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Government flags welfare overhaul

Welfare system to be reined in amid concerns about the cost of supporting five million Australians, as opposition leader warns aged pensions could be affected. Nine News.

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At last, the Coalition has acknowledged what Labor would not - that having Newstart and the disability pension indexed at different rates is unsustainable.

Once similar, there is now a $250 per fortnight gap between the two rates. Newstart is worth a maximum of $501 per fortnight, the disability pension $751.

The payment gap between the disability pension and unemployment benefit Newstart is set to be reduced.

The payment gap between the disability pension and unemployment benefit Newstart is set to be reduced. Photo: Gabriele Charotte

Is it any wonder that unemployed Australians on Newstart getting $35.80 per day try to get themselves classified as disabled in order to bring home $53 per day?

And it's going to get worse. Projections prepared for the Henry tax review show Newstart shrinking to just one third of the pension by 2050.

It's happening because one is lifted in line with the slow-moving consumer price index, the other with faster-moving wages.

The US economist Herbert Stein advised two American presidents, Nixon and Ford. But he is best known for the delightful Stein's Law which reads: “If something can't go on forever, it will stop”.

It has fallen to the Coalition to take the action Labor would not.

In announcing the welfare review Social Services Minister Kevin Andrews pointed to the growing gap between the amount of money that people get on on Newstart and on pensions.

“It creates a perverse disincentive for people to want to get on to the disability support pension,” he said.

It's an acknowledgement Labor never made in government, even after receiving the Henry review.

Andrews is unlikely to lift Newstart to the full rate of the pension, but he is likely to put them on the same path. The Henry review recommended something between the two extremes.

And he is likely to be told it needs to be lifted somewhat. Newstart is now scarcely enough to pay for rent and food, let alone dress someone for job interviews and buy the train tickets to get them there.

In late 2012 the Coalition sided with Labor in using its numbers on a Senate committee to block a proposal to lift Newstart. Andrews has put that behind him and is looking to the future.

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