JOBSEEKER and the CPI – a short note from ACPSRO – March 2021
When the Government announced an increase of $25 per week for the JobSeeker allowance it was widely excoriated by multiple experts and interest groups as being completely inadequate. Much was written to demonstrate this. On the other hand, you may be more concerned about the accumulating national debt and agree that the increase was not inappropriate in all the circumstances.
This note is not about the amount of the increase. Rather it is about a little noticed aspect that has an important message for most of us.
In 1994 NewStart (as it was then called) for an adult without dependants was $147.05 per week. Rent allowance ($34.20) increased that to $181.25. In 1994 the Henderson Poverty Line for a single adult seeking work was $194.93 per week. The gap was $13.68 or 7% below the poverty line.
Since 1994 the allowance has been regularly adjusted for increases in consumer prices as measured by changes in the Consumer Price Index (CPI).
In September 2020 the basic allowance (now called JobSeeker) for an adult without dependents was $282.85 per week. The energy supplement ($4.35) and rent allowance ($69.80) increase that to $357.00 per week. In the June quarter of 2020 the Henderson Poverty Line for a single adult seeking work was $561.22 per week. The gap is $204.18 or 36% below the poverty line. (The $25.00 addition will narrow that gap to 32%.)
The important message is that in the space of 16 years an income adjusted regularly for increases in consumer prices as measured by changes in the Consumer Price Index will go from being 7% below the poverty line to 36% below the poverty line.
You may estimate that you live at a standard that is twice or even three times the poverty line. But your income today, if regularly adjusted for movement in the Consumer Price Index for the next 16 years is likely to end up being some 29% (36% -7%) less than you will need to maintain your present living standard.
This has significant implications for:
- Retirees receiving an indexed annuity
- Retirees receiving an indexed pension
- Self-funded retirees anxious about future costs
- Individuals receiving an indexed benefit
- Investors receiving an indexed rent.
- Investors who buy products to protect against inflation.
In other parts of this website, you will find papers that speculate on why the Consumer Price Index is inadequate as an index of an income intended to maintain a standard of living. That detail can be a distraction. The evidence is here in plain sight.