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Peter Dutton’s policy to double the hours job seekers can work before losing welfare benefits has been welcomed by economists, who say reducing disincentives is vital to helping more people into employment.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers did not shoot down the proposal outlined by the opposition leader in his budget reply speech, but said the government was doing plenty to get more people into jobs.
Allowing job seekers to earn more should be looked at, economists said.Credit: Joe Armao
The government’s policy, unveiled in this week’s budget, will lift the base rate of welfare payments, including JobSeeker and Youth Allowance, by $40 a fortnight from September.
Dutton said the Coalition would not support that increase.
“We think the better approach is to allow people on a JobSeeker payment to work, say five or 10 hours a fortnight. It would give them a lot of extra money in their pocket compared to the $40 that the government is offering,” he said on Friday morning.
“We want to get them off welfare and into work, and we want to have that conversation with the government.”
Impact Economics and Policy lead economist Angela Jackson, who was on the Economic Inclusion Advisory Committee that recommended a broad lift in welfare payments to the government, said both policies had merit.
“As the [committee] found, the current rate is not conducive with living in dignity, so it does need to increase,” she said.
“That said, more broadly Australia’s system of means-testing benefits and access to things like childcare does create very high marginal tax rates and disincentives to work.
“I think the opposition is right to highlight it, and going forward it needs to be part of the reform agenda.”
How much those on JobSeeker can earn
- A single person with no children starts losing their JobSeeker payment – currently $693.10 a fortnight – if they earn more than $150 over two weeks. If they earn more than $1337.50, they stop receiving the payment.
- A single parent on JobSeeker with a child under 16 currently gets $745.20 a fortnight and can earn up to $2053.25 before they get cut off. They also start losing their benefit if they earn more than $75 a week.
Last month, Treasury secretary Steven Kennedy revealed that the government’s employment white paper, due later this year, was likely to explore options to reduce the high financial penalties faced by women and those on welfare who wanted to work more hours.
Treasurer Jim Chalmers said the government already had a major agenda to encourage more people into work, and the white paper would be central to further reform.
“Whether it’s our cheaper early-childhood education, whether it’s the big investment in foundational skills, and skills and training, really right across the board, our big objective here is to get more people into work if they want to and can work,” he said.
Gianni La Cava, research director at economic research institute e61, said a mix of policies should be considered to provide a better safety net for job seekers.
“About one in four recipients earn a wage. These workers pay very high marginal tax rates of around 50 cents in the dollar if they earn more than $75 a week,” he said.
Grattan Institute policy director Brendan Coates said that meant some of the country’s lowest income earners faced a marginal tax rate greater than the wealthiest – the highest marginal income tax rate is 45 per cent.
Coates said Dutton’s policy of letting JobSeekers earn more was a good idea, and it would be a great area for bipartisanship.
“We need to both raise the rate and give people more incentives to work, either by increasing what people can earn before Jobseeker starts being withdrawn, or lowering the rate at which the payment is withdrawn as you earn more,” he said.
Recent e61 research found recipients did not necessarily reduce their work hours to avoid the higher marginal tax, so reducing that rate could let them earn more without creating incentives for people to stay on benefits.
The institute looked at other options to help unemployed people, including using the increase in the superannuation guarantee to pay unemployment benefits, or providing HECS-like loans for those out of work that would be paid back later with interest.
“We haven’t done the research to assess which policy is best. But we believe a mix of them should be in the public conversation if we want to ensure we have the right social safety net for Australia,” La Cava said.
Australian Council of Social Service chief executive Cassandra Goldie said the main priority should be lifting the base rate of JobSeeker. She said those on JobSeeker included people who were studying, single parents, people with disabilities and older people facing financial ruin.
“The [Economic Inclusion Advisory] Committee’s first recommendation was to lift JobSeeker and related payments by at least $128 a week,” she said.
“This must remain the government’s highest priority to ensure everyone can afford to cover the basics: three meals a day, essential medicines and a roof over their head.”
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