We Need to Talk about Refurbishing All Our Safety Nets

The Australian
23 January 2012

By Jennifer Westacott
Chief Executive, Business Council of Australia

Late last year an extract of a speech I gave for the Brotherhood of St Laurence was published in The Australian. Its theme was sharing prosperity and in it I suggested that securing a sense of “true wealth” for Australia into the future involved having some tough conversations now.

One of those conversations was about the adequacy and affordability of social security payments. It has been good to see in recent weeks that a range of prominent Australians, including colleagues from the business community, have spoken publicly about the rate of the Newstart Allowance and whether it encourages or impedes people in seeking paid work.

Workplace Relations Minister Bill Shorten has indicated that the government won’t be increasing the rate, at least in the short term, because it is designed to encourage people into paid jobs.

The point that I, and other employers, have tried to make is that entrenching people into poverty by expecting them to live on $35 a day is not a pathway back into employment.

That said, if unemployment benefits are calculated as part of an overall system to support people gaining employment, as they should be, we don’t view raising the Newstart Allowance as a stand-alone reform.

The tax forum last October started but didn’t finish an important conversation about the adequacy of social security payments in the context of reforming Australia’s taxation system.

Ensuring necessary payments are adequate and economically sustainable involves being prepared to look at where payments act as a disincentive to people who would otherwise prefer to be working. It also means being upfront with the Australian community that, as the Europeans are discovering too late, we can’t afford to spread payments so far across the economy that we end up compromising their sustainability.

In looking at the adequacy of the Newstart Allowance, we need to look at reform that will afford Australia true wealth in terms of a sustainable, meaningful social safety net.

As part of our submission to the tax forum, the Business Council of Australia commissioned Deloitte Access Economics to model trends in spending by federal and state and territory governments, based on methodology used for the Intergenerational Report. The research highlighted an unfolding fiscal crisis unless there are comprehensive changes to the tax system and a more efficient and accountable approach to government spending. Left unaddressed, it threatens the ability of governments to pay for essential services and the social safety net on which the Australian social compact is predicated.

At the same time, we need as a community to address entrenched disadvantage that sees families and communities locked into welfare and prevented from participating in our economy. As well, improving workforce participation is critical to offset the impact of our ageing population.

If we are to improve employment outcomes for people who face barriers to labour market opportunity, including indigenous Australians, older workers and people with disabilities, we need to tailor assistance to help job seekers better meet the needs of prospective employers.

Australia’s job services agencies provide a solid job-matching service for many unemployed people but they perform relatively poorly when it comes to placing people with barriers.

The experience of BCA members is that agencies do not always take the time to understand employer requirements.

We think it would be valuable to review JSA contracts to offer stronger incentives to find jobs for difficult-to-place clients.

In my speech I also suggested that the Productivity Commission be asked to investigate the extent and sources of entrenched disadvantage and the most effective means of breaking the cycle.

Notwithstanding Australia’s relative economic advantages and massive opportunities, unless we can paint a picture of true wealth and shared prosperity the community will simply reject economic and social policies we need to start pursuing now.

The conversation about the Newstart Allowance has demonstrated that different sectors of the community have more in common than many of us may have imagined.

Finding those areas of common ground and using them as a constructive entry point to tough conversations will set us apart from countries that delayed and pretended for too long.