Bleeding hearts have pointed out for more than a decade the extreme difficulty of being a single person living on a base rate of pay of $39 a day. Now other voices are joining the chorus. The Ken Henry tax review arguably overstepped its remit a decade ago by arguing the Newstart allowance should be increased “to improve fairness”. After this year’s budget, the head of the Business Council of Australia, Jennifer Westacott, bemoaned a “missed opportunity to do something on Newstart” and former prime minister John Howard acknowledged the growing need to "unfreeze" the jobless allowance: "I was in favour of freezing that when it happened, but I think the freeze has probably gone on too long.” Illustration: Dionne Gain Credit: In the decades prior to the 1990s, all government benefits were indexed to rise in line with consumer prices. The Whitlam, Hawke and Keating governments also had policies to ensure payments were scaled to a fixed percentage of average wages, delivered by ad hoc increases – such as the one in 1994. Since then, Newstart and youth allowance payments have been effectively "frozen", as Howard describes it, rising only with inflation – denying beneficiaries a slice of rising wages and prosperity.

In 1997, the Howard government made sure aged pensioners shared the benefits of rising prosperity by indexing the age pension to wages. But there is a growing awareness of the political imperative to also do something about the low rate of payment for people of working age. Last month, the Australian Council of Social Services released economic modelling by Deloitte Access Economics on the impact of increasing the single rate of payments from $273 a week to $348. The measure would drain federal coffers by $3.3 billion a year. But targeting dollars at the poorest in societywould deliver cash to those most likely to spend it, boosting consumption. Because jobless Australians disproportionately live in regional areas, they would also be less likely to spend the money on imported goods, keeping more of the economic benefits local. More voices are joining the chorus arguing for an increase to the Newstart payment. Credit:Virginia Star Overall, the boost would create 12,000 jobs, according to the modelling. However, this boost fades over time and is offset by assumed rises in taxes. All new taxes impose a dead-weight loss on economic activity.

Even the report’s authors concede the argument for boosting Newstart rests less on “prosperity” and more on “fairness”. Critics argue it is imperative the payment be substantially less than average wages to prevent dole-bludging. But Newstart delivers an income that is just 36 per cent of average wages after tax and just over half the minimum wage. That's a powerful inducement for jobless Australians to look for work. Loading Newstart is designed to be a temporary payment and more than a third of Newstart recipients receive the payment for less than a year. That compares with only 13 per cent of people moving off other forms of welfare each year. But policy changes have seen many Australians – particularly single parents with older children – moved onto the payment. Even the hardest of hearts must concede that at some point the detriment caused by keeping recipients at 1990s-level living standards starts to outweigh any benefit of encouraging a vigorous search for work, which may or may not be available.