Government policy driving dole growth

While the introduction of the training supplement would be best described as an unintended consequence of a well-intentioned policy, it has been the specific purpose of other government policies, particularly budget savings measures, to push people onto Newstart and keep them on that payment for longer.

For example, the increased number of Newstart recipients who are "incapacitated" can be partly explained by a $400 million savings policy measure requiring Disability Support Pension (DSP) applicants to have their ability to work tested before they can receive the $370 per week pension.

The introduction of tougher DSP impairment tables has also had a significant impact on the overall number of people on DSP. The number of rejected DSP claims has increased (from 4,973 in July 2011 to 6,320 in June 2012) with a corresponding decrease in acceptances (from 6,223 to 4,640 over the same period).

The combined effect of these two reforms has been a decline in the overall number of people on DSP by about 4,000 since the beginning of this year, but it also means that more people will be on Newstart for longer.

This trend is likely to continue given the Gillard Government's 2012 announcement of nearly $700 million in savings over four years from increased participation requirements for PP recipients. The savings are largely the result of PP recipients moving on to the less generous Newstart payment.

This has seen government projections for the average amount of time people are on the PP (Single) decline from 361 weeks in 2011-12 to 340 weeks in 2015-16. However, over the same period, the equivalent projections for Newstart increased from 178 weeks to 213 weeks.

The government has already ruled out an 'immediate' increase in the dole. This is not surprising - a significant part of the government's welfare-to-work strategy and more than $1 billion in savings are dependent on more people being on Newstart for longer.

The increasing number of people who are on the dole but are exempted from job-search requirements is a serious concern. If people on the dole are not required to look for work, they will stay on the dole for longer. Addressing this issue should be the government's priority instead of increasing the base rate of Newstart Allowance.