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Federal Budget: Increasing Job Seekers Over 55 Only ‘Dangerous’; Grattan Institute CEO


Labor would set a dangerous precedent by creating two classes of benefit recipients if only Australians over 55 saw more job seekers, a leading economist warned.

Danielle Wood, executive director of the Grattan Institute, said she understood the federal government’s desire to keep any increases in Social Security benefits “modest” given the current tax constraints, but cautioned against splitting Social Security benefits based on age.

“I do think it’s a bit of a slippery slope, this distribution of people on those payments,” she told the National Press Club in Canberra on Wednesday.

“Likewise, people under 55 really struggle to make ends meet.”

Ms Wood spoke on Wednesday with Su-Lin Ong, managing director of RBC Capital Markets, and Cherelle Murphy, chief economist of EY Oceania, as the Albanian government finalizes its first full federal budget.

The government has yet to confirm media reports that the budget will include a jobseeker increase for people on benefits aged over 55 when it is handed over next Tuesday, but the idea has drawn backlash from welfare lawyers and some Labor MPs .

Ms Wood said she was not a fan of the proposal but would begrudge anyone over 55 a raise if that was all that was on the table.

Labor has already rejected calls from two government-appointed expert panels for a substantial increase in JobSeeker’s rate for everyone on the pay.

The Economic Inclusion Committee — set up last year by Labor in exchange for the support of David Pocock, the key figure in pushing through labor relations reform — recommended raising Jobsseeker by $132 a week.

That recommendation would help some 920,000 Australians on JobSeeker and related payments, but it would cost the budget nearly $6 billion a year.

Ms Wood said she expected Labor to take a cautious approach to the budget and offer modest cost-of-living relief, such as changing dispensation rules – which will allow Australians to save money on common medicines, but will cost the government nothing.

“The needs of the most vulnerable suggest that more should be spent. But macroeconomic and fiscal conditions are forcing restraint,” she said.

However, Ms Wood also outlined an alternative path for the government to support more ambitious projects, such as increasing JobSeeker and other social benefits.

“Of course all that daring comes at a price,” said Ms Wood.

“And the government should neutralize the inflationary and fiscal impact of these proposals by making tough decisions about raising taxes and cutting spending elsewhere.”

The Grattan Institute has proposed revising the controversial phase three tax cuts to make them less generous to the highest income earners.

The third tranche of cuts passed by the Morrison government with Labor backing removes the 37 per cent marginal tax bracket and lowers the marginal tax rate from 32.5 per cent to 30 per cent.

The reform, which takes effect in July 2024, also raises the 45 percent marginal tax rate threshold so that people earning between $45,000 and $200,000 pay the same 30 percent tax rate.

The Grattan Institute says the government should keep the 37-cent tax bracket to reduce the size of cuts for high-income earners and save about $8 billion a year.

“That alone would offset the fiscal and inflationary impact of an increase in JobSeeker,” Ms Wood said on Wednesday.

Labor pledged to maintain stage three tax cuts ahead of the 2022 federal election, but the inflation crisis has led to calls for a policy rethink.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.