Acoss seizes on comments from Philip Lowe, who says ‘very low’ household income growth the reason economy has softened

This article is more than 1 year old

This article is more than 1 year old

Australia’s peak social services body has seized on comments from the Reserve Bank governor after he said an increase to Newstart would be “good for the economy”.

Speaking at an event in Adelaide, Philip Lowe said “very low” household income growth was the reason the economy had “softened”, which has prompted the RBA to reduce interest rates to a record low of 1.25%.

Asked for his view on the role of income support levels, Lowe suggested an increase to the $277.85-a-week payment would help stimulate the economy, though it was “a matter for the government”.

“Anything at the moment that can boost income growth is good for the economy,” he said. “So the interest rate cuts will boost household disposable income because people pay a lot of interest, and I hope the tax rebates get through the parliament and that will boost income.

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“And perhaps, in time, stronger support payments for unemployed people will help as well but that’s up to the government.”

Lowe’s remarks buoyed the Australian Council of Social Service (Acoss), which said they “confirm that increasing Newstart would boost growth in incomes and the economy”.

Single Newstart recipients are currently expected to survive on $40 a day, plus very minor supplementary payments.

“If you ask someone on Newstart what they’d spend an increase on and you ask a high-income earner what they’d spend a tax cut on, you get very different answers,” the Acoss chief executive, Cassandra Goldie, said. “People on Newstart, on the other hand, have no choice but to spend everything they have in order to get by – they simply can’t save any money or even afford to pay off debts.”

In his speech to the Committee for Economic Development of Australia in Adelaide, Lowe flagged another potential rate cut as he warned of “spare capacity” in the labour market, including “significant underemployment”.

“As a country we should also be looking at other ways to get closer to full employment,” he said. “One option is fiscal policy, including through spending on infrastructure. Another is structural policies that support firms expanding, investing, innovating and employing people.”

Melinda Cilento, the CEDA chief executive, said Lowe’s presentation suggested “now is as good a time as ever” for an increase to Newstart.

Acoss’s proposal to lift the payment by $75 a week would cost the federal budget $3.3bn a year, while boosting consumer spending, Deloitte said last year.

Separate Acoss research has found 44% of people on Newstart were on it for more than two years and 15% for more than five years.

The government has so far declined to consider an increase to Newstart, despite calls from the Business Council, John Howard and, most recently, the Liberal senator Arthur Sinodinos.

Labor took a review of social security payments to the election, a move that was expected to lead to a boost in income support rates.

The social services minister, Anne Ruston, was contacted for comment.