Punitive approach to restraining welfare costs lazy and short-sighted

Fri, 20 Nov 2015  |  

This article first appeared at The Guardian at this link: https://www.theguardian.com/commentisfree/2015/nov/16/punitive-approach-to-restraining-welfare-costs-lazy-and-short-sighted 


Punitive approach to restraining welfare costs lazy and short-sighted

The discussion being driven by the Turnbull government that there are ‘too many people on welfare’ has as its driver a framework to make it harder for people to get such payments. It is about eligibility for the payments that is dominating the government’s plans for who will be on welfare in the years ahead.

According to Christian Porter, social services minister, annual government expenditure on welfare is estimated to rise from $157bn to $277bn in a decade. The vast bulk of these payments will go to aged pensioners, the unemployed and the disabled. When looking at this increase, Porter says there is a serious issue of how we pay for it and how we make the welfare system sustainable.

Porter’s approach is squarely on making it harder for people to get “generous” welfare payments. In his sights is a tightening of the tests for the unemployed to receive the Newstart allowance and for those unable to work to receive the disability support pension.

Let’s be honest here. This is lazy policy and looks at using punitive measures rather than limiting the supply of people who will need welfare support in the years ahead. Rather than tackling the welfare “time bomb” this way, it is possible to lower spending on welfare by encouraging economic growth, productivity and decency. What about reducing unemployment, encouraging more self-funded retirement and helping those with a disability through a mix of employment opportunities and preventative health care?

Call me crazy, but I think the following are valid solutions to the problem that will, unquestionably, reduce the welfare bill without slashing payments, imposing draconian eligibility criteria or stigmatising those receiving welfare.

Let’s start with the obvious one – unemployment benefit payments.

History shows that the best way any government can cut unemployment is by growing the economy at a strong and sustained pace. After two years in which annual GDP growth has been soft, below trend and disappointing, unemployment in Australia is around 750,000 people or close to 6% of the workforce.

If the government were to actually do something about growing the economy faster through infrastructure, addressing inequality or a counter-cyclical use of fiscal policy, unemployment would fall and, voila, payments to the unemployed fall.

There’s the first solution.

Next is the aged pension. Everyone knows that if retirees are to avoid relying on the welfare system, contributions during working life need to be around 15% of income. They are currently set at 9.5%, a rate that will remain for the next five years after the Abbott government decided to freeze contributions rather than fast track a rise to 12%.

Paul Keating wanted to increase the rate to 15% in the early 1990s but John Howard ensured the welfare bill would explode in the decades ahead when, in 1996, he and treasurer Peter Costello froze contributions at just 9%, which is where they stayed for 11 years. Keating says this has cost the average worker $300,000 in retirement savings over a lifetime and is a reason why the age pension is a large and growing welfare cost.

The solution? Lift the compulsory contributions to 15% forthwith. Problem fixed.

Disability payments are a more difficult issue to tackle because many aspects of disability are health-related rather than linked to economic growth. That said, government intervention to promote the provision of skills and training for people with disabilities will improve their employment prospects; in addition, the provision of high-quality health care can help lessen the severity of disabilities and increase opportunities for those with disabilities to participate in the workforce.
Efforts to tackle skills, education and workforce participation for the disabled are not only a decent thing to do, they help reduce the welfare bill.

So rather than addressing the high cost of welfare payments by making it harder for people in need to receive them, there is an alternative: stronger growth, lower unemployment, higher contributions to superannuation and a nurturing of people with disability so that they can gain meaningful opportunities for employment.

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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced. 

What's ahead for the Australian economy and markets in 2020

Thu, 02 Jan 2020

What's ahead for the Australian economy and markets in 2020

Happy New Year!

2020 will be a year where Australia’s annual GDP will exceed $2 trillion, our population will get very close to 26 million people and we will clock up 29 years with no recession.

It is also a year where the economy will be a dominant issue for policy makers, will drive what happens to interest rates, will help drive investment returns and will feed into the well-being of the Australian community. 

2020 kicks off with relatively good news in terms of economic growth, even though the labour market is likely to remain weak, with wages growth struggling to lift and inflation remaining below the RBA’s 2 to 3 per cent target. The Reserve Bank may have one more interest rate cut in its kit bag, but by year end, the market is likely to price in interest rate increases, albeit modestly.

The ASX, which had a great 2019 is set to be flatten out, in part driven by the change in the interest rate outlook, but it should get a boost from better news on housing and household spending.

In terms of the specifics, I have broken down the 2020 outlook into a range of categories and given a broad explanation on the issues underpinning the themes outlined.

GDP Growth

It’s a positive outlook. A pick-up in GDP growth from the current 1.7 per cent annual rate is unfolding, with the only real issue is the extent of the acceleration.