KPMG says current level of Newstart is ‘damaging’ and not enough for people to meet material needs

This article is more than 11 months old

This article is more than 11 months old

The Morrison government should increase Newstart by nearly $100 a week, KPMG says, with the accounting giant calling for an even larger rise than welfare groups and arguing the low rate of the payment “tears at our inclusive social contract”.

In a submission to a Senate inquiry into welfare allowance payments, KPMG said the current rate was too low to help people meet their material needs, such as eating to a healthy standard, keeping a roof over their heads, maintaining clothes for interviews and travelling to Centrelink appointments.

An increase would benefit the economy by stimulating spending, particularly in regional areas, the firm said, because Newstart recipients “spend, rather than save, almost all they receive”.

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To avoid what it called a “socially damaging state of affairs,” KPMG said the government should raise Newstart to 50% of the minimum wage and 80% of the age pension.

“Based on this, Newstart should increase to $370 per week for a single person with no dependents,” the accounting firm said of the dole, which is currently $279.50 a week.

The Coalition has been fending off calls from welfare groups and the Greens to boost Newstart, Youth Allowance and other payments by $75 a week, at a cost of $3.3bn a year. The accounting firm Deloitte, which modelled the $75 increase, has also backed an increase to the dole, as has the former prime minister John Howard.

The KPMG proposal put the cost of a $100 a week increase to Newstart at $3bn to $3.5bn per annum, but argued such a rise would “still allow room for a significant financial incentive for moving into even the lowest-paid work for three or more days per week”.

KPMG said in the submission that Newstart was currently 37.5% of the pre-tax national minimum wage and was therefore “inadequate and damaging”.

“There is an optimal level for Newstart which involves balancing meeting material and psychological needs and providing incentives for work. That balance is not being met,” the submission said.

“An inadequate Newstart tears at our inclusive social contract, given our society does not guarantee work and thus should ensure that there is an adequate living standard for those that cannot obtain work.”

KPMG also backed calls for Newstart and other welfare payments to be determined independently, joining more than a dozen charities, welfare advocacy bodies and health groups.

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While the Morrison government has said Newstart does not need a boost because it increases twice a year with inflation, KPMG said the consumer price index was an “inappropriate” benchmark. Pension payments are indexed to wages, which have risen more quickly and led to an increasing gap between the age pension and the dole.

“If the unemployment benefit set after the second world war of £1 5s was simply adjusted for inflation it would be equivalent to around $90 per week currently,” KPMG said.

“This is less than a third of the current level and about a quarter of what we believe to be adequate. This demonstrates the inadequacy of using CPI as a basis for adjustment.

“The mixture of expenses likely to be experienced by those unemployed will evolve over time and should not be fixed to a period which is decades old. Thus the cost of a mobile phone would not have been included when the current level of Newstart was evaluated more than 20 years ago (now adjusted for inflation).”

The Senate inquiry will hold public hearings on Thursday and Friday.