Report reveals rising inequality a threat to Australia’s economy and paves way for future Labor governments to increase welfare and education spending

This article is more than 4 years old

This article is more than 4 years old

A sweeping stocktake of Australia’s social policy and how it meets national need suggests future Labor governments will consider increasing unemployment benefits and help for the long-term unemployed, spend more on education, simplify family payments, revamp labour market programs and protect employees’ rights and conditions despite drastic changes in the workplace.

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The review, the result of two years of consultations by Labor’s shadow minister for families and payments, Jenny Macklin, paints a picture of rising inequality and social policies that have not kept up with changes in the economy, the labour market or the life choices of Australian families.

To be launched by Macklin and the Labor leader, Bill Shorten, on Wednesday night, it says rising inequality is not just a threat to Australian society, but also to economic growth.

“Inequality is dragging Australia down,” Macklin argues, saying Labor’s model of “inclusive growth” is in line with a new international policy consensus.

“After a quarter-century of continuous economic growth, inequality is at a 75-year high.

“2.5 million Australians live below the poverty line, and hundreds of thousands of Australians are unemployed,” the review states, citing statistics including that the average wealth of a household in the top 20% wealth group is now about 70 times the average wealth of a household in the bottom 20%,” the report says.

Macklin emphasises the report is neither an election manifesto nor a detailed policy document.

She says its aim is to use Labor’s years in opposition “to take a more studied look at social policy in Australia. To consider what’s working, what isn’t, and how Australians are faring, so that we would be ready to govern again, with a clear agenda”.

It describes an increasing pattern of underemployment where casual or contract workers struggle to earn enough to survive, on top of entrenched unemployment in particular groups – including young people trying to get into the workforce – leading to disadvantage concentrated in the same geographical areas that have recorded high long-term unemployment for many years.

“On average, it takes young people 4.7 years from leaving full-time education to entering full-time work. This is significantly higher than the one year it took in 1986. Only 65% of university graduates, and 58% of Certificate II or higher graduates are in full-time work four months after graduating,” the report entitled Growing Together says.

“In 2008, at the height of the global economic downturn, the unemployment rate in Australia reached 5.9%. At that point, about 655,000 Australians were unemployed. Today, our unemployment rate is at 6% and more than 750,000 Australians who want a job can’t get one.

“As of November 2015, labour force under-utilisation (the unemployed plus the underemployed) was 14.3%. This is the real picture of unemployment in Australia.”

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And it says this existing unemployment and underemployment comes as Australia’s faces “a serious new jobs challenge” due to dual pressures – the cyclical pressure of the transition out of the largest investment boom in Australia’s history and the structural pressure from new technologies and from climate change.

“Increasingly, underemployment, insecure work and low wages growth is making it harder for families to build stable lives. Inequality is rising – undermining living standards, sustainable growth and social cohesion,” the report concludes.

“All this is happening at a time when economic growth has slowed, household incomes are under pressure and balancing the budget is more challenging. Perhaps for the first time in our history, we cannot be confident that the next generation of Australians will be better off than we are.”

Macklin says the “gap between the very wealthy and everyone else is getting wider. Living standards for the middle and working classes are falling” and Australian should be doing better than that.

The document does set out areas where a Labor government might act.

These include:

Concentrating on preschool and early years education in line with research showing this is by far the best way to overcome disadvantage, to the benefit of the individual and economic productivity.

Conducting a review of the adequacy of Newstart (unemployment benefit) payments, including for single parents, which both welfare and business groups argue are too low.

Developing new policies to get long-term unemployed people back into the workforce, citing criticisms of current labour market programs.

Reworking family payments in line with the recommendations of the Henry review, which recommended a simpler system of payments to ensure children had a basic acceptable living standard. Labor rejects the Coalition’s proposed changes and insists payments to single parents and grandparent carers must be protected.

A new minister for ageing and longevity.

A commitment to full employment and to protecting workers’ rights as the labour market changes, for example in the sharing economy.

The document also proposes much tougher scrutiny on social policy in the future, to make sure spending does not again get out of kilter with needs.

“This is a national debate we need to have. Put bluntly, too much money goes to programs without a solid evidence base, and too little towards establishing what works,” it says.

“A future Labor government should investigate the establishment of a body to apply the same rigour to social policy as is applied to other areas of policy ... to inform change and reduce waste,” it says.

According to Kasy Chambers, chief executive of Anglicare Australia, the commitment to an oversight body is important.

“That means Labor is committing to continue thinking about policy in this deep and thorough way, which is crucial given the amount of money spent in these area, and should avoid knee-jerk policy reactions to a particular event or situation,” she said.

Paul Smyth, professor at University of Melbourne’s school of political science, who was consulted in the preparation of the report, said the report paved the way for Labor to build policy in line with “the new model that puts social policy at the centre of economic policy rather than marginalised on the sidelines”.