Increasing the Newstart Allowance: A necessary part of equitable fiscal stimulus

by David Ingles and Richard Denniss

The arguments for a higher Newstart Allowance or unemployment benefit include the fact that the unemployed have a low propensity to import and to save and are geographically distributed across the country. There is the added virtue of helping to address an increasing problem of horizontal equity, the notion that those in a similar financial position should be treated equally. The different indexation regimes applying to pensions (indexed to wages) and allowances (indexed to prices) increasingly create distortions in the welfare safety net. The single rate of the NSA is now $11,682 per annum compared with the pension rate of $14,615, and the couple rate is $21,070 compared with $24,414. In addition, the means tests on the NSA are much tighter.

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