Greens leader, Richard DiNatale, has been rubbished by economists for proposing a socialistic “universal basic income” (UBI) scheme in his Press Club Address yesterday. From The Australian:
Greens leader Richard Di Natale’s policy to abolish all existing welfare and introduce a “universal basic income” — a non-means-tested payment to all citizens — would require federal public spending to rise by $254 billion a year, or by almost 55 per cent…
Social researcher Ben Phillips — who modelled for The Australian the cost of paying all residents aged 15 and over $23,000 a year (the Age Pension) and children $5500 a year (the maximum rate of Family Tax Benefit A) — said the plan was “utopian”. On his analysis, all marginal income tax rates, including the current zero-rate on incomes up to $18,200, would need to rise by 33 percentage points to pay for the proposal, bringing the top rate on incomes above $180,000 to 78 per cent.
“One of the claims of UBI advocates is that they remove the high effective marginal tax rate,” Mr Phillips said. “To some extent that’s true but the majority of taxpayers move to even higher effective rates”…
Independent economist Saul Eslake said Senator Di Natale’s policy, announced at the National Press Club yesterday, was an “extraordinarily expensive way of seeking to address what may well be a few cracks through which a limited number of people fall”.
Peter Whiteford, social security expert at the ANU, said Australia already had the most targeted social security system in the OECD…
Privately, senior Greens conceded an effective UBI payment would need to be between $20,000 and $40,000 a year…
I think Saul Eslake’s comment that UBI is an “extraordinarily expensive way of seeking to address what may well be a few cracks through which a limited number of people fall” sums up the Greens policy perfectly.
The main shortfalls of Australia’s social security system are as follows:
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the Newstart (‘Dole’) allowance for the unemployed is highly inadequate and should be significantly increased; and
the Aged Pension is too generous to those with significant wealth, but not generous enough to those with few means, thus warranting a shift in payments.
As shown in the next chart, the Newstart Allowance has not increased in real terms (i.e. above the Consumer Price Index) since 1994. This means that people who are unemployed have not shared in increases in living standards received by the rest of the community for more than 20 years.
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OECD comparisons also shows that Australia’s dole allowance is amongst the lowest in the world for singles:
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.