7.1
While submitters called for an immediate increase to Newstart and related payments, the evidence received by the committee also highlighted the need for a major reform of the social security system to ensure the income support payment system provides an adequate safety net for working-age unemployed people.
7.2
Inquiry participants put forward recommendations and suggestions on how to approach a reform of the system, set and review payment rates and ensure that people on income support payments do not live in poverty.
7.3
This chapter first discusses previous reviews of the tax and income support system and overseas examples, which provide some guidance around methodologies that could be considered for reforming the income support system.
7.4
Then, the chapter explores the evidence the committee received in relation to key principles that should underpin the design of an adequate system to support working-age unemployed people.
7.5
Importantly, the chapter also discusses the need for a robust review mechanism to ensure that payments remain adequate overtime. It also reviews the budgetary implications of increasing the JobSeeker and Youth Allowance payments and potential economic benefits of an increase for the Australian economy.
7.6
The chapter ends with the committee's concluding comments and final recommendations.
Past reviews
7.7
Submitters referred to a number of reviews of the tax and income support system suggesting methodologies that could be used to review the level of payments for working-age jobseekers. They also highlighted the findings of these reviews, which indicated the need for increasing and reviewing Newstart payment rates.
7.8
While Mr Nathan Williamson, Deputy Secretary, Social Security at the Department of Social Services (DSS) informed the committee DSS had not been asked to investigate poverty or an increase of Newstart, he reminded the committee that reviews under different governments, including the Henry, the Harmer and McClure reviews had looked at issues around poverty, financial hardship, and budget standards.
Henry Review
7.9
The Australia's Future Tax System Review (Henry Review) was established by the Rudd Government in 2008 to examine Australia's tax and transfer system. In 2010, the Australian Government released the final report and its initial response.
7.10
The financial problems faced by the working-age unemployed were recognised by the Henry Review, which highlighted the need for a principles-based approach to setting payment levels.
7.11
The Henry Review recommended an increase to the base rates for single income support recipients on Newstart.
7.12
The Henry Review also recommended that the maximum rate of rent assistance should be increased and should be indexed by movements in national rents.
Harmer Review
7.13
As a component of the Henry Review, Dr Harmer also investigated measures to strengthen the financial security of seniors, carers and people with disability. The Pensions Review report (Harmer Review) was completed in February 2009.
7.14
In their joint submission, Professor Peter Whiteford and his colleagues stated that the Harmer Review provides a good model for an inquiry into the adequacy of Newstart because of its approach:
That Review's approach to adequacy was to test whether 'current rates of pension are providing a basic acceptable standard of living, accounting for prevailing community standards'.
7.15
The review looked at a wide range of potential standards to assess the adequacy of the pension rates, including:
Male Total Average Weekly Earnings (MTAWE);
median full-time earnings;
the Henderson Poverty Line;
a relative poverty line set at a fraction of median household income; and
some form of 'budget standard'.
7.16
The Harmer Review also looked at how the level of payments compared to similar payments in other high-income OECD economies.
7.17
The outcome of the Harmer Review was one of the largest pension increases in history.
7.18
In their submission, Professor Peter Whiteford and his colleagues noted that the increase in pension rates widened the gap between the pension rates and the allowances paid to the unemployed.
McClure review
7.19
In 2013 the Minister for Social Services, Kevin Andrews, commissioned a review of the welfare system and appointed the Reference Group on Welfare Reform chaired by Patrick McClure. The Reference Group's final report was released in February 2015. Key findings included:
the social security system needs major reform to deliver better outcomes;
the system is too complex and difficult;
the system lacks coherence;
the system should be re-designed to meet future economic and social challenges.
7.20
The Reference Group recommended an integrated approach based on four pillars of reform:
a simpler and sustainable income support system;
strengthening individual and family capability;
engaging with employers; and
building community capacity.
7.21
The Reference Group noted that differences in indexation adjustments between allowances and pensions had led to a growing gap in payment rates. It recommended a twin-tracked approach to payment adjustments across all income support payments:
a community living standards adjustment following a periodic review (at least every four years) undertaken by a panel of experts; and
an automatic cost-of-living adjustment every six months, following a process to determine the most appropriate cost of living index for the new payment architecture .
7.22
It also acknowledged that Newstart Allowance was no longer restricted to recipients who needed the payment for only a short period and were likely to move into full-time work. It acknowledged that policy changes to DSP and Parenting Payment, along with economic condition had increased the average time spent on Newstart.
Overseas jurisdictions
7.23
As outlined in chapter 1, comparisons between Australian allowances for the unemployed and those in other OECD countries are complicated by the fact that most other countries have contributory social-insurance systems. This means that those unemployed for a short period receive benefits that are a percentage of their past earnings. These systems tend to have higher assistance during shorter periods of unemployment, but often drop for the long-term unemployed. In Australia, in contrast the unemployed receive the same level of payment for as long as they continue to be eligible.
7.24
Professor Peter Whiteford and his colleagues noted that Newstart combined with the Commonwealth Rent Assistance, is the lowest payment in the OECD for the short-term unemployed:
We [Australia] replace about 39 per cent of the previous net wage, but on average high-income countries replace 68 per cent of the previous net wage of these workers.
7.25
Professor Whiteford and his colleagues reported that when looking at payments to long-term unemployed jobseekers, using the example of someone unemployed for five years, Australia does improve its ranking considerably among OECD countries:
In some countries there are no benefits for the long-term unemployed and in the United States they drop to negligible levels. But Australia is just below the OECD average – hardly the best safety net in the world.
Whakamana Tāngata – Restoring dignity to social security in New Zealand
7.26
At a public hearing in Perth, Mr Chris Twomey, Leader, Policy and Research at WACOSS, talked about the need to reform the social security system and made references to the work of the New Zealand Welfare Expert Advisory Group, which reviewed the future of New Zealand's welfare system.
7.27
Brotherhood of St Laurence also mentioned New Zealand's review of its welfare system as one of the examples from overseas that can be drawn upon.
7.28
In May 2018, the New Zealand Minister for Social Development announced the establishment of a Welfare Expert Advisory Group to undertake a broad-ranging review of the welfare system and advise the Government on the future of New Zealand’s welfare system.
7.29
The review's report was released in February 2019 and made 42 recommendations, which 'seek to embed a new basis for social security, restoring trust in the system and enabling whakamana tāngata, to ensure people can live in dignity'.
7.30
The review proposes that adopting this approach will lift outcomes for Māori and others who are particularly adversely affected by the current system. The recommendations made in the report are wide ranging and include:
making income support adequate for meaningful participation in the community, and maintaining it over time;
making the income support system easy to access and able to provide timely support, including to people transitioning in and out of the system;
urgently expanding and accelerating Government efforts to substantially increase public housing on an industrial scale and continuing urgent efforts to end homelessness;
establishing an effective employment service the Ministry of Social Development is better able to assist people to obtain and keep good, sustainable work; and
improving the health and wellbeing of people with health conditions and disabilities, along with carers of people with health conditions and disabilities who interact with the welfare system.
Social Security Scotland
7.31
Good Shepherd Australia New Zealand suggested as a potential model to reform the income support payment system, the mechanism and principles used by the Scottish Government, especially in relation to regular provision of advice to Parliament.
7.32
In 2018, the Scottish Government started to reform its social security system to deliver benefits in a more positive and supportive way. The reform is based on the fact that social security is a human right. The eight principles that underpin the new system are:
social security is an investment in the people of Scotland;
social security is itself a human right and essential to the realisation of other human rights;
the delivery of social security is a public service;
respect for the dignity of individuals is to be at the heart of the Scottish social security system;
the Scottish social security system is to contribute to reducing poverty in Scotland;
the Scottish social security system is to be designed with the people of Scotland and on the basis of evidence;
opportunities are to be sought to continuously improve the Scottish social security system in ways that put the needs of those who require assistance first, and advance equality and non-discrimination; and
the Scottish social security system is to be efficient and deliver value for money.
7.33
A Charter taking these principles and explaining what they mean in practice was created by people with lived experience of social security, advocacy groups and organisations in the community sectors, and the Scottish Government and Social Security staff.
7.34
To ensure accountability to the Charter, the Scottish Commission on Social Security consisting of an independent group of experts, provides reports to the Scottish Parliament to ensure the commitments of the Charter are being delivered.
7.35
In its submission, the Brotherhood of St Laurence also mentioned the Charter, noting the emphasis on dignity and respect in its principles.
Key principles for reforming the income support system
7.36
Many submitters indicated that a broader reform of the social security system is needed. The following sections explore the key principles identified by submitters that should underpin future reforms.
Simple and accessible system
7.37
Mr David Stanton, from the Crawford School of Public Policy at ANU, appeared in a private capacity at a public hearing in Canberra and told the committee that the social security system has become 'incredibly complex' and argued that a return to a much simpler system should be considered to ensure people access the payments they are entitled to:
[…] simplicity brings ease of understanding and clarity of objectives. Complexity makes it very difficult for people to understand what they're entitled to. You can have take-up issues where people don't get the payments for which they're entitled and there is a confused set of relationships within the system.
7.38
Similarly, WACOSS suggested that the social security system should be reformed in a way that ensures support is easy to access.
7.39
The Australian Council of Trade Unions also suggested a simpler system, citing the 2018 OECD Jobs Strategy, which argues that excessive bureaucratic hurdles for access to unemployment benefits and excessive monitoring of mutual obligation requirements can be counterproductive for activating job seekers.
7.40
Community Industry Group also noted that access to income support is unnecessarily complex and prohibitive and recommended the system be streamlined.
7.41
Similarly, the National Foundation for Australian Women contended that 'changes to the system over time have led to unintended complexities, inconsistencies and incoherencies'.
7.42
Reverend Professor Peter Sandeman, Chief Executive Officer at Anglicare SA, reminded the committee that the McClure reviews suggested 'consolidation and simplification of all the payment systems', and added:
Going back to McClure 1 and 2 and looking at simplification of the systems would be a good thing to do. When we did provide that report [McClure review in 2000] way back when, we actually had bipartisan—in fact, tri-partisan—support. It's an idea that I think goes across parliament to support such a thing. It's difficult to do, but it's very important to do it.
A system based on people's needs
7.43
As discussed in chapter 6 of this report, submitters noted that Newstart in its design and intent is not suitable to support a range of jobseekers that may require long-term income support for reasons such as medical conditions, caring responsibilities or labour market circumstances.
7.44
The Business Council of Australia argued that 'Australia needs a welfare system that better reflects people's capacity to work' and that applies consistent principles across the system.
7.45
ACOSS referred the committee to its 2014 submission to the McClure Review, which argued that the system of social security payments for people of working age should be based on financial need rather than work capacity or future employment prospects.
7.46
Brotherhood of St Laurence expressed the view that the social security system needs to be equitable and recognises that people have different needs depending on their age, gender, health and circumstances.
7.47
Professor Whiteford and his colleagues noted that 'while it is true that people are better off in work, government economic policy assumes there be an ongoing level of unemployment' and concluded:
This emphasises the importance of income support that is enduringly adequate and fair.
Payments linked to community living standards
7.48
As discussed throughout this report, submitters expressed grave concerns about the current levels of payment rates for working-age jobseekers as these payments do not provide an acceptable minimum standard of living.
7.49
As outlined in chapter 2, submitters recommended an increase in payment rates to lift people out of poverty, restore fairness and equity, and provide an acceptable minimum standard of living for those unable to work.
7.50
In essence, submitters stressed the need for adequate payments to prevent poverty and enable economic and social participation.
7.51
For example, KPMG emphasised the need to link payments to a community standard.
7.52
Issues around defining what constitutes a minimum acceptable standard of living and proposals in relation to set payments rates have been discussed in chapter 2. Proposed increases to payment rates are further discussed later in this chapter.
7.53
Submitters stressed that for payments to remain linked to community living standards, there is a need for the adoption of an adequate mechanism to regularly index payments.
Indexation arrangements linked to costs of living
7.54
Newstart and other allowance are indexed to movements in the Consumer Price Index (CPI).
7.55
The CPI is intended to track changes in the cost of living and includes 11 major groups of expenses, including discretionary costs such as clothes, recreation, culture, alcohol and tobacco.
7.56
Good Shepherd Australia New Zealand explained that the CPI 'basket of goods' identifies an average cost increase, but fails to differentiate between essential services such as rent, food or utilities from discretionary costs such as clothes and leisure pursuits. As a consequence, Good Shepherd Australia New Zealand argued that it unfairly disadvantages people on income support and more specific calculations are needed to reflect the impact of price rises on income support recipients.
7.57
ACOSS explained that pensions are indexed to wage movements as well as two consumer price indices, the CPI and the Pensioner and Beneficiary Living Cost Index, meaning that pension indexation reflects movements in productivity growth and living standards.
7.58
Submitters argued that indexing Newstart and related payments to the CPI alone is not adequate and that the lack of indexation of these payments to wage movements is a major cause of the growing impoverishment of people on Newstart.
7.59
For example, at a hearing in Sydney, Mr Grant Wardell-Johnson, Lead Tax Partner, Economics and Tax Centre at KPMG discussed the inadequacy of an indexation to the CPI and told the committee:
I think there is a document that's been produced by the Australian parliament that says that, if you take the unemployment benefit as it existed in 1945 and you increase it by CPI, you get to $90 per week. That's obviously so logically ridiculous that you need another index rather than CPI.
7.60
Submitters recommended that Newstart and related payments should be indexed to wage movements.
7.61
Per Capita submitted that the approach to setting the rate of Newstart be brought into line with the approach taken to set the pensions, and indexed to the MTAWE.
7.62
In their submission, Professor Peter Whiteford and his colleagues recommended that a transparent system of indexation and benchmarking be established to ensure that the relative value of differing income support payments is broadly maintained over time.
7.63
ACOSS specifically recommended:
Allowances should be indexed twice per year to movements in a standard Australian Bureau of Statistics measure of wage levels (before tax), as well as movements in the Consumer Price Index (whichever is higher).
An effective review mechanism
7.64
Submitters stressed that a robust and transparent review mechanism should be in place to periodically assess the adequacy of the income support system and payments.
7.65
Submitters were of the view that the body responsible for setting and reviewing the income support payment rates should be independent and apolitical.
An independent commission charged with reviewing and setting up income support payments
7.66
Submitters noted that bodies such as the Fair Work Commission and Remuneration Tribunal successfully and independently carryout reviews around wages and payments.
7.67
For example, the Remuneration Tribunal which reviews annually the remuneration of members of Parliament was established to ensure clarity, transparency and efficiency in parliamentary entitlements.
7.68
Some submitters suggested that responsibility for setting income support rates should be removed from government (and politics) and be placed in the hands of an independent tribunal or commission, not dissimilar to the setup of the Fair Work Commission of the Remuneration Tribunal.
7.69
However, inquiry participants noted that because social security payments is an area of significant expenditure for the federal government, it would be unlikely that the major political parties would consider relinquishing control over the setting and reviewing of income support payments.
7.70
For example, Per Capita stated:
[…] relinquishing control of this spending would fundamentally undermine the ability of an elected government to control the federal budget.
7.71
Instead, submitters saw the establishment of an independent body providing advice to Parliament and / or to government as an appropriate instrument to conduct regular review of social security policies and payments.
An independent body providing advice to government
7.72
Most submitters expressed the view that an independent body should be established to provide expert advice to Parliament about the setting of social security payments.
7.73
ACOSS argued that an independent body to advise the parliament would 'enable a fairer approach to social security design' and 'would ensure that evidence guides payment design and reform'.
7.74
Ms Susan Tilley, Manager, Aboriginal Policy and Advocacy at Uniting Communities, also stressed the need for evidence-based and independent advice:
We need someone outside of government to look at the evidence and data and come up with baselines and decent rates that people can live on.
7.75
Submitters indicated that the independent body should not only advise parliament on payment rates but also on eligibility criteria, accessibility (waiting periods) and indexation.
7.76
Good Shepherd Australia New Zealand supported the recommendation of the establishment of an independent body and cited the Scottish Commission on Social Security, which provides reports to the Parliament on whether their Social Security Charter is being upheld, as a good model for Australia.
7.77
Jobs Australia is of the view that establishing an independent commission to provide advice to Parliament would 'take the obfuscation out of the debate and provide focus on achieving bipartisan goals of social security policy' aimed at 'assisting jobseekers to find work, maximising wellbeing within the community, stimulating the economy whilst maintaining a fiscally prudent approach to government spending'.
7.78
Specifically, ACOSS recommended:
A Social Security Commission should be established by legislation to provide independent expert advice to the Parliament about the setting of social security payment rates (including income support, family payments other supplements) and cover adequacy, means test settings, indexation, and accessibility (including waiting periods).
7.79
In their submissions, many submitters mentioned that they fully supported ACOSS' proposal and recommendation around the establishment and mandate of a Social Security Commission.
7.80
However, ACOSS stressed that it is not necessary to wait for such a commission to be established to deliver on 'the urgent, immediate increase to Newstart, Youth Allowance and related allowances'.
Economic impacts
7.81
The positive impacts of increasing the payment rates for working-age unemployed people have been discussed throughout the report. This chapter focuses on looking at the financial impacts on the Federal budget of raising the payment rates as well as the economic benefits.
Budget implications of changes
7.82
As briefly discussed in chapter 2, all submitters recommended an increase to Newstart and related payments. Some submitters put forward recommended amounts for increasing Newstart and related payments as well as supplements.
ACOSS proposal – Raise the rate campaign
7.83
At the time of lodging its submission in October 2019, ACOSS recommended an increase of $75 per week to Newstart and related payments and a 30 per cent increase to the Commonwealth Rent Assistance (CRA). This proposal was supported by many submitters.
7.84
In 2018, the proposed increase of $75 per week (with indexation based on wage and price movements) to the maximum rates of Newstart, Youth Allowance and related payments for single recipients was costed at $3.3 billion per year by Deloitte Access Economics.
7.85
In February 2020, ACOSS sent a supplementary submission to the committee, to update the recommended increase to the single rate of Newstart and related allowances. ACOSS now recommends that the single rate of Newstart and related payments be increased by a minimum of $95 per week alongside a 30 per cent increase to the CRA ($20 per week).
7.86
ACOSS explained it calculated the $95 per week figure by indexing the 2016 Minimum Income for Healthy Living (MIHL) standard (developed by UNSW's Social Policy Research Centre) to the Median Full Time Non-Managerial Total Earnings wage index. This indexation shows that a single person who is unemployed now needs $460 per week to cover basic costs.
7.87
To calculate the gap between what people receive and what they need, ACOSS subtracted the total income support payments received by a single person who was unemployed and renting privately from the $460 figure and found a gap of $115. ACOSS then subtracted from $115 the $20 per week increase to the CRA to get the revised base rate increase of $95 per week.
7.88
According to ACOSS, the revised costing is $3.8 billion per year. Additionally, according to ACOSS, a 30 per cent increase to the CRA would cost $800 million per year.
Other proposals
7.89
Some other submitters proposed alternate amounts for an increase in payment rates without providing costings. These proposals point to the need for a similar or a higher increase than the 2020 ACOSS proposal of an increase of $95 to the Jobseeker rate and $20 to the CRA.
7.90
In chapter 2, based on the evidence it had received, the committee expressed the view that the income support system should ensure that all eligible income support recipients do not live below the OECD relative measure of poverty. To gage the level of overall payments needed to ensure people do not live in poverty, the committee commissioned the Parliamentary Budget Office (PBO) to produce costings based on a single person receiving the maximum rates of Newstart.
Setting payment rates using the OECD relative measure of poverty
7.91
According to the PBO costing, a fortnightly income of at least $1012 per fortnight ($506 per week) is required to ensure an income support recipient does not live below the OECD relative measure of poverty.
7.92
The increase in the JobSeeker Payment does not take into account supplement payments income support recipients may currently receive. Payment adjustments would need to be made to reflect other potential sources of incomes.
7.93
The PBO has estimated that the increase of the JobSeeker Payment would represent in the first year of implementation an increase of about 4.2 per cent in the social security and welfare budget. It would result in the social security and welfare budget going from representing 36.2 per cent of the total federal budget to 37.2 per cent.
7.94
By comparison, according to the PBO, implementation of the ACOSS proposal of an increase of $95 per week and a 30 per cent increase to the CRA would result in the social security and welfare budget representing 36.8 per cent of the total federal budget.
Economic stimulus
7.95
As previously mentioned in this report, submitters are of the view that an increase to income support payments would stimulate the economy. For example, WACOSS explained:
When those on the lowest incomes see an increase in their disposable income, they spend it on much-needed essential goods and services, typically locally, providing an injection of activity into the economy of their community.
7.96
Per Capita is of the view that increasing income support payments to unemployed workers will act as a 'well targeted employment creation stimulus' because people will spend the money in their local communities, particularly on food and clothing'.
7.97
In 2018, Deloitte Access Economics, at the time of the proposal of a $75 increase to the Newstart rate, projected that the increase would result in the creation of at least 12,000 extra jobs.
7.98
The Reserve Bank of Australia stated that in the short-term, providing people on low-incomes with a boost to their income would be an effective stimulus for the economy because such households would most likely spend the extra dollars.
7.99
Uniting Communities noted that the argument of increasing the rate of Newstart to stimulate the economy is supported not only by the Governor of the Reserve Bank, but also by key economists, and some liberal and national politicians.
7.100
In their submission, Professor Peter Whiteford and his colleagues emphasised that 'the social security system is an important element of economic policy in stabilising household incomes during periods of economic downturns'.
7.101
The Wyatt Trust argued that, unlike lowering income tax and business tax, the economic activity generated by increasing the rate of Newstart is likely to be on local Australian products and businesses.
7.102
At a public hearing in Canberra in February 2020, the Treasury advised the committee that it had not been asked to provide advice on the economic impact of an increase to Newstart payment rates.
7.103
Importantly, as discussed throughout the report, submitters highlighted the other key benefits of an increase in payment rates, including enabling people to live in dignity, improving their health and wellbeing and employment prospects.
Economic response to the coronavirus
7.104
On 22 March 2020, as part of its economic response to the coronavirus, the Australian Government announced it would temporarily expand eligibility to income support payments and establish a new, time-limited Coronavirus Supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients of the eligible payment categories. These changes will apply for a period of six months, starting from 27 April 2020.
7.105
The income support payment categories eligible to receive the Coronavirus Supplement are:
Youth Allowance Jobseeker;
Parenting Payment (Partnered and Single);
Farm Household Allowance; and
Special Benefit recipients.
7.106
Anyone who is eligible for the Coronavirus supplement will receive the full rate of the supplement of $550 per fortnight.
Expanded and faster access
7.107
For the period of the Coronavirus supplement, there will be expanded and faster access to income support through a range of measures including:
accelerated claim process; and
streamlined application process.
Flexible jobseeking arrangements
7.108
While those receiving the JobSeeker Payment have an obligation to actively look for work or build their skills, the mutual obligation requirements have been changed for the period to allow more flexibility. This includes exemption from mutual obligations for those who have caring responsibilities or who need to self-isolate.
7.109
Mutual obligation requirements for JobSeeker Payment, Youth Allowance (jobseeker) and Parenting Payment have been suspended until 27 April 2020 with the possibility of this measure to be further extended.
7.110
Sole traders that become eligible for the JobSeeker payment will automatically meet their mutual obligation requirements during this period by continuing to develop and sustain their business.
Committee view
7.111
The evidence discussed throughout this report clearly indicates that the payment rates for jobseekers do not support an acceptable minimum standard of living. This situation is far from new. As pointed out at the beginning of this chapter, previous reviews of the income and tax system, including the Henry Review undertaken over 10 years ago, identified the need to increase the rates of payments available to working-age unemployed income support recipients, as well as the rates of supplements, such as the CRA. These reviews also clearly identified some serious flaws in the policy design of the system to support unemployed working-age people. These included a lack of coherent principles to set payment levels, an inadequate mechanism to index allowances, and the system's complexity and incapacity to respond to people's needs and circumstances. The committee agrees with these findings. The committee notes that the findings of these reviews have been mostly ignored by the governments that commissioned them.
7.112
Importantly, throughout this inquiry, the committee heard evidence from people on Newstart and related payments that clearly exposes systemic deficiencies in the current income support system. The system is patently inadequate to provide adequate support to the unemployed to live and find employment. In particular, the system fails to be an enabler for economic participation for the long-term unemployed.
7.113
The committee agrees with submitters that the social security system needs major reforms to ensure it better responds to people's needs while supporting economic participation. The committee notes that other jurisdictions, such as New Zealand and Scotland, have undertaken major reforms to their welfare systems to ensure they strongly align with the principle that social security is a human right and that people must live in dignity. The committee encourages the Australian Government to reform the social security system on the basis of this key principle. Respect for the dignity of individuals must be at the heart of our social security system.
7.114
The committee considers that a review of the social security system should be underpinned by a series of principles, including:
social security is a human right;
social security is an investment in people;
social security is to reduce poverty;
respect and dignity of the individual is at the heart of the social security system.
7.115
A review of the social security system should provide advice to the Parliament on how to ensure the income support system:
is based on people's needs;
genuinely supports economic participation;
is agile and able to respond to future economic and social challenges, especially those related to the changing nature of work;
that payments are linked to community living standards and are adequately indexed; and
does not allow people to fall below the OECD relative measure of poverty.
7.116
The committee is cognisant of the limitations of government-led reviews. As such, the committee sees value in setting up a Social Security System Expert Group led by independent experts. The Social Security System Expert Group would regularly report to Parliament on the adequacy of the system and advise on potential changes to legislation to strengthen the system. Importantly, the Social Security System Expert Group would be first tasked with a comprehensive review of the system to advise Parliament on a set of reforms it must consider in order to achieve better economic and social outcomes for income support recipients.
7.117
The committee recommends the Australian Government establish a Social Security System Expert Group led by independent experts charged with periodically examining the adequacy of the social security system and reporting to Parliament to ensure the Australian Government meets its responsibilities.
7.118
The committee recommends that the Social Security System Expert Group is tasked with a review of the social security system to advise Parliament on how to reform the system to achieve better outcomes and increase economic participation. Such a review would provide advice to Parliament on the following matters:
establishing an appropriate mechanism to establish payment rates for allowances, pensions and supplements;
determining an appropriate benchmark for the indexation of all income support payment rates;
ensuring payments and allowances reflect people's circumstances and needs;
adopting effective models to support people into work;
providing additional support and measures to address entrenched disadvantage and long-term unemployment; and
addressing any other related matters identified by the Social Security System Expert Group.
7.119
The committee acknowledges that the Australian Government is temporarily expanding eligibility to income support payments and has established a new, time-limited Coronavirus Supplement to be paid at a rate of $550 per fortnight for a period of six months starting from 27 April 2020. The committee notes that the temporary Coronavirus Supplement of $550 per fortnight is in effect increasing by approximately 100 percent the payment rate of the JobSeeker Payment and Youth Allowance. This new measure is welcome and will provide immediate relief for working-age jobseekers.
7.120
The PBO advised the committee that a fortnightly income of at least $1012 per fortnight was required to ensure an income support recipient does not live below the OECD relative measure of poverty. The committee notes that the Coronavirus Supplement brings the payments to eligible recipients to an appropriate level of supports that ensures people do not live below the OECD relative measure of poverty. However, this measure is temporary and has not been designed to be in placed beyond the current COVID-19 crisis.
7.121
The committee is of the view that a permanent increase of payment rates is warranted and cannot wait for the outcomes of a comprehensive review of the social security system. The committee urges the Australian Government to increase the JobSeeker Payment, Youth Allowance and Parenting Payment rates once the Coronavirus Supplement phases out. There is no doubt that circumstances will have changed significantly post the COVID-19 crisis. This will need to be taken into account when determining a fair and responsible increase in the JobSeeker Payment, Youth Allowance and Parenting Payment rates.
7.122
The committee recommends that once the Coronavirus Supplement is phased out, the Australian Government increase the JobSeeker Payment, Youth Allowance and Parenting Payment rates to ensure that all eligible recipients do not live in poverty.
Chair