Value of the dole to plunge over 40 years

THE Intergenerational Report has sharpened the argument to review the unemployment benefit, showing it would plunge in value in the next 40 years.

Pensions and dole over 40 years.

THE Intergenerational Report has sharpened the argument to review the level of the unemployment benefit, showing it would plunge in value in the next 40 years under current indexation ­arrangements.

Although the IGR forecast that the real value of the average wage, after allowing for inflation, would rise from $75,000 now to $104,000 in 2055 as workers enjoyed the returns of productivity growth, the jobless would be left ever further behind, with the Newstart payment indexed to consumer prices.

Estimates by ANU welfare specialist Peter Whiteford show the Newstart benefit, under the current policy, would fall from 19 per cent of average earnings now to 10.5 per cent by 2055.

The low level of the unemployment benefit, $515 a fortnight for a single person, has been the target of a campaign by the Australian Council of Social Service for some years. However neither the Abbott government nor the former Labor government was receptive to arguments that it was resulting in a level of poverty that made it harder for people to look for work.

The growing gap between Newstart and the disability pension, which is indexed to wages, has generated distortions that discourage people with disabilities to look for work.

The IGR assumes the unemployment rate will stay steady at 5 per cent for the next four decades, but says the impact of unemployment benefits on the budget will halve from 0.6 per cent of GDP to 0.3 per cent, reflecting the effect of lower indexation.

Professor Whiteford said other income support payments, including family tax benefits, childcare benefits and carers allowances, are also based on consumer price indexes and similarly will fall in value. Total working-age payments will fall from 4.6 per cent of GDP to 3.2 per cent.

“Either we have a much higher relative poverty in the future or we don’t get so much money for the budget from savings in these areas,” he said.