A once in a century opportunity missed- A Liveable Income Guarantee

Oct 21, 2020

Ignoring for now the failure to promise an increase in Newstart, the general chorus emanating from commentators on the budget has been critical of the omission of serious money for social housing, for an increased childcare subsidy, and for increased rental assistance – all of which would have provided instant and widespread stimulatory bang for the buck.

The more general criticism is that the budget lacks vision or, to paraphrase an expression often used to describe John Howard: It is visionary if your eyes are glued to the rear-view mirror. But the real tragedy is that a totally painless political opportunity has been missed to comprehensively restructure and improve the approach to the provision of welfare to the unemployed.

This really was a once in a century opportunity, gifted to the government by the Covid-19 induced total removal of any limit on government spending. The government could have had the enormous political dividend of this policy change and still have implemented its entire suite of generous support measures for business. Instead, the young, the poor, the disadvantaged and women are destined to pay for this missed opportunity for years, perhaps decades, to come. All it needed to fund this proposal was the omission of one item from the budget and the insertion of this in its place.

I am referring to a new Australian National University Policy Brief which Professor John Quiggin, Elise Klein and Troy Henderson have produced. It is an ingenious suggestion that “a payment equal to the age pension, and subject to the same asset and income tests…be provided to everyone who is willing to make a contribution to society consistent with their ability to do so.” They suggest it be called a Liveable Income Guarantee (LIG), and it would have cost the government literally nothing to implement other than the foregoing of the Stage 2 and Stage 3 income tax cuts – which the majority of economists agree will have minimal stimulatory effect, and which will inevitably prove unaffordable when some semblance of normality returns to the federal budgeting process. The details of the ANU proposal can be found here.

The administrative simplicity of implementing this suggestion is enormously appealing. The rules have already been written, and tested over many years. They are simply the rules applicable to entitlement to the age pension, minimally modified. This is part of the genius of the idea. The cost would have been distributed equitably across the society via the progressive personal income tax scale. Instead we are to have an inevitable, regressive flattening of the tax scale when the government predictably brings forward the Stage 3 income tax cuts to 2021/22 in next year’s budget – just in time to act as a sweetener for an election.

The number and types of jobs created by the virtually guaranteed instant spending from day one of almost the entirety of this stimulatory measure would have been a perfect fit for the broader economy – no distortions of any kind. The savings from discontinuing the pseudo training courses provided by the profit maximising multinational employment agencies, as they mercilessly game the system and exploit the unemployed, could all have been banked – or redirected so as to more adequately fund some of the myriad under-funded government health and welfare services. Cash payments to pensioners, half of which will again be saved, would have been rendered entirely unnecessary.

Is it necessary to draw attention to the savings to government which would come from drastically reduced demands on mental and physical healthcare and legal aid services from such a measure? Or the benefits which would flow from the freeing up of sole parents to properly nurture their children? Or the benefits from making it possible for the unemployed to undertake skills training for the many aged care, early childhood education and other service jobs which will surely flow from the royal commission, and from the justifiable demands for equality from women, without the constant stress of poverty combined with a punitive system demanding countless job applications for non-existent jobs?? Need I go on?

The budget is premised on the expectation that, given enough incentives, business will lead the country out of recession. But if the government really thinks business will invest and hire in the face of dangerous uncertainty and an ongoing lack of consumer demand, it is being deluded into wishful thinking by its preferred ideology. Stimulating demand is far more likely to lift the economy.

Therefore, if there has ever been a no-brainer, the Liveable Income Guarantee is it. And, by foregoing this God-given once in a century reform opportunity in favour of a host of lavish yesteryear incentive payments to business ‘to create jobs’ (at $350,000 per job and $163,000 per job per year, as described by Alan Kohler here), our ‘Prime Minister through divine intervention’ has demonstrated not only a lack of vision, but also a lack of the Christian compassion for the poor and disadvantaged his faith might have led us to expect.

At least we now know for certain which Australians the Morrison government is governing for – and which it isn’t.

Ray Bricknell

About Ray Bricknell

Ray Bricknell is a retired project management consultant who now tutors classes in Current Affairs and Macroeconomics at the University of the Third Age, Brisbane.

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