The government could splash $16 billion more on social services, boost the economy, and preserve its budget surplus all at once – and it probably won't do it

The government looks unlikely to accept renewed pleas to increase Newstart (Photo by Tracey Nearmy, Getty Images)
  • The Australian Council of Social Services (ACOSS) has revealed its 2020 budget submission, ahead of the May 12 budget.
  • ACOSS has urged the government to spend $16 billion to boost desperate social services and stimulate the economy, including by raising the Newstart unemployment payment by $95 a week.
  • According to its costings, the spend wouldn’t compromise the government’s surplus, but the Coalition appears unlikely to accept the proposals nonetheless.
  • Visit Business Insider Australia’s homepage for more stories.

Australia should look to its poor to save the economy, the government is being urged.

The Australian Council of Social Services (ACOSS) has made an impassioned appeal to the country’s beancounters and leaders to drastically reconsider their approach, ahead of the May budget.

“We’ve seen report after report of failings in our service systems, with older people being neglected in aged care and people with disability suffering abuse,” ACOSS CEO Cassandra Goldie said releasing the peak body’s budget submission to the federal government. “People in paid work have long gone without pay rises and those looking for paid work are being trapped in poverty, without a real increase to Newstart in 25 years and with unemployment rising.”

“We cannot accept the ‘new normal’.”

ACOSS is calling on the government to unleash new spending on welfare, social housing, improved mental health and aged care services, as well as support for drought-ravaged communities.

An additional $3.8 billion spend on Newstart is its centrepiece policy, pleading with the government to raise the unemployment support payment by $95 a week. It’s not the first body to make the case. A sustained campaign, which has even found support among the Business Council of Australia and former Liberal Prime Minister John Howard, has been underway to raise Newstart by $75 for years, and has suffered repeated rejection by the Coalition. Now ACOSS says the $75 figure is too little, having been outpaced by cost of living. In real terms, Newstart hasn’t budged since 1994.

An ACOSS budget would also spend an extra $1.2 billion a year to boost rental assistance by $20 a week, $2.6 billion to be invested in health promotion and prevention, $1.1 billion on a dental care scheme, and $1 billion on social housing.

In light of these living pressures, stagnant wage growth, rising unemployment, the fallout from drought and bushfires, and a flagging economy, Goldie said it’s time to prioritise the welfare of Australians over a budget surplus.

“We cannot afford a small-target Budget in these circumstances. Nor can we afford to prioritise the delivery of a small budget surplus over and above boosting wages and jobs or ameliorating the needless suffering being caused by inadequate income support and services,” she said. “Now is the time for the Government to step up and use its budget to bolster growth in incomes, spending and investment to reduce unemployment and improve community wellbeing.”

Not that the spending blows the surplus forecast. Some of the measures, like the allocation of $2.3 billion to provide aged-care in the homes of the elderly, would actually offset the growing health costs. It calls for the $6.3 billion private health insurance rebate to be eliminated along with the $500 million a year extended Medicare safety net. In fact, increased revenues would provide an $11.5 billion windfall to government coffers, according to ACOSS’ costings. In total, the entire program would only cost $4.5 billion more, preserving a $5 billion surplus pending the still-unknown cost of the bushfires.

“The government argues it can implement income tax cuts costing $32 billion a year, hold real annual growth in public spending to its lowest rate in 50 years, keep the budget in surplus and still guarantee the services the community needs,” ACOSS budget submission said. “This is clearly unrealistic, as demonstrated by the halving of projected budget surpluses over the next four years in the December 2019 Mid-Year Economic and Fiscal Outlook statement (MYEFO).”

While concerned with the livelihood of vulnerable Australians, ACOSS’ budget proposals largely echo the sentiments of Reserve Bank of Australia (RBA) governor Phillip Lowe, who has suggested – if not urged, at times – the government to inject some much-needed cash into the economy.

Lowe has acknowledged consecutive rate cuts are increasingly ineffective at moving the economic dial, a fact highlighted by its failure to slash rising unemployment – one of its key objectives.

However, as with Newstart and as with the RBA’s urgings, the Morrison government shows no inclination to listen with Treasurer Josh Frydenberg instead committed to three rounds tax cuts, the first of which has already been rolled out.

His government announced its own policies in recent weeks, including a $2 billion bushfire recovery fund to be rolled out via local councils as well as $1,000 payments for adults and $400 for children affected.

But it looks highly unlikely it will do much else to increase government spending when it hands down the budget on 12 May.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.