The head of the Business Council has renewed calls to increase the Newstart allowance, after the Liberal MP Julia Banks declared she could live on $40 a day.

Banks told ABC radio on Wednesday she could “live on 40 bucks a day knowing that the government is supporting me with Newstart looking for employment”.

Westacott, however, said it was impossible.

“You cannot live on $39 a day,” she told ABC radio.

Westacott said the peak business lobby group had long supported an increase to the unemployment allowance, as part of a broader package of measures to increase productivity.

“I said in 2011 you can not live on $35 a day – well, we really have to get our head around this but not just in terms of tinkering around with the allowance.

“We have to make sure that allowance is adequate but we also have to do other things, like this effective rate, the marginal tax rate, perhaps when people go from unemployed to working.

“We have to make sure the programs are there, the literacy programs, the numeracy programs, that the job services networks are doing their jobs properly.

“A lot of these people are shockingly disadvantaged.”

Banks, who according to her interests register owns five properties, including three investment homes, did not say where she would live in Melbourne, if she only had $40 a day to spend. As a MP, Banks receives $285 a night in travel allowance when she comes to Canberra, more than a Newstart recipient receives in a week.

The Greens senator Rachel Siewert, who said she attempted to live off the payment “for a week sometime ago”, said it was “near impossible”.

“For anybody to make a claim that $40 per day is enough to live on shows they have become detached from the hardships experienced out in the community,” she said.



Seiwert said the payment needed to be increased by $75 a week.

Earlier this week, Deloitte Access Economics senior partner Chris Richardson, a known budget conservative, declared fixing the social service allowances was a higher priority than budget repair.

He recommended raising the unemployment payment by at least $50, which would add $3bn to the budget bottom line, but was necessary in the interest of fairness and prosperity.

Bill Shorten committed Labor to a “root and branch” review of the payments, while shying away from a promise to increase the allowance.

The BCA and Richardson were echoing clarion calls made by the Greens and the charity sector for years, with Conny Lenneberg, the executive director of the Brotherhood of St Laurence, saying the cost of living was “really biting”.

“A payment of as little as $38.98 a day is making it tough to even cover the costs of looking for work,” she said. “The struggle to live on Newstart is also pushing some people into homelessness.

“There is a growing recognition in our community that Newstart deprives people of their dignity.”

In her Wednesday interview, Banks, who holds a marginal Melbourne seat, said she saw no need to increase Newstart payment

“We can’t just keep throwing billions of dollars at Newstart. Then the economy just flags,” she replied.

However, Westacott argued increasing social security payments, as part of a wider review, would help the economy.

“This is the problem with public policy,” she said. “People want to pick one thing and hope that, in and of itself, will solve all of the problems.”

The finance minister, Mathias Cormann, avoided answering whether he could live on $40 a day, and instead stuck to the government line about “getting back to work as soon as possible”.

“Many people move on and off Newstart as a transitional measure, many people on Newstart also receive income from other sources,” he said. “The proposition that somehow Newstart allowance should be an ongoing income on an ongoing basis, that is not right.”

The Newstart allowance has not been increased in real terms for almost a quarter of a century.

The maximum allowance for a single person is $545.80 a fortnight, while a parent can receive up to $590.40.

The most recent Anglicare report into housing affordability, released earlier this week, found just three of 67,000 rental listings were affordable for someone on a Newstart allowance.