Calls to increase the current rate of Newstart allowance have ramped up recently, with members of parliament and advocates alike uniting to push for an increase to the $40 per day welfare payment, arguing that it is inadequate for people to make ends meet.
The row has divided pollies with the Coalition standing firm in their position that the welfare payment is adequate, given it’s intended to be a “stop gap”, according to Deputy Prime Minister Michael McCormack, while Labor rallied against the government with Shadow Treasurer Jim Chalmers calling on Scott Morrison to act immediately and address wide-spread inadequacy concerns.
Last week, the Senate referred an inquiry into the “adequacy of Newstart and related payments and alternative mechanisms to determine the level of income support payments in Australia”, with the Senate Community Affairs References Committee due to report its finding in March 2020.
But how does Australia’s unemployment benefit compare to those offered to jobseekers in other OECD countries?
The current rate of Newstart sits at $277.85 per week, which works out at just under $40 per day. And, unlike other countries, the allowance is paid at a set rate, regardless of individual circumstances or what people may have been earning prior to finding themselves out of work.
Professor Peter Whiteford, from the Australian National University, wrote that Newstart is actually “one of the worst safety nets in the world” in a piece for Inside Story, having analysed the payment alongside the counterparts from other countries within the OECD, noting that Australia’s offering falls below the average for the 34 member countries.
“Unemployed Australians have always received lower payments than age or disability pensioners,” he said. “But since 1997, when the Howard government started indexing pensions to average weekly earnings but continued to index unemployment payments to the consumer price index, the gap has widened significantly.”
Whiteford’s analysis found that, judged purely on the replacement rate – which is the percentage of a person’s previous earnings that are covered by unemployment payments – Newstart is the second lowest unemployment benefit in the OECD, behind the United Kingdom.
Newstart recipients are also eligible for other payments, such as rent assistance, however Whiteford pointed out that, with rent assistance included, Newstart is actually the joint lowest of all 34 countries, alongside Greece.
Those out of work in the UK receive fortnightly Jobseeker’s Allowance (JSA) payments which differ, depending upon your age, eligibility and personal circumstances. Single adults, up to the age of 24, can receive as much as £57.90 (AU$102.59). While those aged 25 and over can be entitled to up to £73.10 ($129.47) and couples (both aged 18+) can receive £114.85 ($203.41).
UK jobseekers who have paid enough National Insurance contributions – a form of tax which funds state benefits, as well as the State Pension – will receive a payment that has not been means tested, however those who have not paid a sufficient amount will have their entitlement means tested.
Brits out of work are also entitled to other benefits, increasing the overall amount jobseekers can claim, including monthly Universal Credit payments which are intended to help unemployed people, or those with a low income, with their living costs. Those with children receive extra.
Jobseeker Support is New Zealand’s equivalent of Newstart and is paid to those out of work for up to 52 weeks. According to the government’s website, recipients need to be out of work, working part time or have a disability which affects their ability to work.
The weekly rates payable range from NZ$145.98 (AU140.60) for a single person aged 18-19 and living at home with family, up to $228.07 for a single person who is also in receipt of Domestic Purposes Benefit woman alone or Widows Benefit woman alone.
Married couples without children can receive $364.94 per week, while those with children are entitled to $391.00 and sole parents can claim $339.69.
Of all 34 OECD countries, Israel boasts the highest rate of unemployment benefit. According to the government’s website, the daily unemployment benefit rate is calculated according to age and the income received over the last full 6 months preceding the period of unemployment.
To be eligible, people must have completed their compulsory service with the IDF (Israel Defense Forces), those who were discharged from service are also eligible – provided they were not discharged due to ‘unfitness’, as well as those who were exempt from the period due to health, family or education reasons.
In order to receive the benefit, recipients must also have completed a qualifying period which is defined as 360 days of work, out of the previous 540 which preceded the start of their unemployment, for those who were paid a monthly salary, or 300 out of 540 days for those who were paid daily.
The system in the USA is slightly more complicated, given that the rate of unemployment benefit varies between states, with the process managed jointly between the overarching Federal Government and individual state governments.
The benefit is paid according to the unemployment compensation system, which was introduced in 1935 as part of the Social Security Act. The system is largely financed by payroll taxes levied against employers and, on average, those out of work are paid up to US$450 (AU$661) per week.
National Seniors Australia, COTA Australia and The Benevolent Society previously issued a joint statement about the importance of Newstart Allowance to older workers specifically, saying: “Older workers are too often excluded from the workforce simply because of their age.
“Unemployment at the end of your working life means the loss of vital savings needed to avoid poverty in retirement and later life. The inadequacy of Newstart is undermining the retirement income system. It’s pushing older workers into poverty as they head to retirement.
“This is especially the case for those who rent, who have not been able to accumulate significant savings and those facing high out-of-pocket health costs. The rate of Newstart has to be increased. It hasn’t been for decades. It’s time now to raise the rate.”
Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.