2.1
Since the beginning of the COVID-19 pandemic, the Australian Government has introduced measures to support individuals in receipt of income support payments as part of a broader suite of temporary measures designed to provide direct emergency support to individuals, families, businesses and the economy during this difficult and unprecedented time.
2.2
In announcing the new permanent measures contained in the Social Services Legislation Amendment (Strengthening Income Support) Bill 2021 (bill), the Prime Minister explained that:
The actions we have taken this year successfully cushioned us against the impact of the pandemic and mean that we no longer need to rely on the emergency supports which have sustained us over the past 12 months. Now is the time to set our nation up for the future and build on our successes which will see Australians once again emerge stronger, safer and together.
2.3
The bill seeks to strengthen Australia's social security safety net through permanent increases to working age income support payments and income free areas, and provides for a further extension of some temporary measures until 30 June 2021.
2.4
The committee received evidence from a range of organisations about the provisions of the bill. The views expressed largely related to the permanent increase to working age income support payments and the income free area.
Permanent increase to working age payments
2.5
As outlined in Chapter 1, Part 1 of the bill allows for the permanent increase of the base rate of working age income support payments by $50 per fortnight from 1 April 2021, following the cessation of the temporary coronavirus supplement payment.
2.6
Submissions to the inquiry expressed significant support for raising the base rate of working age income support payments above the current rate and submitters observed that this is the largest permanent increase to working age income support payments in Australia in 35 years.
Adequacy of new rate
2.7
A common theme in submissions was the concern that the new base rates of working age income support proposed in the bill – equivalent to around $44 per day for jobseeker payment and $36 per day for youth allowance – sit below some measures of income poverty and may not be adequate to meet the ongoing needs of income support recipients.
2.8
Consumers Health Forum of Australia, Public Health Association of Australia, UnitingCare Australia and others described that the pre-pandemic rate of working age income support had contributed to poverty, poor health, food insecurity, housing stress and homelessness, and acted as a barrier to employment due to these stresses. Submitters also cited the Senate Community Affairs References Committee's inquiry into the adequacy of Newstart and related payments, which considered this matter in depth.
2.9
Some submissions noted that, with the cessation of temporary measures like that coronavirus supplement, the permanent increase to the base rate of jobseeker represents an effective reduction in income for current recipients of support payments.
2.10
The Australian Council of Social Service and several social services providers reported that reductions in the rate of the coronavirus supplement over past months had led to some people forgoing essentials, as well an observable increase in demand for charity support, and raised concerns that the bill could have a similar impact.
2.11
For these reasons, submitters advocated for a higher increase to the base rate than the $50 per fortnight provided in the bill, with common proposals for alternative increases including:
$200 per fortnight, to bring the rate to a similar level relative to full-time wages as it was in 1994;
$350 per fortnight, to bring the rate to 50 per cent of median income, a common measure of income poverty, and into line with the rate of age and disability support pensions; and
$550 per fortnight, equivalent to the current jobseeker payment rate plus the initial $550 rate of the temporary coronavirus supplement.
2.12
The Social Services Minister, Senator the Hon Anne Ruston described that in determining the new increased rate, the Australian Government has:
… made sure that … we have balanced [support for recipients], incentive to work and making sure we have a sustainable welfare system into the future so that not only today but into the future we will have a system that can continue to support people who need it.
2.13
The base rate is also not the only income payment that people on jobseeker and other working age payments receive, as the Prime Minister explained when announcing the increase:
There's Commonwealth rent assistance, there's energy supplements. There's a range of other payments which increases the amount someone will receive on a fortnightly basis by more than $150 extra per fortnight because of those additional supports. That’s our social safety net.
Indexation
2.14
Under current arrangements, working age income support payments are adjusted in line with the consumer price index (CPI) twice each year. As outlined in Chapter 1, base rates will continue be indexed in accordance with this practice following the permanent increase.
2.15
Some submitters proposed that the bill should be amended to adjust the indexation method for working age support payments to match the method used for pensions, which are indexed by the greater increase in either CPI or the Pensioner and Beneficiary Living Cost Index and then 'benchmarked' against average wages.
2.16
Per Capita and other submitters noted that indexing working age payments in line with wages, which have historically grown at a faster rate than CPI, would prevent a gradual reduction in the real value of those payments and therefore ensure support recipients' standard of living would not fall behind that of other Australians over time.
Permanent increase in income free area
2.17
As outlined in Chapter 1, Part 4 of the bill provides for a permanent increase of the ordinary income free area for jobseeker and youth allowance (other) to $150 from 1 April 2021, sets the taper rates for income over that amount, and provides that the amount will no longer be indexed.
2.18
Submitters broadly welcomed the permanent increase of the income free area to $150 per fortnight.
2.19
However, some noted that the permanent increase is an effective decrease from the temporary threshold of $300 in place since 25 September 2020. The Brotherhood of St Laurence and others noted that, for an income support recipient who earns $300 in a fortnight, the change to an income free area of $150 will result in a loss of $40 per week.
2.20
Submitters also argued that the proposed change to remove indexation from the income free area would cause its real value to decline over time.
2.21
In introducing the bill, the Hon Stuart Robert MP noted that these changes encourage workplace participation while ensuring that the welfare system will be fiscally sustainable. He described that the increase to the income free area will allow:
… people to keep more of what they earn as they reconnect with the labour market, and encourage recipients to take the first step into employment without impacting their payments.
Extensions to temporary measures
2.22
Submitters supported the further extensions to 30 June 2021 for temporary eligibility measures including qualification criteria for jobseeker payment and youth allowance (other), the ordinary waiting period waiver, and the portability period for recipients of age and disability support pensions unable to travel due to the coronavirus pandemic.
2.23
Anticipating that some impacts of the pandemic, including difficulties relating to international travel, may continue past 1 July 2021, several submitters called for the qualifications criteria and portability period to be extended indefinitely.
2.24
Several submitters also recommended the permanent removal of the seven-day ordinary waiting period from the Social Security Act, rather than the extension to the temporary waiver proposed in the bill.
Other matters raised
2.25
Some submitters also raised other matters related to the income support system, outside of the scope of the current bill, including:
proposals for increases to the rate of Commonwealth rent assistance and other supplementary payments for income support recipients;
calls for the permanent removal of liquid assets test waiting period, which was reinstated in September 2020 after a temporary suspension at the start of the pandemic;
recommendations for a reduction of the newly arrived residents waiting period; and
concerns about the new mutual obligations requirements for jobseekers announced on 23 February 2021.
Conclusion
2.26
Income support is an important element of the social security safety net to support individuals who are unable to support themselves through work, savings, or other means. Income support for unemployed people in Australia does not function as a wage replacement or as part of contributory schemes, as it is the case in other countries. Accordingly, the jobseeker payment and related payments are set at a rate in recognition of their role as a safety net payment and consistent with policies that encourage seeking out and maintaining paid employment.
2.27
Throughout the COVID-19 pandemic, the government acted decisively to respond to this once-in-a-lifetime disruption to the labour market, making temporary changes to Australia’s social security safety net to provide additional support and assistance to Australians impacted by this unprecedented crisis. This included the introduction of the coronavirus supplement and expanded access to jobseeker payment and related payments. This demonstrated how flexible existing systems are, and how the social security system is able to provide targeted and enhanced support to Australians in time of crisis.
2.28
As the economy and the job market continue to recover and strengthen, the government is ending the temporary measures put in place during the pandemic. Now is the time to focus on job creation and having the right incentives to ensure people are ready to take those jobs. In addition to providing employment opportunities through new initiatives, the government is strengthening the income support system through this bill's permanent increase to working age payments to over 1.95 million Australians.
2.29
The $50 per fortnight increase is the largest increase to working-age support payments in more than 35 years. The committee notes that the permanent increase represents a cost of an additional $9 billion to the social security and welfare budget across forward estimates, accounting for around a third of all government spending. The government’s budget commitment to social security demonstrates the scope and scale of taxpayer funded assistance provided to the Australian community.
2.30
Importantly, the committee is of the view that the taxpayer-funded increase of $50 to income support payments balances the need to ensure payments encourage and enable workforce participation with the need for the welfare system to be fiscally sustainable for future generations. In addition, the bill will raise the threshold before benefits start to taper off, enabling recipients to earn more before their payments are decreased. This provides the right balance of supports and encouraged people to engage in the workforce.
2.31
The committee notes that the bill extends some temporary measures put in place during the pandemic, recognising that travel restrictions and need to self-isolate might still occur as the world emerges from the crisis. This includes extension of the waiver of the ordinary waiting period, expanded access to payments for persons having to self-isolate or care for someone who is self-isolating due to the pandemic, and the portability period for certain age pensioners and recipients of the disability support pension until 30 June 2021.
2.32
The committee considers that the provisions of this bill will further strengthen the income support system in a fair and sustainable way. Importantly, this bill is part of a broader suite of measures aimed at ensuring Australians are supported to engage with the workforce.
2.33
The committee recommends that the bill be passed.
Senator Wendy Askew
Chair