrier to work. There are also misconceptions about who the average Newstart recipient is; they are likely to be middle-aged and living outside urban centers.

The adequacy of Newstart and related payments is the subject of a Senate inquiry which is due to make its report by 27 March 2020. A report released by ACOSS and Deloitte in 2018 argued the case for an increase of $75 per week for such payments and more recently, ACOSS has recommended an increase of $95 per week. An increase was found to be supported by voters across party lines.

Meanwhile, the government is looking at cost-cutting to meet its budget surplus in light of the devastating fires and the economic impacts of COVID-19 (the coronavirus epidemic) whether or not it is actually good for the economy or not in the long term. One proposal is another attempt at cutting back on welfare spending through the use of online payroll data.

Yet the focus on surplus and disregard for the basic needs of the most financially disadvantaged in the country raises grave concerns. In effect, decontextualised budget surplus is nothing more than rhetoric and not in itself indicative of a successful economy, despite it being constantly put forward by the government to the public as the deciding factor.

As Dr Richard Denniss, Chief Economist at The Australia Institute stated in September 2019, ‘Australia needs a budget deficit. Even the governor of the Reserve Bank is calling on government to be more active with fiscal policy. For now, Scott Morrison remains more concerned with the symbolism of a surplus than cyclical fiscal policy’.

With the recent blows to the economy, which is now having a bit of a stumble, it is the perfect time for the government to take action on economic stimulus and increase spending beyond the bushfire responses. Economic stimulus that includes an increase to vital social security payments could certainly make a positive contribution to the fight against poverty.

 

 

Bree Alexander's words have appeared with Enchanting Verses, Westerly Magazine and Australian Multilingual Writing Project. Under pseudonym Lika Posamari, she was shortlisted for the Overland Fair Australia Prize 2018 (NTEU category) and published a poetry chapbook The Eye as it Inhales Onions.

Main image: Centrelink sign (Getty Images)

Topic tags: Bree Alexander, poverty, economics

 

 

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Existing comments

Thankyou Bree, The desired surplus is a basic target , and responsible fiscal management is a basic national and social expectation.This though is not a true account of the economy, when citizens are living below the poverty line. How can the poor , disabled, under employed, students and aged citizens be expected to contribute ? Newstart has not been increased with so many increases costs of living . There are many multi national corporations not paying tax - these are the cheats. There is more funding and investment in building gaols , though not in affordable housing! This is irresponsible fiscal management. There are royal commissions wasting funding when the solutions are obvious.Profits for big business is not benefitting the society they rely on to conduct business. False economies skewed to show a surplus. Our social fabric is paramount to a healthy economy, ready for any shocks. The health of our society is measured by the access and affordability of basic needs. As we see each year in the aftermath of fires,floods cyclones and droughts , we need a well supported welfare system. Not an emergency band aid. Too long we wait for sensible changes to attitudes on affordable and appropriate housing as a part of good health , mental health , justice systems and culturally engaging education. Economies will flourish if the basics are a focussed priority. It’s simple really. Problems will always arise when dignity is taken away. A Fair go .. is too much to ask today Australia.
Catherine | 26 February 2020


Thank you very much, Bree, for this excellent summary of the combined ACOSS and UNSW joint study. I agree entirely with you that, "disregard for the basic needs of the most financially disadvantaged in the country raises grave concerns." It's extremely disturbing that Australia has no plan in place to reduce poverty. And as media coverage of this study seems to show, it's almost impossible to get proper media and political attention for the millions living in poverty (Thank you, Eureka Street, for providing this space in your publication). How can we change the situation so that more Australians doing well think about and take action on behalf of those millions in our country unable to make ends meet? Financial disadvantage is creating a more and more divided and troubled society.
Robert Van Zetten | 27 February 2020


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