Government claims it will help with increases in living costs but unemployed say it does not keep pace with rise in prices

This article is more than 2 years old

This article is more than 2 years old

The federal government says a $2 boost per week to Newstart allowance will help unemployed Australians keep up with increases in their living costs, but people on the payment say the increase is laughable.

Welfare payments such as Newstart, Youth allowance and the pension increase twice a year through indexation – but are pegged to different rates. On Thursday, the base rate of Newstart will rise by $2.20 – or about 30c a day – to $275.10 a week.

Single parents will get a $2.35 increase weekly, while for couples the income boost stands at $1.95 each. Rent assistance, which is also accessed by some people on Newstart, will increase by 50c a week.

In a statement last week announcing the payments were increasing, the social services minister, Paul Fletcher, said they were indexed to “help people keep up with increases in living costs”.

“That’s just laughable,” said Kylie Ruxton, who has been living on Newstart for about a year. “What am I supposed to do with that? I’ll buy a loaf of bread.”

Ruxton lives alone in the Victorian town of Bendigo and is applying for a disability support pension after suffering a back injury at work.

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She said the $2.20 increase to her payments would not help her keep up with the rise in her expenses, particularly groceries.

“I’m finding things I used to be able to afford, I’m no longer able to afford now,” she said. “After rent is paid and all the expenses are paid, I’ve got about $90 for the two weeks. Some weeks are almost impossible.”

“My parents help out as much as I can. I’ve got a few friends that will help out. A former neighbour used to give me food that she didn’t want. I’ve visited food banks a couple of times. I usually don’t eat big meals. I have toast most nights. It’s extremely difficult and it’s depressing trying to survive on such a small amount of money.”

Two days after she receives a $2.20 a week increase to her income, Ruxton will celebrate her 35th birthday.

“I won’t be doing anything for my birthday at all,” she said. “Just staying at home. A small grocery shop today left me with $35 until next Sunday, so I won’t be celebrating at all, sadly.”

In March, when Newstart was last adjusted, the increase was $1.30 more at $3.50 a week. The dole and Youth Allowance are indexed to the consumer price index, while the pension is benchmarked to wages. The pension will be lifted by $4.10 a week on Thursday.

A report by Deloitte Access Economics released on Monday said the decision to tie Newstart to prices rather than wages reflected a “difference in generosity”.

It meant that for those on Newstart, “your living standards are set to sink relative to national averages”.

In particular, Ruxton said that the rising cost of electricity was a key concern for those on Newstart, saying she was currently $200 behind on her power bill.

“I’m told by the power company that I won’t have the amount due back to zero until May next year unless I make more payments,” she said. “So I’m just going to get further and further behind.”

Fletcher said Newstart was “designed to provide a safety net for people who require financial assistance while unemployed and looking for work”.

“The Australian government wants a sustainable welfare system that supports the most vulnerable, encourages those capable of work or study to do so, and reduces intergenerational welfare dependency,” he told Guardian Australia in a statement.

“The government welcomes input and advice from a range of stakeholders on the direction of welfare policy.”