Submission to the Senate Standing Committees on Community Affairs into the Social Services Legislation Amendment (Strengthening Income Support) Bill 2021
- Key concerns with Bill
- Inadequacy of base payment rates
- Changes to income tests
- Reinstatement of waiting periods
- Resumption and increase of mutual obligations
UnitingCare Australia welcomes the opportunity to provide feedback on the Social Services Legislation Amendment (Strengthening Income Support) Bill 2021 (the Bill).
We are deeply concerned that the new base rate for JobSeeker and related payments, as set out in the Bill, remains manifestly inadequate and will condemn people without paid work – and their families – to poverty. In place of the $75 per week Coronavirus Supplement, the Bill will only provide a $25 per week permanent increase to the base rate of payments from 1 April. Alongside this cut to income support, the Government has announced mutual obligations will be further tightened, waiting periods for working age payments reinstated, and income tests imposed that are more stringent than those currently in place.
UnitingCare Australia urges the Government to reconsider these changes and commit to an adequate, permanent increase to payments that will lift people out of poverty and enable them to live with dignity. Increasing the base rate of JobSeeker, Youth Allowance and Parenting Payments by a mere $3.57 a day is not enough to enable individuals and families to cover the essentials of life, let alone the additional costs of looking for work.
This submission highlights some of the detrimental consequences of keeping JobSeeker and related payments below the poverty line. It also demonstrates the wide-ranging benefits when payments are significantly increased, as occurred when the temporary Coronavirus Supplement was introduced in 2020. Our submission is informed by the insights and expertise of UnitingCare Australia’s network of organisations, including emergency relief providers, financial counsellors, housing and homelessness services, domestic violence services, and services supporting vulnerable children and families. It also draws on case studies from these services that illustrate the detrimental impact that a payment cut will have for many people reliant on income support, including children whose parents are locked out of paid work, women fleeing domestic violence, people with disability, students, older people struggling to re-enter the workforce, single parents, and people living with illness or poor mental health.
UnitingCare Australia urges the Committee to listen to the voices of those who will be pushed into hardship and destitution when payments are reduced, and we call on Parliament to support a permanent increase that will reduce poverty, curb homelessness, and change lives. An ongoing and adequate increase to JobSeeker and related payments will have multiple social and economic benefits: avoiding the social and health harms of entrenched poverty; reducing the impost on other service systems and additional pressure on frontline services; and supporting economic recovery by increasing consumer demand and employment growth.
Key concerns with Bill
Inadequacy of base payment rates
JobSeeker and related payments will fall well below the poverty line
Prior to the introduction of the Coronavirus Supplement, Australia’s unemployment payments were the lowest in the OECD.1 We also had the second highest rate of poverty among the unemployed across all OECD nations.2 One in eight people in Australia lived in poverty, while one in six children were living below the poverty line.3 The biggest risk factor for living in poverty was living on income support.3
As the 2020 Report from the Senate Inquiry into the Adequacy of Newstart demonstrated, the pre-COVID-19 rates of income support consigned people to deep poverty, food insecurity, housing stress, homelessness and poor health. The inadequacy of payment rates also contributed to persistently high rates of child poverty. The meagre level of unemployment payments was well below the poverty line, and this not only compromised people’s health and wellbeing, but also undermined their ability to look for and retain work, as well as placing additional pressure on an already overstretched social services system.4
The introduction of the Coronavirus Supplement represented the first real increase to unemployment payments in 26 years. This additional support lifted hundreds of thousands of people out of poverty, including children, while shielding the newly unemployed from destitution.
Our network of organisations saw the overwhelmingly positive effects that arose from the additional income provided via the Coronavirus Supplement. As illustrated by the case studies and quotes below, our network of services heard from many families and individuals who were able to buy healthy meals, purchase new clothes and shoes for their children, pay off debts, and take care of medical needs, some for the first time in years. For others, such as Leanne, it meant they were able to cover basic costs and avoid an escalation in debt and hardship when they lost employment.
Case study: Aisha
Aisha is in her early 30s and lives in a shared apartment in Sydney. Prior to COVID-19, she was living on Newstart, having become unemployed after a fixed-term work contract ended. She had struggled to make ends meet, with only $130 per week after paying rent. Aisha was often forced to choose between essential items, including groceries or vital medication for a pre-existing auto-immune condition. She did not have money to get her car repaired and became increasingly isolated, unable to afford the costs of transport and outings with her friends. She sometimes turned to local charities to help with food.
According to Aisha, the Coronavirus Supplement made an enormous difference to her life:
With the additional income from the Supplement, Aisha was trying to save some money so that she had a financial buffer for future expenses, such as fixing her car. She was also trying to save for costly specialist appointments to get her health on track. However, the constant uncertainty about the future rate of JobSeeker had caused anxiety and “a constant paranoia that it is too good to be true”:
Case study: Leanne
Leanne is a young woman living on the Northern Beaches of Sydney who had arranged summer hospitality work in the region. The Northern Beaches COVID-19 hotspot that developed over summer meant Leanne’s employment and income was lost; however, until restrictions were lifted she was able to manage her living expenses due to JobSeeker with the additional Coronavirus Supplement.
Had the rate of JobSeeker been set at the new lower rate proposed from 1 April 2021, Leanne would not have been able to meet her expenses. Essentials such as rent and food would have become unaffordable. The JobSeeker payment with the higher Coronavirus Supplement rate allowed Leanne to maintain the essentials, and with temporary relief from debt arranged by a financial counsellor she was able to get back on track financially and not suffer permanent disadvantage or more severe long-term debt hardship.
For frontline services, the Coronavirus Supplement played a vital role in mitigating demand and preventing service systems from being overwhelmed. While the level and nature of demand for assistance varied geographically and across different areas of service delivery, a number of financial counselling and emergency relief providers from our network reported a significant decline in demand when the Coronavirus Supplement was first implemented.*
For example, several services that operate the National Debt Helpline reported a drop in calls from people receiving JobSeeker, Youth Allowance or Parenting Payment. Some services also reported an increase in demand as the Supplement was reduced, as illustrated by the graph below, which shows the number of clients turned away from Uniting WA’s Emergency Relief services between June 2019 and February 2021.
Prior to the pandemic, many community services were already under-resourced and over-stretched, reflecting the existing level and complexity of need among those living in poverty in Australia. With the looming reduction in payments from 1 April 2021, many organisations within our networks have voiced deep concern about the risks of rapidly escalating homelessness, increased financial hardship, and additional social, emotional and mental health issues that will likely arise as more households are plunged into severe financial hardship. While the Bill provides a wafer-thin increase to the base rate, people receiving the current level of JobSeeker and related payments will experience a $50 per week loss in income, pushing them below standard benchmarks for poverty and income adequacy. This will exacerbate the demand on frontline services and result in increased downstream costs across government service systems.
Feedback from our services, summarised below, reveals widespread concern about the implications of reduced payments for people living in poverty and the anticipated escalation in demand on frontline services.
Summary of feedback from UnitingCare Australia’s network of services
What will the reduction in JobSeeker, Youth Allowance and related income support payments from 1 April 2021 mean for the people you serve?
What do you anticipate the reduction in JobSeeker and related payments will mean for the services you provide?
* The exception to this was an increase in demand for food relief and emergency relief from people who were not eligible for the Coronavirus Supplement, primarily those on temporary visas. Many services also reported a greater proportion of those seeking assistance were accessing support for the first time. Some services also experienced changes in service usage due to lockdown restrictions and changed modes of service delivery.
Children and families
The drop in income for families reliant on JobSeeker or Parenting Payments will have profound implications for children with parents locked out of paid work. As noted above, prior to the pandemic the rate of child poverty in Australia was stubbornly high, with one in six children living below the poverty line.3 An overwhelming majority of these children were living in families reliant on JobSeeker or Parenting Payment. The short and long-term effects of child poverty can be profound, with multiple studies showing that child poverty can contribute to a range of negative social, educational and health implications.5
Permanently lifting JobSeeker and Parenting Payments above the poverty line is vital to improving the health and wellbeing of children living in families reliant on income support. In July 2020, over 1.1 million children were living in families receiving the Coronavirus Supplement, with the majority living in sole parent families.6 As of March 2021, around one million children are estimated to be living in families receiving the Coronavirus Supplement.*
Case study: Neive
Neive is a single mother with three dependent children aged 13, 11 and 8. She is the victim of domestic violence and in early 2020 moved to a safe house. Due to chronic illness, Neive was unable to continue paid employment. She now receives Jobseeker Payment and, since April 2020, has received the Coronavirus Supplement.
Jobseeker and the Coronavirus Supplement helped Neive to improve the quality of life for herself and her children. She has been able to pay for daily living expenses and, most importantly, provide for her children and cover their school expenses. As a single mother living with a chronic illness, the increased financial support has allowed Neive to focus on recovering her health while supporting her children’s needs.
The additional income has also been vital in allowing Neive and her children to feel safe and secure. Neive has said that the additional Coronavirus Supplement “has been beneficial for me and my kids not feeling vulnerable and being financially and mentally stable and independent.”
* This estimate has been made by Anti-poverty Week, and is based on the 10% reduction in JobSeeker and Youth Allowance Other Payments that has occurred since July 2020.
Domestic and family violence
Our services have expressed grave concerns about the implications of reduced payments for family violence. Reduced income and greater financial stress can play a role in precipitating and exacerbating family violence. As shown in recent study examining domestic violence since COVID-19: “the more financial stress respondents were under, the more likely they were to report experiencing domestic violence”.7 The stress and isolation experienced during community lockdowns has further contributed to an increase in the numbers of women experiencing physical or sexual violence since the start of the pandemic, with a third of women indicating that it was the first time they had experienced physical or sexual violence in their relationship.8
In addition to increasing the incidence and severity of domestic violence, financial stress and a lack of sufficient financial resources can also make it more difficult for women to seek support and leave an abusive partner. Economic insecurity is one of the reasons people feel unable to leave a violent relationship, and why some may return to violent partners. When a relationship ends, it is the general trend that women experience a precipitous drop in their household income. Women leaving violent relationships may be unable to maintain a position in or enter the workforce due to a wide range of issues, which can include: relocation to ensure safety; resettling children in school and friendship networks; physical and psychological trauma and the need for recovery; and ongoing experiences of post-separation abuse – including work-related harassment, economic abuse and legal systems abuse.
In this context, an adequate and supportive social security safety is vital to enable women and children to leave violent relationships and stabilise their situation. The inadequate rate of payments provided in the Bill, along with the reintroduction of the Ordinary Waiting Period beyond July 2021, works against this. As reported by one of the domestic violence services in our network, “the low level of income support payments, the harsh treatment of people through unreasonable mutual obligation requirements and the operation of the Targeted Compliance Framework can make it difficult for women to leave abusive relationships”. According to another senior practitioner in a domestic violence service:
Financial control and financial dependence is a big factor and contributor to why women decide to stay in a violent relationship and with abusive partners. The increase in JobSeeker payments assisted many family violence victim/survivors to move forward towards a life free from abuse, making meaningful changes to their life earlier than expected with less possible risks, which is what we all desire while working with women [in such situations], but it’s not always possible given the limitation in resources women have in place. The extra financial support assisted woman to have increased autonomy and control over their own life and decisions related to safety.
The importance of increased income support payments for survivors of domestic violence are illustrated below by the stories of Ellen and Camille.
Case study: Ellen
Ellen lived in regional NSW and had tried on several occasions to leave a violent and abusive relationship. With the additional financial support of the Coronavirus Supplement, she was able to move to safety in Sydney where she could also access social support systems. The additional income enabled her to secure private rental and establish a new life while waiting for an intervention order to be processed through the courts, enabling her to have long-term protection from her former partner.
Case study: Camille
Camille moved from Regional Victoria to escape family violence. As a stay-at-home spouse, Camille had not engaged in paid employment for over 25 years. She became actively engaged with a Uniting job agency and then COVID-19 happened.
With her limited work experience, Camille is finding it extremely difficult to secure a job. After relocating to Melbourne, she was placed in temporary transitional housing, first at a woman’s refuge and later in hotel accommodation. As her temporary accommodation comes to an end, Camille has only been able to secure a rooming house, which will cost almost 30 per cent of her income.
Not only is the rooming house expensive, but she lives in constant fear for her safety, with many of the residents coping with mental health or drug-related issues. The only income Camille has received since arriving in Melbourne is the JobSeeker payment. She mentioned that during lockdown, and with the Coronavirus Supplement, she was able to buy those items she had to leave behind. She was beginning to feel some sense of stability with new clothing, a phone and a balanced diet. However, with the Coronavirus Supplement due to be cut, Camille is conscious she will struggle to meet these additional costs, causing her further anxiety.
When visiting emergency relief, Camille mentioned that because the payments have already reduced by more than half – and with the high costs of renting continuing to mount – her income for food and other basic living expenses is incredibly limited. She is now relying on emergency relief services all around Melbourne to secure food, toiletries, clothing and medicine.
Disproportionate impact on young people
The economic and employment ramifications of COVID-19 have disproportionately affected young people and exacerbated many of the challenges they were already facing before the pandemic. The COVID-19 recession compounded a decade of persistently high youth unemployment, pushing rates close to the highest level seen this century and at a new crisis point. While youth unemployment has dropped since the peak of the pandemic, youth unemployment and underemployment remain high and are more than double the rates for the wider working age population. For most young people without paid employment, income support payment rates are simply too low to meet the costs of daily living and job search or study, unless they live at home or have substantial support from their parents. This includes young people exiting the child protection system, many of whom struggle to secure stable and affordable housing and paid employment.
In this context, dropping Youth Allowance and JobSeeker back to poverty-level rates will have dire consequences for the many people already struggling to secure work and housing, or undertake education or training.
Case study: Nina
As a teenager, Nina faced homelessness. She is now 20 years old and currently lives in transitional housing. Prior to COVID-19, Nina struggled. She had no freedom to hang out with friends and family without any disposable income, living week to week. With the additional Coronavirus Supplement and suspension of mutual obligations, Nina had the resources to upskill and she completed two TAFE-accredited courses. Not only has this increased Tina’s future employment prospects but she found a passion for a career in the hospitality industry. The additional income has improved her quality of life, and Nina’s mental and physical health have improved. She says the additional Coronavirus Supplement has allowed her to feel safe and to enjoy life with a lot less stress, given she has been able to save a small amount of money in case of an emergency. She said she has been able to use her card to buy essentials without fearing the transaction will decline. Above all else, Nina has said she is grateful that she has no longer had to go hungry.
With the pending cut to the Coronavirus Supplement, Nina is terrified about going back to a time where she is constantly concerned about not being able to pay for rent, bills and food. She’s also worried about the significant negative impact on her mental health, which creates an additional barrier to employment.
Housing stress and homelessness
Without a permanent and more substantial increase to JobSeeker and related payments, rental stress will undoubtedly increase, with many services anticipating a surge in homelessness. Even with the additional Coronavirus Supplement, many tenants in private rental struggled to meet costs. Anglicare Australia’s Rental Affordability Update, released in the wake of the COVID-19 downturn, found that almost 99 per cent of rental listings and share-houses were not affordable for someone on Jobseeker, even with the Coronavirus Supplement. This situation will likely be compounded in states and territories where the reduction in income support coincides with a lifting of the moratorium on rental evictions and freezes on rental payments. Some tenants have accumulated substantial rental arrears, while others face difficulties due to escalating and ever-more unaffordable rental costs.
Case study: Jane
Jane is a single mother with four children who currently receives Parenting Payment and the Coronavirus Supplement. Due to the housing shortage in Perth, she was forced to relocate and took on a rental that she is struggling to afford (between $380 and $450 per week). When the Coronavirus Supplement ends, Jane will have insufficient funds to cover her rent and faces the prospect of eviction. As the demand for private rental is so high, Jane is fearful that she and her children will become homeless as she is unable to afford any other properties.
Case study: Sarah
Sarah receives JobSeeker and has been struggling to pay her rent after her partner left her and her two children. Her financial situation worsened as the Coronavirus Supplement was reduced in September and December, and Sarah had to ask her parents to have custody of her children, as she was unable to meet rental costs. She has not been able to find an affordable rental property, and is concerned this will become even more difficult once her income drops further from 1 April 2021.
Case study: Dylan
Dylan initially presented to emergency relief seeking food security and assistance with housing and phone credit. He confided that he had been couch surfing and was without stable housing as a result of a break-up in his relationship.
The relationship breakdown was a direct result of the extended COVID-19 lockdown. With increased social isolation, patience and compassion within the relationship began to decrease just as tension, alcohol and drug use increased. Consequently, when Dylan left what had become an abusive relationship, he found himself without a home, stability or support.
Initially, because of the Coronavirus Supplement, Dylan was able to survive and meet basic costs. With the pending cuts to the Supplement, however, Dylan is now in a state of crisis. He has been referred to social housing, however the waiting list is very long due to the recent escalation in demand. Homeless for the first time, Dylan is unsure how to navigate the services he requires. Now in extreme poverty and facing further cuts his already meagre income, Dylan is experiencing chronic anxiety and depression as he looks to an uncertain future.
Case study: Mary
Mary is in her forties, single and with no dependents. She is a from a culturally and linguistically diverse background, with no other family in Australia to provide her with support.
Mary was referred to a financial counsellor as she is experiencing considerable financial hardship. She lost her job at the beginning of the COVID-19 lockdown, and has found it difficult to secure further employment since she works in retail, an industry that was devastated by the economic crisis of 2020. She is now completely reliant on the JobSeeker Payment.
Mary’s income does not meet basic living expenses, including accommodation, food, her monthly phone bill and utilities. Her position will worsen in March if the JobSeeker Payment is further cut to just $40 a day. Mary has fallen into significant debt after taking out multiple payday loans to manage her rental payments, even though her rent was reduced during the pandemic to help her to maintain her current accommodation, which she had moved into after fleeing family violence. Mary’s loan repayments are unsustainable given her current income.
Unless there is a permanent increase to the JobSeeker Payment, Mary will be forced to leave her rental accommodation as the old rate of JobSeeker will not cover her fortnightly rent, let alone food and other essential items. Despite Mary being linked to housing support services, she is about to become homeless. She now awaits a tribunal hearing to determine what her arrears repayment obligation will be after she is evicted next month.
Changes to income tests
The Bill provides changes to the income-free area that reverses the more generous income test introduced in 2020, as well as removing indexation of the income-free area for working age payments. This is a step backwards for those currently on JobSeeker who are working part-time, many of whom are in insecure and precarious low-paid work.
Under the more generous income test, from 25 September 2020 to 31 March 2021 the income-free area (the amount of income a person can earn before their payment rate is reduced) increased from $106 per fortnight for JobSeeker Payment and $143 per fortnight for Youth Allowance (Other) to $300 per fortnight. A person’s fortnightly payment rate was then reduced by 60 cents for each dollar of income over $300. At the time this change was announced, the Government stated it would “encourage people to re-engage with the workforce because we know that even a few hours of work a week while on payment can have a dramatic impact on the pathway off income support.”9
The income-free area in the Bill will mean that from 1 April 2021, the income-free area will be reduced to $150 a fortnight; the removal of indexation will result in the real value of this income-free area declining over time. At 29 January 2021 there were 274,172 people who had some earnings while claiming JobSeeker or Youth Allowance Other – 94 per cent of them were earning over $143 a fortnight. These people will be directly affected by both the change to the income test and the loss of $50 a week from their base payment. This will mean a person on JobSeeker who is earning $300 per fortnight will experience a loss of $40 per week compared with March 2021, in addition to the $50 a week reduction in the base payment.
In short, the reduction in the income-free area will be a setback for people in low-paid, part-time employment, reducing the returns from participation in employment and preventing people on low incomes from achieving a degree of financial security and stability.
Reinstatement of waiting periods
UnitingCare Australia opposes the reinstatement of the Ordinary Waiting Period. We note that this follows on from the resumption of other waiting periods and income tests, including the reintroduction of the Liquid Assets Test Waiting Period on 25 September 2020. The cumulative effect of these waiting periods is that people are left without financial support for longer periods and are more likely to exhaust their resources or fall into debt or homelessness before they receive income support payments. This is particularly detrimental to women seeking to leave an abusive relationship, as well as people in acute housing stress. It is also increasingly out of step with the contemporary market and the growth in insecure, short-term work.
Resumption and increase of mutual obligations
UnitingCare Australia is concerned that the changes provided for in this Bill will be implemented at the same time as onerous and punitive mutual obligations are reimposed and strengthened. We believe these mutual obligations and the penalties for non-compliance are disproportionate and counter-productive, and will ultimately compound the hardship from inadequate payment rates, resulting in more being people cut off income support and pushed deeper into poverty. Harsher mutual obligation payments will only make life harder for people without improving their job prospects.
As this submission has shown, the economic crisis triggered by COVID-19 not only exposed the flaws in our social security system, but also demonstrated that an alternative approach is possible. The introduction of the Coronavirus Supplement lifted hundreds of thousands of people out of poverty and shielded the newly-unemployed from destitution. Cutting this Supplement while offering a wafer-thin increase to the base rate will reverse the gains that Australia has made in tackling poverty, pushing many individuals and families into hardship, debt and housing stress, while at the same time placing pressure on already overstretched and underfunded social support systems.
If Australia is to achieve a more equitable and inclusive economy as we emerge from the pandemic, we need a social system that better protects against poverty and is more than a threadbare safety net of last resort. We therefore urge the Committee to recommend that the Bill provides for an adequate, permanent increase to JobSeeker and related payments that will lift people out of poverty and enable them to live with dignity.
1 OECD, (2021). OECD Statistics (online): Net replacement rate in unemployment. https://stats.oecd.org/Index.aspx?DataSetCode=NRR
2 OECD, (2017). Benefits and wages: statistics. https://bit.ly/2lKdW1t
3 Davidson, P., Saunders, P., Bradbury, B. and Wong, M., (2020). Poverty in Australia 2020: Part 1, Overview. ACOSS/UNSW Poverty and Inequality Partnership Report, No. 3. ACOSS: Sydney. http://povertyandinequality.acoss.org.au/wp-content/uploads/2020/02/Poverty-in-Australia-2020_Part-1_Overview.pdf
4 Australian Senate, (2020). Final Report of the Community Affairs References Committee Inquiry into the Adequacy of Newstart and related payments and alternative mechanisms to determine the level of income support payments in Australia. Canberra. https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Community_Affairs/Newstartrelatedpayments/Report
5 Miranti, R., Brown, L., Li, J., Tanton, R., Vidyattama, Y., Tuli, S and Rowe, P., (2018). Child Social Exclusion, Poverty And Disadvantage In Australia. NATSEM: Institute for Governance and Policy Analysis (IGPA), University of Canberra. Report commissioned by UnitingCare Australia. https://unitingcare.org.au/wp-content/uploads/2019/07/Child_Social_Exclusion_Poverty_and_Disadvantage_in_Australia_Report-1.pdf
6 Parliament of Australia, (2020). Senate Committee on COVID-19 Answers to Questions on Notice #269, Question SQ20-000532. https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/COVID-19/COVID19/Additional_Documents?docType=Answer%20to%20Question%20on%20Notice
7 Boxall H & Morgan A 2021. Who is most at risk of physical and sexual partner violence and coercive control during the COVID-19 pandemic?. Trends & issues in crime and criminal justice no. 618. Canberra: Australian Institute of Criminology. https://www.aic.gov.au/publications/tandi/tandi618.
8 Boxall H, Morgan A & Brown R 2020. The prevalence of domestic violence among women during the COVID-19 pandemic. Statistical Bulletin no. 28. Canberra: Australian Institute of Criminology. https://www.aic.gov.au/publications/sb/sb28