The business case for raising Newstart

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October 24 2019
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Raising Newstart would have the benefit of reducing the poverty gap for unemployed people and giving them better resource to find work while also having a positive flow-on effect for the national economy, according to new research.

The University of Adelaide has outlined that the sector of underemployed and unemployed Aussies are causing significant drag on the economy, with a lack of rewarding work resulting in a reduction in household consumption and consumer confidence.

An increase in the Newstart Allowance (NSA), deployed alongside a variety of other schemes, including sponsored work and training, would see more people able to access lucrative and rewarding work, which would ultimately benefit the economy, it found.

The research considered that in the long term, this would not only benefit the economy but consequently reduce the reliance on services such as the NSA.

The university indicated that the NSA is no longer substantial enough for jobseekers to subsist on due to the Howard government’s decision to benchmark NSA to inflation rather than wages.

The ratio of NSA to federal minimum wage (FMW) is now only 37.5 per cent.

“If the relativities between Newstart and average weekly earnings had stayed the same, the Newstart allowance would now be $347 and $356 per week for males and females, respectively, compared with the current rate of $278 a week,” associate professor of economics at the University of Adelaide Michael O’Neil outlined.

Underemployment and unemployment also mean a loss of human capital, a decrease in tax revenue, and an intensification of social problems.

“An increase of between $80 and $120 per week would be justified on the basis of equity for the recipients and in reducing the poverty gap many Newstart recipients face, while it would also help the unemployed to be better resourced for finding paid employment,” Professor O’Neil continued.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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