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Young people wishing to sign onto the dole will be forced to wait six months before they receive a cent of government money, after which they will have to work for the dole for another six months before either getting a job, or getting cut off again for another six months.
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Budget 2014: where the pain hits
Almost no-one's hip pocket is untouched by Joe Hockey's budget, explains Matt Wade.
From January 1 next year, all under-30s who want to sign onto the dole (Newstart) or Youth Allowance ''Other'' (the present, lesser payment for unemployed people up to 22) will be subject to the new system, which will save the budget $1.2 billion over four years and which is aimed at getting the young ''earning or learning''.
In addition to the six-month waiting period, the eligibility age for Newstart will rise from 22 to 25 years. Newstart is worth about $45 more a week for a single person living apart from their parents than the Young Allowance ''Other'' payment.
During the mandatory six-month waiting period the young unemployed person will be required to participate in a government-funded ''job search and employment services activities''. If he or she has previously been employed, the six-month waiting period will be discounted - for every year of previous employment, a month will be taken off the waiting period.
Once the six-month waiting period is over, the unemployed youngster will have to do at least 25 hours a week in Work for the Dole activities for another six months, before either getting a job or going back through the whole cycle again, meaning another six months of no government money whatsoever.
Employers who pick workers off the dole queue will be eligible for a wage subsidy - meaning the young person's dole payment would be re-directed to his or her employer for six months.
In addition to these changes, threshold tests for the dole will remain frozen for three years from July 1, as opposed to rising in line with the CPI. The actual rates of Newstart and Youth Allowance will also be frozen.
Some jobless under-30s will be exempt from the tough new scheme, including those unable to work more than 30 hours a week, carers and parents, part-time apprentices and Disability Employment Service clients.
Young people on the Disability Support Pension also face a crack-down. All DSP recipients under 35 who signed onto their pension between 2008 and 2011 (when tougher eligibility criteria were introduced by the previous Labor government) will be reassessed under the new, tighter system.
People with a ''severe or manifest'' disability will not have to re-apply, which appears to leave the way open for recipients with a mental illness to be reassessed. Those recipients under 35 who are assessed as being able to work for at least eight hours a week will also be given a ''participation plan'', meaning they will have to engage in labour market activities of some sort, such as Work for the Dole, work experience or education and training. People who do not comply will be sanctioned, although the budget papers do not specify how.
Disability Support Pension recipients will not be able to leave Australia for more then four weeks and keep collecting their pension overseas. This will save the budget $12.3 million over five years.