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Bare bones budget for jobseekers

Just as well the Commonwealth Government Budget wasn’t tabled last week – that would have been too much of a mixed message.

A nation’s budget is all about redistribution of wealth, a concept worth keeping in mind at a time when £100 million of British taxpayers’ money was spent on an unnecessary coronation pageant.

As has been repeatedly pointed out, Prince Charles became King by default on September 8, 2022, on the death of his mother, Queen Elizabeth II. There was no pressing reason to stage a mediaeval pageant, however splendidly well done.

This week, the media’s attention swung back to the King’s southern hemisphere colony, as Treasurer Jim Chalmer presented his budget.

So much had been flagged already that one does have to question is there a critical reason for the media embargo till 7.30pm on Tuesday.

As I started writing this on Tuesday morning, much of the Budget’s headline measures had already been revealed. This included a $15 billion spend on cost-of-living relief; $1.5 billion of it in electricity bill relief for 5.5 million households and 1 million small businesses. I should point out that this is from an ABC article published on Tuesday morning. The ABC’s business reporters Ian Verrender and Gareth Hutchens were all over it.

One of the other measures flagged earlier aimed to change the dispensing rules at pharmacies. Australians will be able to buy two months’ worth of medicines on a single prescription, with the change affecting more than 300 common medicines. This overrides the current rule that only 30 days’ supply of medicine can be applied to one prescription.

The ABC and other media outlets also seemed confident, ahead of the Budget, that Chalmers would produce a surplus and indeed he did. You can’t please everyone, though. Greens leader Adam Bandt said the government had prioritised delivering a ($4.5 billion) surplus over supporting people in poverty.

“Labor’s second budget is a betrayal of people who were promised that no one would be left behind,” he said in a tweet on social media.

Other leaked or pre-announced budget measures included cheaper child care and a (long overdue) pay rise for aged care workers. Welfare recipients received higher payments, but nowhere near the level asked for by lobbyists.

The Budget is a document which sets out how taxes paid by Australian businesses and individuals will be spent. It is a massive number, equating to 29% of GDP. In 2021-2022, $683 billion was raised in taxes across all levels of government. This was 15.2% higher than the previous year. A table prepared by the Australian Bureau of Statistics shows an upward trajectory for taxation revenue. The slight blip in 2019-2020 was due to disruption to employment by the onset of Covid-19 and its attendant lockdowns. Total tax revenue includes all Commonwealth, State and Territory taxes, GST, those indirect taxes that still exist and excises imposed on alcohol, tobacco and fuel.

The cost-of-living package is one thing, but the government has been under enormous pressure to raise the level of unemployment benefit. The Australian Council of Social Service (ACOSS) last month presented a detailed brief to Treasurer Jim Chalmers. A former Commonwealth Treasury head, Ken Henry, appeared on television as the ACOSS brief’s anointed spokesman. In a call to raise the level of NewStart and Youth Allowance, ACOSS said some 750,000 people in communities across Australia live on unemployment and student payments that do not cover the cost of housing, food, transport and healthcare.

The single rate of Newstart is (or was) less than $40 per day and living on Newstart and Youth Allowance presents the biggest risk to living in poverty. ACOSS wanted the rate raised to within 90% of the aged pension, so were almost certain to be disappointed.

In an open letter to the Prime Minister, ACOSS said 80% of people receiving JobSeeker payments have been receiving the benefit for more than 12 months. The same research found that seven in ten people on income support were eating less or reporting difficulty getting medicine or care. In December 2022, Anglicare found that there were 15 Jobseekers competing for each entry-level role.

“The longer people remain on income support, the harder it is to transition back into paid work,” the letter said.

ACOSS chief executive officer, Dr Cassandra Goldie, said post-Budget that while the $20 per week pay rise was welcome, it did not go far enough.

“The (increase) to JobSeeker and related payments is well below the Economic Inclusion Advisory Committee’s findings. The committee said that it needs to rise by at least $128 a week to ensure people can cover the basics.”

ACOSS and others are right to complain. Australia has the lowest rate of unemployment payment in the OECD. One in four people on Newstart have only a partial capacity to work because of illness or disability.

The ABC’s business reporter Gareth Hutchens wrote an intriguing analysis in May 2021 about the ‘full employment’ policies of governments prior to the 1970s. Then followed a policy aimed at creating a permanent pool of unemployed as a means of promoting economic growth and making Australia more globally competitive. Along with rising unemployment came a political ploy to blame the victim. The term ‘dole bludger’ emerged, first used by Liberal MP Bert Kelly, a pioneer of “New Right” political ideas. But the phrase was also promoted by Clyde Cameron, minister for labour in Gough Whitlam’s Labor government (1972-1975).

As unemployment soared in the mid-1970s, being without a job was recast as the fault of workers for being ‘too lazy’. There was much debate about the need for ‘overly generous’ income support. (Anyone who has ever been on it would dispute its ‘overgenerosity’. Ed)

Policymakers from the early 1980s started using an unemployment rate of 5% as a deliberate policy tool.

“How could everyone be expected to find a job,” Hutchens wrote. “There haven’t been enough jobs to go around, by design.”

Now, almost 50 years later, the long-term unemployed are still being victimised over a deliberate policy to keep them out of work.

If I may hark back to a FOMM from 2018 when we speculated about what one could do were one made King for a Day:

King Bob decreed: “I’d single out the dysfunctional tax and welfare systems and propose the following reforms:

Introduction of a universal basic income for all adults: $25k a year, indexed, no strings attached. Adults are free to earn money over and above the $25k but will be taxed on a sliding scale to the maximum rate for anyone earning more than, say, $100k.

In my Kingdom, all forms of social welfare would be replaced by a new regime, overseen by the Office of Financial and Social Opportunity and Incentivisation (NOOFASOI). The office would oversee payment of the UBI and iron out the inevitable wrinkles in a new and untested system.”

In the real world, countries as diverse as Finland, France, Ireland, Norway, the US, Canada, New Zealand, Holland, Iceland, India and Brazil are either talking about a UBI or trialling it in one form or another. In 2016, the Parliament of Australia published this comprehensive yet concise policy paper by Don Henry, for those who want to find out more.

While I leave you to make of that what you will, I’ll be delving into the 997-page Budget, seeing what’s in it for me. As we all do.

‘Tis the season of charitable giving

charities-hunger-relief — Image: Hunger relief charity Foodbank Australia

When our internet landline rings (rarely), I know for certain it will be my sister in New Zealand or Guide Dogs Australia asking for “Mrs Wilson”. She Who Gives to Charity Sometimes is like most of us. If she feels inclined to donate to a charity, she likes to do it on her terms. Guide Dogs Australia is a worthy charity that we support in several small ways (calendars, Christmas cards and so on). In the weeks leading up to Christmas, Guide Dogs volunteers will offer gift wrapping at selected shopping centres. There is usually a dog to pat too.

If you have an email subscription to a charity like the Salvos, Lifeline or Red Cross, they do like to remind you that they’re there. On Monday I had an email from the CEO of Lifeline, Colin Seery. He began: “Christmas is upon us. People will need us. We have to be ready for what could be the busiest days we have ever faced.

“The festive season brings additional challenges to charities which support people in need. In 2021 Lifeline received over 98,000 calls in December, a record for that time of year.

“It’s sobering to think that of all the hardship we’ve faced over the past few years,” Mr Seery wrote, “The festive season remains overwhelming for so many.”

Lifeline says it needs to raise $328,000 to ensure people find the support they’re looking for when contacting Lifeline.

The major problem for fund-raisers – and who knew there are 57,5000 charities in Australia – is that there is a lot of competition for a limited pool of money set aside for ‘giving’. Organisations which offer similar services to Lifeline (The Salvation Army, St Vincents, The Smith Family, Beyond Blue etc), all have their collection tins out at this time of year.

On a global scale, there are the large charities like Red Cross, Save the Children and World Vision. They draw funding from affluent Australians and those who donate as their means dictate.

As the weeks roll by, you can expect to hear about the need for Christmas food hampers and why flooding in New South Wales, Victoria and South Australia will make them difficult to deliver. The ABC reported on events unfolding in southern states as suppliers struggle to source food hampers.

Hunger relief charity Foodbank said it had “real challenges” supplying its 1,000 charity partners and schools in New South Wales and the ACT. Chief executive John Robertson said fresh produce and sources of protein were particularly hard to secure when the pressures of natural disasters were factored in.

Foodbank Australia, which organises food hampers for needy Australians on a regular basis, has a big demand this year for its Christmas appeal. Mr Robertson told the ABC that even though production had been lifted from 20,000 hampers last year to 30,000, it was still not going to be enough. Christmas hampers include canned leg ham, Christmas cake, pudding & custard, along with a range of staple foods such as pasta, cereal, canned fruit and vegetables. Foodbank also does this in other states and territories, along with organisations including Anglicare, The Salvation Army, OzHarvest and FoodAssist.

A Foodbank spokeswoman told FOMM the supply chain issues include the recent freight train derailment, which will cut off a main route. The floods in both Victoria and New South Wales in very rich food-producing areas have also disrupted operations, she said.

There is clearly a demonstrable need for charitable organisations to provide food, clothing and shelter for those whose needs are not being met. It is comforting to know the scale of the not-for-profit sector, as outlined by its regulator, the Australian Charities and Not-for-profits Commission (ACNC). As of 2021, there were 57,500 registered charities in Australia and another 600,000 not-for-profits. The latter are commonly small community groups put together for a specific purpose and not all are charities. If they are incorporated they can raise funds if needed, but fund-raising is not usually their core business.

The difficulty for smaller charities is that when they do need to raise funds, for whatever reason, they are competing with the big end of town.

The ACNC report on Australian charities shows that 65% of them are rated small (annual revenue of $250,000 or less). Medium charities are ranked as those with annual revenue of $250,000 to $1 million (16%). Large charities (19% of the total), have annual revenue of $1 million or more. One-third of small not-for-profits are uber-small – revenue of $50,000 a year or less.

The charity sector in Australia overall employs 1.2 million people – 10% of the country’s workforce, the majority employed by large charities.

McCrindle Research says charitable giving is deeply ingrained in the Australian psyche, with 82% of people giving to not-for-profit organisations in some capacity. Of these, 61% believe that not-for-profits are an essential pathway for Australians to fulfil their human duty of providing hands-on-help to others in need.

David Crosbie, CEO of the Community Council for Australia (CCA) said the sector had been transformed in just two decades.

“A charity space shackled with red tape in 2000 and lacking even a legal definition of its powers and purpose has (been) transformed into a vibrant sector with an effective regulator and legally-enshrined advocacy rights.

“But as the number of charities has grown, so too has the sector’s reliance on government funding.

“This in turn has increased the scrutiny on charities to be effective, as more organisations are forced to compete for fewer resources.”

Mr Crosbie, writing in Pro Bono Australia’s annual report in 2020, said the biggest win for the sector was the establishment through the Charities Act 2013 of a clear legal definition of a charity. This definition included advocacy as a core activity for NFPs(Not For Profits).

Charities had fight again to protect their hard-won status in 2017. The Federal Government’s foreign donations bill threatened to curtail the sector’s advocacy rights, by broadening registration and disclosure requirements for non-party political actors including charities. (Could have been termed the ‘Anti ‘GetUP’ bill’. Ed)The sector successfully campaigned to amend the bill, arguing it would stifle advocacy and impose unnecessary red tape on many NFP organisations.

Flooding and subsequent clean-ups in NSW, Victoria and South Australia will make it difficult for families to regroup in time to celebrate Christmas. For those of us who live in places not affected by floods, look around and you’ll become aware of organisations that provide hunger relief for people who need it.

Foodbank, which is based in South Australia, operates nationally. The organisation sourced 48.1 million kilograms of food and groceries in 2021, equating to 86.7 million meals or 238,000 meals per day. Foodbank partners with farmers, growers and retailers including major supermarket chains to deliver food boxes to charities for distribution to those most in need.

A Foodbank report released in October showed that more than 2 million households in Australia ran out of food in the last year, due to limited finances. This meant sometimes skipping meals or going whole days without eating. About 1.3 million children lived in food insecure households during that time. Demand for hunger relief services is now higher than it was during the pandemic – much of it to do with the roll back of JobSeeker in early 2021.

Whether it’s with the aim of helping people right now or to lift spirits at Christmas, you can help. A donation of $50 can provide a hamper to a family in need.

JobSeeker and the $50 ‘bonus’

jobseeker-unemployment — Contrary to popular opinion, almost half the people in this study relied on NewStart (now JobSeeker) for less than a year. Graphic courtesy of Wes Mountain and The Conversation.

You know how it goes. You’ve finished ferrying 16 items down the checkout conveyor and the assistant says: $142.99 – cash or card?

“How do the poor people get by?” I ask of no-one in particular.

Later, I went to the butcher ($47) and the organic fruit and vegetable shop ($56), all up $245.

She Who Pays the Bills said: “But we only needed a few things”.

Now if we were on unemployment benefit, such profligacy would leave us with just $375 to cover the next 13 days (rent, bills, fuel and more groceries).

It is timely to write about the cost of living, and how the reality appears quite different to the official inflation rate (1.2% in December). The Federal Government’s superficially successful $100 billion wage subsidy programme (JobKeeper), ends on Monday. Businesses that claimed JobKeeper passed on the subsidy to people they employed, regardless of how turnover and profit was tracking through the year that the programme was in place.

The last day of March also signals an end to the scaled-down Covid-19 supplement paid through JobSeeker. In the first few months of its origins, JobSeeker initially doubled the benefits paid to unemployed people.

JobSeeker, which replaced NewStart and associated benefits from March 21, 2020, introduced three levels of supplements paid through the first year of the Corona virus. From April 27 2020 to September 25, recipients were paid $550 extra a fortnight. This was then reduced to $250 extra per fortnight until December 31, 2020. The final supplement of $150 a fortnight was paid from January 1 until it ends next week.

Welfare groups had long lobbied the government to raise the unemployment payment beyond the poverty level.

The government made much of its decision to raise the rate paid to those on JobSeeker by $50 a fortnight ($3.57 per day).

As of next week, welfare recipients will have to learn to live without the additional $150 a fortnight – reverting to $620 a fortnight, excluding other payments like rental assistance*.

Economist Ross Garnaut’s latest book proposes that successive Federal governments, in cahoots with the Reserve Bank, have deliberately kept unemployment high since the mid-1980s. He writes that governments have ‘allowed’’ hundreds of thousands to languish in unemployment as a means of pursuing a policy to suppress wage growth and inflation.

Garnaut says this deliberate policy has ‘immiserated’ people.

He told ABC business reporter Gareth Hutchens that Australia should use its many resources to push the unemployment rate down to 3.5% by 2025. You may not remember, but unemployment was at this level or lower for decades between 1950 and 1975. This was an era when many Australians had permanent jobs in factories that made things.

Garnaut says the government and Reserve Bank have to stop guessing the level of ‘full employment’ (at which point the RBA starts lifting interest rates, as a means of combating inflation).

He says the budget deficits needed to sustain full employment should be funded directly or indirectly by the Reserve Bank. It is complex, but if you are interested, read more here.

The Conversation’s in-depth study of unemployment benefits busts a few myths. Research by a team drawn from the Brotherhood of St Lawrence, RMIT and ANU studied benefit payments between 2001 and 2016.

The premise of the report is that Australians receiving unemployment payments are often portrayed as “a relatively small group of people with personal or behavioural problems that stop them from getting a job.”

The research was conducted to challenge long-held perceptions of ‘us and them’.

One of the most startling conclusions clarifies myths about the long-term unemployed. The research found that nearly half of the Newstart population of 4.4 million (47%) received the payment for less than a year. Over two-thirds (68%), received it for less than two years. The study uncovered a concerning trend in the number of welfare payments suspended for not reporting income correctly or not meeting job-seeking targets.

“Our study found rates of suspension increased dramatically over the study period, from 2% in 2001 to 11% to 2016.

“Successive governments have increasingly sought to enforce this, leading to more uncertainty around the payment”.

So, while the unemployed go forward living on a minimum $44 a day, how will things go with the end of JobKeeper, the flawed business subsidy scheme which kept 3.5 million people off the dole queue?

As business editor Ian Verrender noted in an analysis for the ABC, JobKeeper turned into a profit mill for businesses that boomed during the lockdown. Billions of taxpayers’ dollars were paid to wealthy businesses, without the mutual obligations associated with welfare. The only reason we know about this at all is the corporate regulator’s belated decision to force listed companies to disclose their taxpayer handouts in the December half corporate results.

Verrender, an investigative scribe, laments the lack of a public register of JobKeeper recipients – “despite the scheme being among the most ambitious (of its kind) in the world”.

But it is not just the blue chip public companies that scored a windfall; tens of thousands of private partnerships, sole traders, charities and small to medium-sized businesses also prospered.

Many of the heads of Australia’s biggest businesses feature in the timely release of the Top 250 Rich List by the Weekend Australian. I say timely because it suits my purposes to mock the rich. What else can you do when the 250 individuals named in this list are collectively worth (in monetary terms- Ed.) $470 billion. As former journalist union chief Christopher Warren wrote in Crikey – that is equivalent to 25% of Australia’s GDP. Even the lower echelons on this list have a net worth of $450 million or more – $449 million more than the collective net worth of your average self-funded retiree couple..

Wish, the glossy magazine lift-out supported by full-page ads by Mercedes Benz, Cartier, Giorgio Armani and the like, is a supreme example of what The Australian calls ‘aspirational’ journalism.

For those on JobSeeker who aspire to getting best value from that extra $50 per fortnight, here’s a slow cooker recipe for lamb forequarters (large chops that are too tough for the barbeque). You can probably score a kilo for $15 or so. Buy 1.5 kilos each of onion, carrots, potatoes and the cheapest green vegetable (about $10 all up). Add a can of red kidney beans ($1.67) to flesh it out and cook the lot in a slow cooker while you are out applying for one of the 15 jobs a month needed to justify your welfare payment.

If you chucked in the right combo of herbs and garlic and made a gravy worthy of ‘Sir’ Paul (Kelly), the lamb will just fall off the bone and you’ll be eating this for days.

Buy an $8 bottle of red while you still can (he said, one eye on the coming of the cashless welfare card). Invite someone over (‘a loaf of bread would be great, thanks’).

Enjoy every casserole.

How deep is the financial hardship well?

financial-hardship-savings — How many weeks your savings will last without income – graph provided by The Grattan Institute

It is probably no comfort to anyone to reflect on the year when investors could get 14.95% on a bank term deposit. It was January 1991, the recession Paul Keating said we had to have. People with personal loans and credit card debt watched horrified as repayment rates went to 20% and beyond. The average variable mortgage rate rose to 17.5% at the same time. The gap between the haves and have-nots in that era was painfully obvious.

In the early 1990s, financial hardship forced many younger Australians, unable to service their mortgage repayments, to walk out of their mortgaged houses, leaving the house keys on the bank’s counter. Meanwhile, the lucky worker/investor with a lazy $100k to invest could earn $14, 950 in interest (the price of a new car), over 12 months with no risk whatsoever. Except, of course, if the deposit was with one of the eight financial institutions that went broke in that era.

In 2020, the COVCID-19 pandemic has certainly made it clear how many Australians are suffering financial hardship. At one end of the scale, you have self-funded retirees, on the pig’s back, really, but struggling with the collapse in the value of shares and difficulties finding safe places to store their cash for a return of more than 1.75%.

At the other end of the generational spectrum, while the official unemployment figure is an improbably low 6.2%, it does not reflect the one million casuals who not only lost their jobs, but did not qualify for the Federal Government’s safety net, Jobkeeper.

COVID-19 struck at a time when the Australian household savings rate had dropped to 3.6% (20% is the ideal), and is forecast to drop to 2% or lower in 2021-22. The rate is calculated as a percentage of the amount saved from disposable income.

Meanwhile household debt – most of it linked to mortgages – is at a high of 119.60% of GDP. Economist Gerard Minack told the 7.30 Report in November that household debt at 200% of household income was a “massive macro risk”.

Then came COVID-19 and an economic shutdown the likes of which the country has not seen since the 1930s.

I’m running these confronting numbers past you because there is a lot of nonsense written about Poor Pensioners vs Irresponsible Millenials. Also, some commentators, particularly in the housing sector, are ‘talking it up’ at a time when worst-case scenarios predict a 30% drop in prices.

Conversely, stock market analysts are talking the market down, even as it keeps (slowly) recovering. You have to wonder why.

In mid-April the share market was officially proclaimed a “bull market’’ by the Australian Financial Review (AFR), because share prices had jumped 20% since mid-March.

What’s amazing is that the market has rallied at the same time that Australian superannuation funds paid $9.4 billion in financial hardship paymentsto approximately 1.17 million fund members. Australian super funds have a large exposure to equities, so they have managed the payments so far by selling investments, including shares and holdings in managed funds.

They also asked for help. As the AFR’s exceptionally well-informed Chanticleer observed, The Australian Superannuation Fund Association (ASFA) put a proposal to Treasurer Josh Frydenberg to allow the Australian Taxation Office to cover the hardship withdrawal payments. The plan was super funds would repay the payments over a period of time. The industry also called on the Reserve bank of Australia to provide a liquidity buffer. None of this happened, but Australian funds are expecting a continuation of the rush to withdraw hardship payments.

Under the COVID-19 measures, individuals whose income has been affected can withdraw up to $10,000 of their superannuation balances prior to June 30. They can, if necessary, apply for a further $10,000 after June 30.

There are ordinarily a few hoops to jump through to apply for an early-release hardship payment. As we know, superannuation is meant to be locked away until you retire or reach an age when you can officially tap the fund for money. But in these dire times, super funds worked with the Australian Tax office and other government departments to expedite hardship payments.

By close of business on May 7, ASFA made around 1,175,000 individual payments, totalling around $9.4 billion in temporary financial support. ASFA estimated that 98% of applications were paid within five working days.

Applying for a super hardship payment is a risky business if you are under 35. According to AMP, the average super balance for people aged 25-29 is $23,371 for men and $19,107 for women. In the age group 30-34, the average balance for men is $43,583 and for women $33,748. So it does not take too many trips to the hardship well to run out of cash. I used those age groups deliberately, as most pollsters agree that so-called Millennials are people now aged between 22 and38.

But it is not just the young that have little in the way of savings. According to the Grattan Institute, 50% of working households have less than $7,000 in savings. This probably explains the rush of super fund hardship applications. The Institute admits the data is a few years old, but says the scenario is unlikely to have changed much.

“As you might expect, working households on lower incomes tend to have less in the bank. Among working households in the bottom fifth of household income, the median total bank account balance is just $1,350.

“The meagre savings of many low-income workers are a big worry because they are most likely to be employed as casuals and therefore not have paid sick leave or annual leave.”

The Grattan Institute makes the point that as the lockdown drags on, more people will start to run out of ready cash.

“Our analysis shows that half of working households have five to six weeks’ income or less in the bank. The bottom 40% of working households has about three weeks’ income or less in the bank. A quarter of all working households have less than one week’s income in the bank.”

This last figure may bring your head up, if you remember news stories from New York, which we found shocking, of people with less than $400 in the bank.

Sometimes I think about these matters when doing the weekly grocery shopping, where retail prices are clearly outpacing inflation. (Ed: We did score a large pumpkin from a roadside stall for $3, so you can get lucky).

Those with a job who have not had a pay increase in years can justifiably feel cheated. Admittedly, the Federal Government came to the National Cabinet table with an extraordinary rescue package. But while one of these measures temporarily doubled the unemployment payment overnight, it now seems to be flawed piece of legislation.

People may rightly point out that employers are obliged to pass on the Jobkeeper payment of $1,500 a fortnight, regardless of what the employee was being paid previously. At some stage, these payments will stop and we will revert to the status quo. Will recipients who were technically overpaid have to repay some of this money, or does it just go to the deficit?

Robodebt II, coming soon to a cinema near you.

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