ON LINE opinion – Australia’s e-journal of social and political debate
Posted Thursday, 26 May 2005
The 2005-6 Australian Budget pronouncements about disability support pensions and parenting payments are flawed. From July 2006 Australians applying for either of these payments will be drawn into the Howard Government’s mutual obligation quagmire.
Presently, someone applying for a disability support pension has to establish that, because of a permanent incapacity, they are incapable of working 30 hours a week. They are then entitled to a pension for as long as their impairment continues. If they work part-time, their means are evaluated more generously than in the Newstart unemployment payment, allowing them to work full-time during periods when they are well enough to do so.
Currently, a sole parent caring for a child under 16 years and whose income and assets are under the specified amount can obtain a parenting payment. If they work part-time, their means are evaluated more generously than Newstart and it allows them to work full-time for short periods when they don’t have parenting responsibilities.
From July next year, applicants for a disability support pension will, if they are considered capable of working 15 hours a week at award rates, go straight to Newstart. If they are deemed to be incapable of working 15 hours a week at award rates they will be shifted on to the “enhanced” Newstart payment. The “enhancement of Newstart” is simply Orwellian double speak for the abolition of benefit continuity.
And for sole parents, once the youngest child of an applicant for parenting payment turns six, they will be shifted to the “enhanced” Newstart and be required to seek at least 15 hours work a week.
From July next year sole parents living on Howard’s “Animal Farm” with a child over six will be paid $20 less per week than at present, and new applicants for a disability support payment will lose $40 a week compared with present payments. Both sole parents and those with a disability will be subjected to all the subtleties that Centrelink’s “mutual obligation” enforcers can muster.
Because the evaluation of means for Newstart is calculated on fortnightly income and the evaluation of means for the other two payments are calculated over a considerably longer period, shifting sole parents and those with disabilities onto Newstart means they will gain less from any employment they obtain.
The Government has justified these changes on a number of grounds:
The Government needs to explain:
Although many mothers, including sole parents, work more now than two decades ago, it does not mean that all parents should work. There are many reasons why it would be socially disastrous for some sole parents to work once their youngest child turns six. To work or to stay at home to look after children is one of the most difficult decisions that any parent makes. The reality is that in 2005 more Australians are working than ever before, but only 48.5 per cent of the labour force has a permanent full-time job. The rest enjoy all the certainty which casual, part-time and precarious employment provides.
If the Government wants to increase the number of people in the workforce and believes that the differentials in payments between Newstart and disability support pension and parenting payments are causing people to opt for the latter, then there are options more viable than these draconian policies it is implementing. Rather than lowering the rate of payment for disability support pensions and parenting payments, it could raise the level of Newstart to make it commensurate with disability payments. This would combine these payments into a “guaranteed minimum income” (GMI) as Professor Ronald Henderson, head of the Poverty Commission, suggested in 1975.
If such a GMI were installed, there would be no financial advantage accruing to people wishing to “benefit shop”. Presently, for those on Newstart, the combined income tax and social security withdrawal rates applying to income from work are at least 62.5 per cent and can be up to 200 per cent of additional income. This causes poverty traps and perverse financial disincentives to earning extra income. The Government has announced it will slightly decrease the withdrawal rates in July 2006 – but it will by no means eliminate them.
A far smarter idea would be to introduce a basic income paid to all permanent residents at slightly above the single age pension rate. This would abolish poverty traps, income insecurity and perverse financial disincentives simultaneously.
Copyright © 2023 John Tomlinson