By Keith Thomas Davis
Whether you are rich, or poor, the one thing you have in common here in Australia is the fact that you are a Welfare Recipient. The Australian welfare system is a prime example of where the bulk of the sovereign wealth of a nation is distributed to those who need it least, and denied to those who have a demonstrated need of requiring it the most.
The current debate about the raising of Newstart totally blindsides the much bigger conversation that is assiduously avoided by both of our major political parties, and by the bulk of Australians who are the recipients of government welfare largess.
This article has not been written to attract a quick ‘Click’. It has been written to start a very sharp conversation about how disadvantaged welfare recipients are treated in this country. It has been written to expose the inherent unfairness underwriting our system of welfare, and it proposes an alternative to a welfare system that damns and demonises and punishes those who are in no position to protect themselves.
Our current Welfare System is not fit for purpose. It favours the rich and the comfortably off with generous tax breaks and concessions and facilities such as negative gearing (yes, those are an absolute form of gifted welfare), and it punishes the poor and unemployed by keeping them well below the poverty line via the government’s purposefully engineered low level of the Newstart Allowance. We have a welfare system that systematically fails the very people it is supposedly there to support.
If you have never been unemployed or poor I can understand that you may well have the capacity to empathise with the plight of disadvantaged welfare recipients, but unless you have been unemployed or poor there is one thing you cannot possibly know from an experiential point of view.
To be continually demonised and judged by your own government and your own society, to hover on the point of starvation, to see the total weekly amount received under your Newstart falling dismally short of the average price asked for shelter in the rental market, to live your life ridden with anxiety and the fear of the withdrawal of your benefit, is but a small taste of what it feels like to be a welfare recipient in contemporary Australia.
I’m about to throw a lot of fiscal figures your way with sources listed at the end of the article. I don’t pretend for a second that they are all encompassing, they are a rough guide. If progressive or conservative think tank economists waste time picking apart the minutiae of the figures it will simply evidence that they are missing the sharper end of what the conversation is really all about.
Social security and welfare represent 35 per cent of the Australian Government’s expenses. The Government estimates that it will spend around $191.8 billion in 2019-20. This category of expenditure includes a broad range of payments and services including pensions and Newstart.
Welfare Bill Total: $191.8 billion.
Now we’ll look at the issue of tax breaks, a continual form of welfare largess that the government showers onto middle and high income earners. Prior and existing tax breaks and concessions cost the budget $135 billion each year. That figure is more than the four main welfare payments — the aged pension, family assistance payments, disability benefits and Newstart combined. Bear in mind also that the 2019 tax breaks are not included in that figure.
Welfare Bill Total: $326.8 billion
Negative gearing is a welfare gift. It costs the public purse approximately $11 billion a year.
Welfare Bill Total: $337.8 billion
The cost of administering the JobActive (old Job Network) Unemployment Industry organisations cannot be ignored. Those costs are aligned with welfare and come directly out of the budget. Running that punitive system costs $1.5 billion per year.
Welfare Bill total: $339.3 billion
The Coalition’s current round of tax cuts favour the well off and ignore the poor. The third tier tax breaks for high-income earners is projected to be more than $88 billion under the Coalition’s plan.
Welfare Bill Total: $427.3 billion. That is sufficient for the proposal that is about to be made in this article.
The following hits to the overall Australian ‘welfare’ budget have not been included:
There are a myriad number of commercial or not-for-profit Registered Training Organisations (RTOs) that raze the public purse by supplying training and skill courses to the unemployed. Some courses have value, some are woefully tick and flick sub-standard. Some of those RTOs are a little too closely associated with some JobActive providers. Some RTOs do a good job, some simply have an appalling and unprofessional level of training delivery. Either way, it costs the ‘welfare’ budget. Why TAFE is not universally utilised to provide quality training for the unemployed and disadvantaged remains beyond comprehension.
Much welfare largess is also doled out, albeit probably unwillingly, to large corporates national and international, who continue to manage to minimise tax, or pay no tax at all. Nor have all of the other welfare ‘concessions’ such as franking credits, family trusts, etc been explored. But surely we’ve now hit the point where an alternative to our current welfare system will not only be cheaper, but would probably also be better for the soul and the psyche of our nation.
An alternative scenario to the current Australian Welfare System …
Australia has an estimated population of 25.20 million. Of that number, 15.7% are aged over 65, 65.5% are aged between 15-64 years and are deemed to be the working-age population, and the remainder are children under the age of 15 years.
Which means that Australia has 20,462,400 citizens above the age of 15 years.
It is important to note that the bulk of citizens aged 15-17 years old are not working, they are in high school. ABS figures show that the national number of full-time equivalent students in the last three years of high school totals out at 739,248 (excluding the NT & ACT because the numbers there are minimal).
That leaves us with a number of 19,723,152 Australian citizens who are the potential beneficiaries of a new way of distributing Australia’s sovereign wealth.
However, when is enough money to live on – enough money to live on? Many people, it could be argued, have sufficient weekly income to meet normal living expenses. The average Australian worker does not earn between $1,250-$1,499 per week. Here are some interesting statistics …
Number of workers who earn between $1250-1499 per week: 1,089,739
Number of workers who earn between $1500-1749 per week: 922,803
Number of workers who earn between $1750-1999 per week: 638,973
Number of workers who earn between $2000-2999 per week: 961,768
Number of workers who earn $3000 or more per week: 596,521
That totals out at 4,209,804 Australians who do not necessarily need the extra added income inflow of gifted welfare and tax concession dollars. The actual number is higher than that, but it is almost impossible to source numbers for those retirees who are independently wealthy over and above what would be considered to be normal levels.
That leaves 15,513,348 working-age or older Australians who earn less than $1250 per week.
Current unemployed welfare recipients are expected to survive on a Newstart rate (for singles) of $277.85 per week. If they are able to claim the maximum rental assistance rate of $68.60 per week then they have the total of $346.45 per week to try and survive on. Since the median rental rate in the cities is $465 per week, and in the regions is $378 per week, the assertion that welfare recipients are starving below the poverty line is a fact, a deed, and a brutal reality. It is beyond the level of a national shame, it is nothing short of unforgivable.
All of this shows that a Universal Basic Income (UBI) of $25,000 for all individual Australians who earn less than $1250 per week is a far better way of equitably distributing the sovereign wealth of this nation to the people who need it most.
The UBI would cost $387.8 billion. The current welfare bill in Australia is over $427.3 billion. The UBI will save the economy more than $39.5 billion per year. The tax breaks and concessions to people who don’t remotely need them must stop.
Any of the figures provided above can be challenged, I reiterate that they are but a guide, and alternative figures can be provided.
What cannot be challenged is the fact that our current welfare system is dysfunctional. What cannot be challenged is the fact that genuine welfare recipients who are in need of assistance to rise above the starvation levels of enforced poverty, are continually robbed of that chance by people who have no need to receive the level of welfare largess that they do via government provided tax breaks and concessions.
The current welfare system in Australia needs to be dismantled from the top down. Implementation of the UBI will eradicate poverty for the majority of poor and disadvantaged people in Australia. Implementation of the UBI will benefit the economy because all recipients of the UBI will gain spending power, something highly beloved by both politicians and economists.
The UBI will replace all current forms of pension. Will the UBI be tax-free? Yes. Will Rental Assistance still be available for UBI recipients? Yes. Will NDIS services still be available for those UBI recipients who need them? Yes.
What will cease to exist under the UBI? The JobActive network. Mandatory reporting for UBI recipients. Vote buying tax breaks. The Unemployment Industry as a whole. Negative gearing and other tax concessions. The demonising of the poor.
It is important to remember that the UBI Grant is based upon the circumstances of the individual. If you are single and earning under $1250 per week you receive the grant. If your partner earns over $3000 a week and you earn under $1250 per week, you get the grant, and they don’t.
The UBI will raise questions. What about youth who cannot live at home? Should UBI recipients, as a condition of grant receipt, be expected to volunteer to work 2 days per week in a local community organisation close to their place of residence? To anybody raising such matters my challenge to you is this – find a positive solution to your question under the umbrella of the UBI.
Implementation of the UBI is simply a fairer way to go.
The howling may well begin from those who stand to lose something that in all reasonableness they should never have been in receipt of in the first place. So be it. It is beyond time that a sharp conversation on the dysfunctional nature of the Australian welfare system was introduced into the national discourse.
In summation: The sovereign wealth of this nation is continually wasted because it has always, devoid of any sense of mutual obligation, been handed across to those who don’t need it, and it has been continually denied to those who do.
Sources and Quotes
Social security and welfare represent 35 per cent of the Australian Government’s expenses. The Government estimates that it will spend around $191.8 billion in 2019-20. This category of expenditure includes a broad range of payments and services including:
- most income support payments such as pensions and allowances (for example, Newstart)
- family payments such as Family Tax Benefit
- paid parental leave pay
- child care fee assistance payments
- funding for aged care services
- funding for disability services and
- payments and services for veterans and their dependents.
Public debate over the cost of welfare often focuses only on cash payments to working age people such as unemployment benefits and the Disability Support Pension (DSP) but these payments only represent around 17 per cent of welfare expenditure as presented in the budget. (Parliament of Australia: Michael Klapdor and Don Arthur, Social Policy)
Anglicare commissioned Per Capita to crunch the numbers on how much tax concessions cost the budget relative to welfare. They found that major tax concessions totalling $135 billion per year were costing the budget more than the four main welfare payments — the aged pension, family assistance payments, disability benefits and Newstart combined. They used Treasury data, as well as various ABS figures and the University of Melbourne’s HILDA survey. (ABC News March 2018)
Head of the Grattan think tank John Daley says Australia’s version of negative gearing, along with the capital gains tax discount, costs the public purse $11 billion a year. (news.com.au 2016)
“The Jobactive system costs the Australian public more than $6bn over four years. It needs to provide value for money,” said Terri Butler, the shadow spokeswoman for employment services ($6bn /4 = $1.5bn) (The Guardian Jan 2019)
The third tier tax breaks for high-income earners is projected to be more than $88 billion under the Coalition’s plan (figures from The Guardian May 2019)
25.2 million population figures:
As of this year, 2019, Australia has an estimated population of 25.20 million. (World Population Review) Of that 25.20 million: 15.7% are aged over 65, 65.5% are aged 15-64 years and are deemed to be the working-age population, and 18.8 % of the overall population are children. (Australian Bureau of Statistics)
739,248 full-time equivalent students:
Schools, Australia, 2018. Table 43a – Full-Time equivalent students, States and Territories. (Australian Bureau of Statistics)
Individual incomes over $1,250 per week:
Median rent price of $436 per week:
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