Income support, poverty and debt

Summary

The dignity of every Australian means honouring their rights and empowering them to reach their full potential, whatever their background, circumstances or beliefs.

Australia’s economic growth for almost 30 years has improved the living standards for the average household. Yet around 3.3 million people, including 774,000 children, have been left behind and are living in poverty. They rely on inadequate social security for income and struggle to maintain an affordable roof over their heads.

Australia’s poverty rate has steadily increased over the past two decades: survey data suggests the rate of poverty is at its highest since 2001. Young people, single parents, First Nations people, long-term unemployed and those living with disability or ill-health are particularly vulnerable.

Further, seven per cent of people with paid employment, part-time work and high household costs are also at risk of falling behind.

Last year, 3.4 million households (32% of all Australian households) experienced moderate to severe food insecurity. Low-income households, those in regional areas and single-parent households remain at greater risk of food insecurity.

An increase to working age payments not only helps people to afford the basics, it also improves their self-esteem and stimulates the economy, as people spend immediately, and locally, on essentials.

St Vincent de Paul Society in Australia welcomes:

• The establishment of an independent Economic Inclusion Advisory Panel led by the Treasurer and Minister for Social Services and comprising experts to advise Government on income support payments.
• The one-off income credit to enable people receiving age and veterans’ pensions and Disability Support Pension to earn an additional $4,000 to December 2023 without losing any of their pension. Subject to the passage of legislation, from 1 January 2024 this temporary measure will be made permanent. This approach should be extended to other income support payments.
• Regulation of Buy Now Pay Later (BNPL) products. 
• The end of the Cashless Debit Card program in early 2023.
• The 2023 Federal Budget increase to the base rate of working age and student payments and extension of eligibility for Parenting Payment (single) to principal carers until their youngest child turns 14 and to JobSeeker recipients aged 55 to 59, who have been on the payment for at least 9 continuous months, to match payment received by those aged 60 and over.
• $230 million in the 2024 Budget to deliver a further 29 Medicare Urgent Care Clinics, bringing the total to 87.
• $925.2 million over five years from 2023–24 to permanently establish the Leaving Violence Program.

We call for:

• Poverty to be defined and monitored, with data regularly published.
• Child poverty to be halved by 2030.
• A National Children’s Act, a Cabinet Minister for Children and a Ministerial Council for Child Wellbeing.
• Increases to the base rate of working age payments to lift recipients out of poverty.
• Income support payments to be indexed biannually in line with wage growth or CPI, whichever is higher.
• An increase to the earnings threshold of income support recipients by $150 a fortnight (to $300).
• Increased access to medical bulk billing services.
• An increase to the base rate of family and domestic violence payments.
• Review of the regulation of the Buy Now Pay Later Sector.
• A widening of the eligibility criteria and fairer assessment process for the Disability Support Payment.

Financial stress, poverty and wealth inequality are on the rise. The top 10% of income earners have experienced the greatest increase in wealth through rising housing prices and their superannuation. Those on the bottom 20% of income experience persistent and recurrent poverty.

The impact of living in poverty

Just over 820,000 people on JobSeeker (July 2024) are living on an income that is around $150 below the poverty line each fortnight. Many of these people experience disability and ill health. When people live a hand to mouth existence, it is much harder for them to find a job. It creates obstacles, penalises and shames them. And the effects are worse for their children. Not only is their long-term health and wellbeing undermined but they are also more likely to face food insecurity, lack meaningful relationships and miss out on learning at home. Around 774,000 children are doing without, through no fault of their own.

The Australian Early Development Census has found that growing up in poverty is a strong predictor of a child being developmentally vulnerable by the time they start school, potentially reducing good health, education and social outcomes. In 2021, one in five children were assessed as developmentally vulnerable. In disadvantaged areas, this increases to more than one in three children. The Productivity Commission has also found that school children experiencing disadvantage are three times more likely to fall behind than other students.

We know that poverty rates are highest for households relying on JobSeeker (59.6%), working age pensions (Disability Support Pension, Parenting Payment (Single) and Carer Payment (25.7%)), single parents (25.5%), lone persons (18.7%) and renters (17%). 

Financial stress rates are highest for households on JobSeeker (51%), working age payments (41%) and other welfare payments (49%), compared to a national average of 14%.

Each year the Society provides over $50 million in emergency relief assistance, covering people’s basic needs and the essentials of life. This assistance should not be needed in a country as wealthy as Australia, but currently households relying on income support are five times more likely to experience poverty.

Not surprisingly, the impact of cost-of-living pressures for people on working age payments has been crushing – they were already struggling before the sharp price rises that started in 2021. A recent ACOSS survey has found people reported malnutrition from skipping meals and were reducing their required medication intake to make their limited funds last longer. They were also at imminent threat of homelessness because they could not afford the cost of rent. Lifting people out of poverty starts with increasing working age payments and making suitable housing more attainable and affordable.

What increases are needed to working age payments?

The Australian Government’s recent increase to working age and student payments is welcome but base rates remain well short of what is needed to cover the basics – filling a small car with petrol costs around $80, and weekly rents across Australia are becoming increasingly unaffordable.

The Economic Inclusion Advisory Committee found that JobSeeker should rise by at least $129 a week to improve adequacy, well above the recent $20 a week real increase.

Based on A Fairer Tax and Welfare System (ANU), the Society calls for:

• JobSeeker increases of $176, $249 or $338 per fortnight
• Parenting Payment increases of $167, $238 or $351 per fortnight
• Disability Support Pension and Carer payment increases of $69 or $249 per fortnight
• Family Tax Benefit (Pt A) increase of 20%
• The tax-free threshold to be increased from $18,200 to $24,000

These changes would reduce the after-housing poverty rate from 11.7% of households to 8.6% and lift between 193,000 to 834,000 people out of poverty.

The Society has commissioned ANU to update its paper and it will be released in 2025.

Why should the earnings threshold be increased?

Nearly one-in-four people receiving JobSeeker is in some form of minimal employment. Around 55% of JobSeeker recipients have work capacity of 30 hours plus per week. An increase in the earnings threshold from $150 to $300 per fortnight would allow people to earn income, gain experience, and support them to transition to work.

We note that by increasing the income free area more people would become eligible for JobSeeker, but we do not agree with the view that this would encourage longer-term reliance on the payment.