POSTED: 08 FEBRUARY 2009

Rudd neglects the ‘unworthy’ poor *

The announcement of a $42 billion stimulus package, which provides thousands of dollars to families earning up to $200,000 and almost nothing to the long-term unemployed, is evidence that the Rudd Government like the Howard Government before it is distinguishing between ‘worthy’ and ‘unworthy’ recipients of government assistance.

In a submission to the Henry Tax Review titled Increasing the Newstart Allowance: a necessary part of equitable fiscal stimulus by Dr David Ingles and Dr Richard Denniss, The Australia Institute recommends that unemployment benefits be increased by $56 per week for singles and $64 for couples to bring their payments in line with the age and disability pensions.

"Newstart Allowance has been steadily declining relative to average incomes and the age pension for some time. This widening gap between the unemployed and the rest of society needs to be tackled at some point and the current economic crisis provides an obvious opportunity," said Australia Institute Research Fellow Dr David Ingles.

"At a time when unemployment is set to rise through no fault of individual Australians, it would make good economic sense to increase the Newstart Allowance. It is a targeted way of directing money not just into the Australian economy but to those areas of the Australian economy with the highest levels of unemployment.

"When it announced the bonus to pensioners earlier this year, the Rudd Government accepted the argument that pensioners would be more likely to spend their money and spend it on locally produced goods. The same argument obviously applies to the unemployed, with the added advantage that by definition they live in the most recessed communities.

"Increasing unemployment benefits should be a higher priority than proposed income tax cuts."

The submission estimates that, with the current unemployment rate, the annual cost of increasing the Newstart Allowance to pension parity would be around $1.1 billion per year, rising to $1.7 billion per year with a forecast unemployment rate of seven per cent in 2010.

*Based on media release issued by The Australia Institute.

To read the full text of Increasing the Newstart Allowance: a necessary part of equitable fiscal stimulus, CLICK HERE.