Post by bear on Oct 7, 2022 16:12:24 GMT 7
Murray Watt says the government is providing the largest cost-of-living increase to welfare recipients in 30 years. Is that correct? RMIT ABC Fact Check
Minister for Emergency Management, Agriculture, Fisheries and Forestry Murray Watt says the government is providing the largest cost-of-living increase to welfare recipients in 30 years.
The claim
As the cost of living soars, Australians receiving some welfare payments have seen some relief with the bi-annual indexation of payments — applied on September 20 — leading to an increase in the pension, JobSeeker and a number of other allowances.
Taking to Twitter soon after the changes were announced earlier in the month, Labor senator for Queensland Murray Watt credited the increase to the government.
"Cost of living increases hit our poorest hardest," Senator Watt, who is the minister for emergency management and agriculture, fisheries and forestry, said.
"So we're providing the biggest cost of living increase in 30 years to pensioners, carers, JobSeekers, single parents, students & more. Labor cares."
Has the cost of living improved for welfare recipients, and can Labor take credit? RMIT ABC Fact Check investigates.
The verdict
Senator Watt's claim is misleading.
The September 2022 boost to welfare payments was a routine increase designed to ensure payments keep pace with the cost of living.
By design, these regular increases maintain but do not provide an increase to recipients' purchasing power, and occur regardless of the government in power.
Notably, a number of ad hoc increases above the rate of inflation (and other indexation factors) have been made by previous governments to payments over the last 30 years, providing additional cost-of-living relief to welfare recipients.
Indexation is legislated to occur automatically every six months to allow welfare payments to keep pace with the cost of living.(ABC News: Keane Bourke)
The context of the claim
Senator Watt's claim was made on Twitter in the hours after the Department of Social Services (DSS) released its September indexation rates for government payments, which would see a number of allowances rise by 4 per cent.
As a result of the adjustment, the age and disability support pensions are set to increase $38.90 per fortnight for a single person and $58.80 for couples.
JobSeeker payments for single people will increase by between $25.70 and $35.20 per fortnight, depending on circumstances and age, while ABSTUDY, Parenting Payment and Rent Assistance will also get a boost.
In his tweet, Senator Watt linked to an ABC report detailing these rate increases.
How and why welfare payments are adjusted
As detailed by the Parliamentary Library in 2020, most social security payments are adjusted twice a year — on March 20 and September 20 — as legislated under the Social Security Act 1991.
These adjustments are referred to by the DSS as indexation.
The majority of payments are indexed in line with the Consumer Price Index (CPI), which, as the Australian Bureau of Statistics (ABS) explains: "measures quarterly changes in the price of a 'basket' of goods and services which account for a high proportion of expenditure by the CPI population group (i.e. metropolitan households)."
Pensions — including the Age Pension, Service Pension, Disability Support Pension and Carer Payment — are adjusted by either CPI or the Pensioner and Beneficiary Living Cost Index (PBLCI), which tracks changes in cost of living expenses for age pensioners and other welfare recipient households.
The cost of living for pensioners is calculated by its own dedicated index.(ABC News: Margaret Burin)
In those cases, the measure used is whichever has experienced the greater movement in a six-month period.
Pensions are also, as explained in a 2014 Parliamentary Library document, benchmarked against a percentage of Male Total Average Weekly Earnings (MTAWE) — for couples this percentage is 41.67 per cent, while singles get 66.33 per cent of the couples rate (around 27.7 per cent of MTAWE).
"‘Benchmarked' means that after it has been indexed, the combined couple rate is checked to see whether it is equal to or higher than 41.76% of MTAWE," the library explains.
"If the rate is lower than this percentage, the rates are increased to the appropriate benchmark level."
According to the Parliamentary Library, benchmarking pensions against MTAWE "is seen as ensuring pensioners maintain a certain standard of living, relative to the rest of the population".
Parenting Payment is also benchmarked against MTAWE, according to the DSS.
In addition to routine indexation adjustments, governments can also make ad hoc adjustments to welfare payments, as the 2010 Australia's Future Tax System Review (known as the Henry Review) discussed.
According to the Henry Review, these adjustments better reflect "changes in community standards" that cannot be addressed through automatic adjustments alone.
"Slower shifts, such as changes in the composition of households and the nature of workforce participation, can be more appropriately dealt with through separate government decisions."
A cost of living increase?
In making his claim, Senator Watt referred to September's bi-annual adjustment of welfare payments as "the biggest cost of living increase in 30 years".
As detailed above, however, these adjustments to payments are specifically designed "to maintain their real value over time", as the Parliamentary Library put it in the 2020 explainer.
"Payment rates are indexed to maintain their real value — so they have the same purchasing power as costs of living increase," the library noted.
This means that each bi-annual adjustment of welfare payments is designed to have the same effect on cost-of-living pressures for recipients; that is, cost of living remains steady for recipients.
As Ben Phillips, a principal research fellow and associate professor at the centre for social research and methods at the Australian National University, told Fact Check:
"It was misleading [of Senator Watt] to construe the change in language which may give some people the impression the increase was a real increase, or one that was above the general rate of inflation," Mr Phillips said in an email.
Brendan Coates, the economic policy program director at the Grattan Institute, noted the recent increase was "simply the latest in a long-running process of indexing payments to reflect changes in the cost of living".
"Payments are rising by a record amount because inflation is at historically high levels," Mr Coates told Fact Check, "which means JobSeeker needs to rise by more than it typically does just for the purchasing power of JobSeeker recipients to stay still in real (after inflation) terms."
John Quiggin, a laureate fellow at the University of Queensland, concurred.
"The increase is exactly what would have been given by a re-elected LNP government under the policy of indexation which dates back to the early 1970s," Professor Quiggin said.
"The increase is high because of the high rate of inflation, for which Labor presumably does not take credit."
The latest inflation data released by the ABS, relating to the June quarter, shows the CPI increased 6.1 per cent annually while the PBLCI rose 5 per cent.
According to the head of prices statistics at the ABS, Michelle Marquardt, the annual rise in the CPI "is the largest since the introduction of the goods and services tax (GST)" in July 2000.
That rise was also 6.1 per cent, though the annual CPI fell back to around 3 per cent once the temporary impact of the GST change subsided.
Between 1992, the beginning of the 30-year period referred to by Senator Watt, and the GST surge, the highest annual CPI change recorded was 5.1 per cent in 1995.
In other words, the cost of living as measured by the CPI is currently at its equal highest level in 30 years.
The data
The DSS publishes historical data for most welfare payment rates, including the age and disability pension, unemployment benefits (now known as JobSeeker), the Parenting Payment and Rent Assistance.
The department also provided Fact Check with data relating to ABSTUDY payments (a group of payments for Indigenous students), which is not available online.
Fact Check has analysed these datasets, which show payment rates as of indexation dates (March and September each year) as well as a small number of instances at which payments were increased at other times, in addition to record of legislative changes relating to welfare payments.
Increases to welfare payments
Fact Check found governments had made a number of increases to welfare payments above the rate of inflation over the past 30 years.
Senator Watt's claim relates to the last 30 years.
In that time, a number of one-off, ad-hoc increases have been made to welfare payments over and above increases made as a result of indexation.
By nature, these increases, unlike the bi-annual adjustment to payments, are above the rate of inflation and other indexation factors and therefore provide a cost-of-living boost to recipients.
In 1993, for example, the pension was increased by $3 per week for single people and $2.50 per week for each partner of a couple.
According to the department's compendium of legislative changes to social security (1983-2000), this increase, made in January, incorporated bringing forward the scheduled March indexation adjustment, as well as "ad hoc amounts of $2.55 (single) and $2.10 (each partner or a couple)".
Later that year, the rate of Rent Assistance was increased by "$4.00 over and above any indexation adjustment". Paired with an indexation increase made at the same time (March of that year when the annual CPI rise was 1.2 per cent), this boost led to a 6.7 per cent hike in payments for some recipients.
In March 1994, meanwhile, the Keating Labor government increased Newstart (now known as JobKeeper) by an additional $3 per week on top of an indexation increase of 85 cents — making the increase more than four times the rise in the "cost of living" as assessed at the time.
Rent assistance was once again subject to an ad hoc increase in March 1996, when, in addition to indexation increase, rates rose by $2.50, according to the compendium of legislative changes.
On January 1, 2000, the ABSTUDY living allowance was brought in line with Youth Allowance rate, representing a 15.7 per cent increase — not linked to indexation — to the payment for single students aged 21 and over without children.
The introduction of the Goods and Services Tax (GST) on July 1, 2000 also led to an increase in social security payments, as detailed in the department's compendium.
"Rate increases and other changes were made to all social security payments to compensate recipients for increases in prices flowing from the new (GST)," the compendium states.
Changes included an initial 7 per cent increase to Rent Assistance and a 4 per cent increase to all other social security payments (in the case of the pension, this increase came via a supplement payment).
The legislation also included "a mechanism for clawing back some of the increases in maximum rates of indexed payments over time, so that the final increases would be 5 per cent for Rent Assistance and 2 per cent for other social security payments".
According to then treasurer Peter Costello, the "overall effect" of the GST-related changes meant income support payments would be "1.5 per cent higher than they would have, had normal indexation arrangement applied".
"The four per cent increase will raise the level of these payments by significantly more than the expected impact of tax reform on prices, as measured by the CPI," Mr Costello said in a speech to parliament in 1998.
Later, in September 2009, more than 3 million people receiving the pension and related allowances received a boost to their payments "on top of an indexation increase", according to the Department of Social Services.
"The maximum single rate of pension was increased by $65.00 a fortnight ($60 in the base rate + $5 in the new Pension Supplement)," a page on the DSS website explains.
"Couple pensioners received an increase of $10.15 each per fortnight as part of the new consolidated Pension Supplement."
Combined with the routine bi-annual indexation adjustment (at a time when CPI was rising annually at 1.2 per cent), this increase constituted an 11.9 per cent boost to the pension for a single person, according to the historical DSS data.
Pensions (as well as the Parenting Payment) also received a boost in the following adjustment cycle (March 2010), when the MTAWE benchmark increased from 25 per cent to 27.7 per cent.
The COVID-19 effect
The pandemic has seen temporary and permanent one-off increases to unemployment benefits.(ABC News: Daryl Torpy)
More recently, the COVID-19 pandemic saw a number of government payments for working-age Australians increase substantially.
In March 2020, as Australian cities and regions entered the first round of pandemic lockdowns, a coronavirus supplement payment was introduced for people receiving JobSeeker, Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefits payments.
This supplement — of $550 per fortnight — effectively doubled the JobSeeker payment rate and was in place for six months.
After the initial six months, the supplement was reduced to $250 per fortnight in September before dropping again in January 2021 to $150 per fortnight, where it stayed until it was abolished on March 31.
As the coronavirus supplement ended, the government legislated a permanent increase of $50 per fortnight to all working age payments (including Jobseeker, Youth Allowance, Parenting Payment, ABSTUDY and Austudy) under the Social Services Legislation Amendment (Strengthening Income Support) Act 2021.
That $50 boost, applied outside of the regular indexation cycle, represented an 8.8 per cent increase to JobSeeker and ABSTUDY payments for singles, a 9.7 per cent increase for parenting payment and JobSeeker for partnered recipients and a 6.3 per cent increase for parenting payment for singles.