Over the next couple of weeks, we'll be hearing a lot about company and personal income tax cuts. The Turnbull government holds the view that tax relief for companies and middle-income earners is necessary to improve the economic prosperity of Australia, offering a financial hand up to households struggling to pay their bills.
For those on Newstart, though, those same increased costs of living are being all but ignored. It is time to discuss the development of a transparent, consistent process to determine welfare payments like Newstart.
Ken Henry's 2009 report to the Treasurer on Australia's future tax system presented 'a vision of a future tax and transfer system that would position Australia to deal with the demographic, social, economic and environmental challenges of the 21st century and would enhance community wellbeing'.
The Henry review, the most comprehensive analysis of Australia's tax and transfer system in recent times, looked at 'the relationships of the tax system with the transfer payments system and other social support payments, rules and concessions, with a view to improving incentives to work, reducing complexity and maintaining cohesion'.
Henry proposed three types of income support payment: pensions, participation payments and student assistance.
Pensions would be set at an appropriate level for people not expected to work — that level being what would be needed for an adequate standard of living. Participation payments would be less than the pension rate, because government has a legitimate policy objective of encouraging participation in the workplace using both the carrot and the stick.
Student assistance would be less again because students could be expected to engage in some part-time work without too much interference with their studies; and where need be, they could take out a low-interest loan in the expectation that their studies would ultimately contribute to the capacity to earn a higher income.
"It's not as if there is a large cohort of unemployed persons who are without work simply because they do not want to work and because they are in receipt of sufficient welfare payments to live comfortably but frugally."
It is legitimate to provide positive and negative incentives for people to access the labour market, including social security payments lower than those payable to persons who have no prospect of accessing the labour market whether because of age or disability. But it is just plain wrong for governments to keep payments such as Newstart and the Youth Allowance at abysmally low levels, in