Social security cost-of-living measures

Michael Klapdor and Dr Matthew Thomas

The 2023–24 Budget includes 4 ‘cost-of-living relief’ measures aimed at those in receipt of government payments:

a $40 per fortnight increase in the rate of JobSeeker Payment and other working-age payments
allowing long-term, single JobSeeker Payment recipients aged 55+ to access the higher rate currently paid to those aged 60+
a 15% increase in the maximum rate of Commonwealth Rent Assistance (CRA)
co-funding new state and territory government energy rebates for social security recipients and concession card holders.

Separate measures that will benefit some social security recipients are covered in other Budget review articles: ‘Expanding eligibility for Parenting Payment Single and ending ParentsNext’ and increased bulk-billing incentives for GPs (see ‘Medicare’).

Treasurer Jim Chalmers stated that the measures were ‘a modest increase in support to our most vulnerable because we know they’re doing it tough’.

Working-age payment increases

The Government has proposed a $40 per fortnight increase to the base rates of JobSeeker Payment, Youth Allowance, Parenting Payment Partnered, Austudy, ABSTUDY Living Allowance, Disability Support Pension (Youth), Special Benefit and Farm Household Allowance. The higher rate of JobSeeker Payment currently paid to those who are single, aged 60 years and over who have been on income support for 9 continuous months, will be extended to those aged 55 and over in the same circumstances. The measure is estimated to have a net cost of $4.7 billion over the forward estimates and will commence on 20 September 2023 (p. 199).

The current rate of JobSeeker Payment for a single person with no children is $701.90 per fortnight (including the $8.80 Energy Supplement) (p. 23). A $40 per fortnight boost is equivalent to a 5.8% increase on the current base rate. The current rate for a single person aged 60+ on income support for 9 continuous months is $761.30 per fortnight (including relevant supplements) (p. 23). For comparison, the minimum wage for a full-time worker is currently $1,625.20 per fortnight.

The last time these working-age payments were increased outside of normal adjustments in line with Consumer Price Index movements was April 2021 when the Coalition Government increased the base rates by $50 per fortnight. The 2021 increase followed the withdrawal of the temporary COVID Supplement, paid from April 2020 to March 2021 (pp. 7–8). Unlike the 2021 increase, the 2023–24 budget measure will not apply to Parenting Payment Single. It is unclear why this payment has been excluded from the rate increase.

Rate increase does not address longstanding issues

Ten years ago, the Parliamentary Library’s Briefing book for the 44th Parliament noted:

Debate over welfare policy in the 43rd Parliament was dominated by concern as to whether allowance payments were adequate to support recipients with basic living expenses and with their search for paid work. Little has been done to address this concern and the issue will remain contentious.

Since then, the only major increase to these payment rates has been the temporary relief of the COVID Supplement, which effectively doubled JobSeeker Payment rates. In 2022, the Briefing book for the 47th Parliament stated that the use of ad hoc, temporary income support changes in response to COVID-19 ‘suggests the design of the social security safety net may need to be reconsidered to ensure it can withstand future economic shocks’. A call for major reform was also made in 2020 by the Senate Community Affairs References Committee inquiry into the adequacy of Newstart (the previous name for JobSeeker Payment) and related payments:

Evidence to the inquiry has made clear the need for major reform of the social security system to ensure the income support system provides an adequate safety net for working-age unemployed people and becomes a strong enabler for economic participation. It is timely and critical to engage in major reform to ensure the social security system provides an adequate safety net for all Australians at all times. (p. xviii)

In its April 2023 report, the Labor Government’s Economic Inclusion Advisory Committee raised many issues with the design of the social security system and concluded it was ‘essential that further analysis is undertaken of the overall system of support for working age households’ (pp. 4; 47). The committee discussed issues around measuring the adequacy of payment rates, issues with supplements such as Rent Assistance, work incentives, and the changing demographics of those supported by unemployment payments. While calling for more analysis, the committee concluded ‘the immediate priority is a substantial increase to the base rates of JobSeeker Payment and related payments’ (p. 47). The committee considered a substantial increase would be to 90% of the Age Pension rate (p. 16).

Figure 1 compares JobSeeker Payment rates since 1993 with the single pension rate. It includes the proposed rate increases and the Economic Inclusion Advisory Committee’s recommended increase. These weekly rates are the maximum rate available, including relevant supplements. The growing disparity between JobSeeker and pension rates is due to different indexation methods, particularly the fact that pension rates are adjusted by price movements and benchmarked to a percentage of average wages. JobSeeker rates are normally only adjusted in line with price movements. The Government’s $20 per week increase will not reduce this disparity.

Figure 1 Comparison of JobSeeker Payment, pension rates and proposed increases, $ per week

Notes: rates are ‘typical’ maximums and include all supplements automatically paid. Rates are as at 20 March each year (2020 data includes COVID Supplement, although it was not paid until April 2020). Rates increases are compared to current rates as indexation adjustments will also occur on 20 September 2023.

Sources: Department of Social Services (DSS), ‘5 Payment Rates’ Social Security Guide, 8 May 2023; DSS, JobSeeker, Student Payments and Commonwealth Rent Assistance, Budget Factsheet, 9 May 2023; Economic Inclusion Advisory Committee, 2023–24 Report to the Australian Government, (Canberra: DSS, 2023), 16.

Stakeholder reaction

Australian Council of Social Service (ACOSS) CEO Cassandra Goldie stated:

… the real increases to base rates of JobSeeker, Youth Allowance and Rent Assistance will still leave more than one million people in poverty, unable to afford three meals a day and a roof over their head. Whilst every dollar counts, the $20 a week increase to JobSeeker and related payments is well below the Economic Inclusion Advisory Committee’s finding that it needs to rise by at least $128 a week to ensure people can cover the basics.

The Antipoverty Centre, an advocacy group comprised of social security recipients, described the proposed rate increases as ‘meagre’.

Commonwealth Rent Assistance

The Budget provides $2.7 billion over 5 years from 2022–23 (and $0.7 billion per year ongoing) to increase the maximum rates of CRA by 15% (p. 200).

At the end of June 2022 there were 1,398,661 income units receiving CRA (an income unit comprises a single person with or without dependent children or a couple with or without dependent children). A majority of CRA recipients (78.9%) were paying enough rent to be eligible for the maximum rate of assistance. A single person with no children can get a maximum CRA payment of $157.20 per fortnight if they are paying at least $350 per fortnight in rent (p. 37).

CRA helps to reduce the number of private renters in housing stress – that is, paying more than 30% of their income on housing costs. As at June 2022, 72% of CRA recipients would have been in housing stress had they not received the supplement, but CRA reduced the proportion to 44%. However, as the Productivity Commission notes, ‘the value of the payment has declined over time, relative to rents, reducing its effectiveness’ (p. 46).

Recent calls for an increase to CRA

In response to rising housing costs for private renters and falling vacancy rates, a number of organisations have called for a substantial increase to the maximum rate of CRA. For example, in the lead-up to the Budget, ACOSS called for CRA to be benchmarked to rents paid for outer Sydney, Melbourne and Brisbane, which would result in an increase of 50% to the CRA threshold (pp. 45–46).

Unsurprisingly, ACOSS has expressed dissatisfaction with the size of the increase, arguing that ‘the 15% rise will still leave people on JobSeeker and Youth Allowance renting privately in housing stress because these payments have fallen so far behind basic costs’ (p. 5).

Inflationary effects of CRA increase

One of the criticisms of demand-side housing subsidies like CRA is that they can have inflationary effects, pushing up rents, while not contributing to an increase in affordable housing. Following the CRA increase, some commentators have argued for the imposition of rent caps as a solution to this potential problem.

Based on modelling of the likely effects of raising the CRA maximum rate by 30%, Rachel Ong et al. found that when estimated across all private renter households, such an increase does not have a statistically significant effect on market rents. However, in moderately to severely disadvantaged areas any increase in CRA could be expected to translate into higher rents. This is because in markets with relatively inelastic rental housing supply, any CRA-induced rise in rental housing consumption cannot be adequately met by new housing supply, resulting in increased rents (p. 3).

Ong et al. argue that while some portion of a CRA increase would be shifted into higher rents in severely disadvantaged areas, these effects would not significantly dampen the effectiveness of the increase. This is because many low-income renters in such areas would be paying such low rents that they would fall below the rent thresholds required to qualify for CRA (p. 62).

Need for further changes to CRA

For some time, housing and welfare experts have been calling for changes to be made to CRA arrangements, including increasing the rate at which it is paid, changing its indexation method, and better targeting it to those in need (pp. 12–15). In the context of its recent review of the National Housing and Homelessness Agreement, the Productivity Commission recommended that the Government should ‘review Commonwealth Rent Assistance as a priority. There is a strong case for changes to improve its adequacy and targeting’ (p. 2).

Energy bill relief

The Budget includes funding for the Energy Price Relief Plan announced in December 2022. Part of this measure includes $1.5 billion to establish an Energy Bill Relief Fund that will provide energy rebates to some concession card holders and Family Tax Benefit recipients, as well as some small businesses (p. 86). State and territory governments will match the Commonwealth’s funding for the fund and will administer the energy rebates.

The amount of the rebate and the timing differs by state and territory due to differences in existing rebates and tariff schemes (Table 1). According to the Minister for Climate Change and Energy, Chris Bowen, the assistance delivered through the Energy Bill Relief Fund is conditional on it being in addition to existing support provided by state and territory governments. More than 5 million households and 1 million small businesses are expected to benefit.

Table 1 Energy Bill Relief for households; value and timing by jurisdiction

State/territory	Total value of bill relief (per household)	Timing
ACT	$175	Quarterly in 2023–24
NSW	$500	Quarterly in 2023–24
NT	$350	Quarterly in 2023–24
Qld	$500	Quarterly in 2023–24
SA	$500	Quarterly in 2023–24
Tas	$500	Bills in September and September and June quarters of 2023–24 and 2024–25
Vic	$250	In instalments in 2023–24
WA	$350	With bills in July and December 2023

Source: ‘Energy Bill Relief for Households’, Department of Climate Change, Energy, the Environment and Water.

To be eligible for the household bill relief, an individual needs to be an electricity account holder who receives an eligible government payment or holds an eligible concession card. Eligibility varies by state and territory but all holders of a Pensioner Concession Card, Health Care Card, Commonwealth Seniors Health Card, Veterans Gold Card, and all recipients of Carers Allowance or Family Tax Benefit, are eligible. The Energy Bill Relief Fund supports a broader range of households than most existing state and territory energy rebate schemes. Some middle-income households will benefit from the measure – for example, a family with 3 teenage children and a combined income of $140,000 per year can be eligible for some Family Tax Benefit and therefore eligible for a rebate (p. 3).

ACOSS described the measure as ‘welcome relief’, but was disappointed that the plan was not better targeted to provide the most relief to people on the lowest incomes.

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