News

Consumer Action and the Consumer Credit Legal Centre NSW welcomes the opportunity to comment on the inquiry into the adequacy of the allowance payment system and related issues.

This submission responds to items (a) and (b) of the terms of reference:

(a)   the adequacy of the allowance payment system for jobseekers and others, with particular reference to the adequacy of the Newstart Allowance payment as an income support payment for jobseekers and the adequacy of all other allowance payments that support a range of recipients who study or provide care;

(b)   the appropriateness of the allowance payment system as a support into work, with particular reference to:

1. the effectiveness of the payment as an incentive into work,
2. the effectiveness of the allowance payment system in facilitating transitions between working and other activities, such as studying, caring and retirement, or in the event of illness or disability, and in helping or hindering recipients to overcome barriers to employment, and
3. the impact of the differences between pensions and allowances on the transition between working and other activities

We submit that:

• Regarding to term of reference (a), the payments available to jobseekers are clearly inadequate to meet the basic living costs of recipients because:
  • a reasonable estimate of the income that would be received by a jobseeker solely reliant on social security benefits is less than the Henderson Poverty Line;
  • average (or even minimal) rental costs are likely to take up between 65 to 100 per cent of the payments available to a single jobseeker with no children and between 36 to 55 per cent of payments made to a couple with no children. This means that households solely dependent on jobseeker allowances are almost necessarily put into a state of housing stress according to the formula used by the Australian Housing and Urban Research Institute;
  • even if jobseekers can afford housing costs, those solely reliant on social security would be unlikely to also be able to meet basic needs like utilities and groceries and would be reliant on family, friends and emergency relief;
  • payments are becoming less adequate with time as costs of living outstrip increases to Newstart Allowance and Rent Assistance.

• Regarding term of reference (b), the allowance system is not an effective incentive to move jobseekers into work, instead it erodes the ability of payment recipients to find and secure work.

• Keeping payment levels lower than the minimum required to meet basic needs also creates drivers to resort to harmful use of high cost credit like payday loans. This is a poor outcome for jobseekers who can be led into a destructive cycle of indebtedness. It is also an inefficient use of social security funds which are designed to meet basic expenses, not pay off high interest debt.

We recommend that

• As already argued by the Australian Council of Social Service, Newstart and other allowance payments should be increased and indexation of these allowances should be improved; and
• that the Productivity Commission be asked to provide advice on what an optimal level would be for jobseeker payments.

To read our full submission, click here: Joint submission to the Senate Education Employment and Workplace Relations Committee on the allowance payments for jobseekers.