Publications - NATSEM

Here is the truth about the Howard Government's proposed "Welfare to Work" initiatives, aimed at increasing the opportunities and incentives for people with a disability:

The Government’s proposed welfare to work reforms will not directly affect the disposable income or effective marginal tax rates (EMTRs) of those Australians who are already in receipt of Disability Support Pension (DSP) on 1 July 2006 and who remain on that payment.

However, those persons with disabilities who begin receiving income support after 1 July 2006 will be placed on Newstart Allowance if they are assessed as being able to work 15 to 29 hours a week at award wages. The Newstart Allowance maximum payment rate for single adults in 2006-07 is $46 a week lower than that of DSP, resulting in an immediate loss of this amount of income for those placed on Newstart Allowance rather than DSP. The gap between DSP and Newstart Allowance will increase further in future years, as DSP is indexed to movements in average weekly earnings, while Newstart Allowance is indexed to the (generally lower) Consumer Price Index. As a result, by 2009-10, for example, the maximum payment rate for Newstart Allowance for single adults will be about $224, some $68 lower than the $292 payable for DSP (rather than the $46 a week gap apparent for 2006-07.)

The Newstart Allowance income test is also much less generous than the DSP income test, and its payment is also less than that of the DSP. Taken together, these mean that the losses in take-home income can be as high as $122 a week for single people with disabilities and around $390 per week of private earnings who are placed on Newstart Allowance rather than DSP. People with disabilities placed on Newstart Allowance are more than $100 a week worse off when their private incomes range between $196 and $448, relative to the payments they receive under the current system. These reductions in income amount to a 25 to 27 per cent cut in income when private incomes range from $196 to $400 a week.