We can have full employment again. We can future-proof our economy and give all Australians the opportunity to develop and put to use the knowledge and skills we need today and in the years to come
Japan is the world’s first post-neoliberal economy. It has been a prime case study in Modern Monetary Theory for three decades. Let me explain.
Like developed nations across the world, Japan drank the neoliberal Kool-Aid of the 1980s. In 1991, excessive private debt caused a massive commercial property collapse. The government’s response, thankfully, did not follow the neoliberal playbook. Instead, the Japanese pushed economic policies to the extreme of conventional limits: continuously high deficits, high public debt, with the Bank of Japan buying much of it.
Most economists recycled predictions of high interest rates, accelerating inflation and bond market revolts. None came to pass. Instead, Japan maintained low unemployment, low inflation, zero interest rates and strong demand for government debt. For three decades now.
Undeterred, these economists continue to promote a fictional economics that keeps citizens in the dark about the true capacity of government and the consequences of using that capacity to sustain full employment.
They manufacture fear about public debt and deficits, predict government insolvency, invoking these names — Weimar, Zimbabwe or Venezuela — to provoke fears of hyperinflation. They rehearse moral arguments about today’s government spending burdening our grandchildren.
Which is why we are hearing more about MMT. It has an impeccable record of prediction and offers answers that the economic orthodoxy fails to provide.
Renowned British economics journalist Martin Wolf, commenting on MMT, recently wrote: “In my view, it is right and wrong. It is right, because there is no simple budget constraint. It is wrong, because it will prove impossible to manage an economy sensibly once politicians believe there is no budget constraint.”
The Australian’s Alan Kohler has made the same observation.
MMT exposes these fictions. But even those central bankers and economists who understand the fictions on which the orthodox view relies think it is better for their political masters and the general public to be kept ignorant.
In the real world, currency-issuing governments have no intrinsic financial spending constraint. They can purchase whatever is for sale in their own currency, including all unemployed labour desiring work.
Mass unemployment is a political choice. Imagine if all Australians understood that, rather than labouring under the current deception.
It was not too long ago when full employment was official government policy.
The 1945 government white paper on full employment begins with a fundamental commitment to the Australian people. “Full employment is a fundamental aim of the commonwealth government. The government believes that the people of Australia will demand and are entitled to expect full employment,” it states. This commitment was abandoned in the mid-70s.
Australians knew it was government’s responsibility to maintain spending sufficient to sustain full employment. The purpose of fiscal policy was not to achieve a surplus or deficit. Rather, they judged government on how low unemployment was.
Unemployment was a policy target, not a policy tool.
Recall that Menzies nearly lost the 1961 election because unemployment rose above 2 per cent.
Recall, also, that Australia maintained a buffer of public sector jobs that always provided easy employment access to our least-skilled workers.
So when and why did Australians become so tolerant of systemic unemployment and its attendant ills — the accumulated human wreckage, to use indigenous leader Noel Pearson’s description — that goes with it?
The answer lies in the political and economic developments we now call neoliberalism. They were supported by a series of powerful but interconnected economic myths about money, the capacity of government and our economy.
Politicians on both sides now claim that employability (preparing people for jobs) rather than full employment is the proper role for government. They claim the market will take care of jobs.
The past 30 years have not supported their assertions. We have endured elevated levels of unemployment and underemployment, suppressed wages growth, ballooning household debt and rising inequality.
The waste of human potential is staggering.
The unemployed are “managed” within Australia’s newest “industry” — the unemployment industry — and churned through pointless training programs divorced from paid work. They receive below-poverty-line income support and are coerced by pernicious work tests when it is obvious that there are not enough jobs to go around. The robodebt scandal obliges.
The victims of this policy failure are scarred with accusative nomenclature — cruisers, bludgers, job snobs, lifters and leaners — when in truth governments made a policy choice to deny them the chance of employment.
In May, unfilled job vacancies declined by 43.4 per cent. In February, there were three people for each unfilled vacancy. Now it is 7.2. Adding in the 600,000-odd that “left” the labour force after giving up looking as employment opportunities collapsed gives us 12 seekers per job vacancy. Any reasonable person knows this is a systemic lack of jobs.
MMT exposes the fictions that have underpinned our tolerance for such unnecessary labour wastage for too long.
The current government response to the crises is inadequate. I estimate that Australia has more than 25 per cent of available labour underused in some way — a massive daily loss of income growth and harm to the unemployed and their families.
There was no reason for unemployment to rise. The government should introduce what I call a job guarantee by making an unconditional job offer at a socially inclusive minimum wage to anyone willing and able to work.
The buffer of jobs would normally be small and would shrink as private sector activity recovers. No inflationary pressures arise because government would not be competing for labour at market prices. There is no market bid for the unemployed.
Treasury said JobKeeper required an investment of $70bn across six months to reduce the unemployment rate by five points (585,000 jobs). Our modelling shows that a job guarantee that reduced the unemployment rate by six points would require net investment of $53bn over a year.
The scale of this disaster is so large that Australians will have to get used to very large fiscal deficits for a decade or more to support income and employment growth, so that households can reduce their astronomical and unsustainable debt levels.
Any attempt at “paying down the public debt” or “getting into surplus” will be catastrophic and undermine the opportunities of our generation and those that follow.
I am working with Pearson on a proposition for a job guarantee. We can have full employment again. We can future-proof our economy and give all Australians the opportunity to develop and put to use the knowledge and skills we need today and in the years to come.
William Mitchell is professor of economics and director, Centre of Full Employment and Equity, University of Newcastle. He is also docent professor in global political economy, University of Helsinki. He is a co-founder of Modern Monetary Theory.
Stephanie Kelton professor of economics and public policy at Stony Brook University, New York. Picture: John Staines.
Instead of thrashing about trying to figure out what to do with the JobKeeper allowance and JobSeeker supplement after September, the Morrison government should turn them into a permanent federal job guarantee.
Scott Morrison should go down in history as the first leader in the world to implement the great economist Hyman Minsky’s vision of the government being “employer of last resort”, as a better way of dealing with poverty than welfare.
He wouldn’t be the last if he did: we are moving inexorably into a world of Modern Monetary Theory (MMT) and much greater government involvement in the economy. It’s just a matter how much of a mess there is before the political classes actually do what’s necessary.
Qantas raised the prospect this week that high unemployment is going to be problem for years, and that even if the $10bn per month JobKeeper is continued it won’t help — potentially to the point where the health crisis turns into a financial crisis because of a wave of mortgage defaults.
That’s because JobKeeper relies on the company continuing to exist and needing the same number of employees as before. What Qantas showed is that companies will make their own judgments about staff numbers based on their own long-term business plans and prospects, independent of the government support.
In any case, if JobKeeper continues, even if it’s just focused on a few hardest-hit industry sectors, it will simply prop up zombie companies that are no longer viable and never will be. It already is doing that. For recovery to take place, non-viable companies need to stop trading.
And what is the government going to do about the five million people currently getting JobKeeper and the JobSeeker supplement after September? Simply hope they get a job, and if not just shrug and pay them the dole, and let the banks pick up the pieces, selling their houses, causing a housing collapse and financial crisis?
It happens that the JobKeeper Allowance is about the same as the minimum wage — $750 per week versus $740.80 — presumably on purpose.
The obvious thing to do is for the government to become employer of last resort at the minimum wage. Those who can get a better paying job in the private sector do so, but those who can’t have a guaranteed job with the government at $740.80 per week.
Doing what? Well, this week I spoke to one of the world’s leading proponents of MMT as well as the idea of a federal job guarantee, Dr Stephanie Kelton of Stony Brook University in New York. She told me: “There’s so much work that needs to be done and a lot of it is an ageing society as well, and should be oriented around care.
“We’ve got an ageing population, we have a climate crisis. We have unmet needs across almost every community in this country.
“The idea would be for the federal government to provide the funding, but for the local communities themselves to weigh in and to design and call for the types of jobs that would bring the most value to those communities.”
In her book published this month about MMT, called The Deficit Myth, Kelton writes that an employer of last resort policy would “effectively establish a public option in the labour market, with the government fixing an hourly wage and allowing the quantity of workers hired in the program to float.
“Since the market price of an unemployed worker is zero — that is, no one is currently bidding on them — the government can create a market for those workers by setting the price it is willing to pay to hire them. Once it does, involuntary unemployment disappears.”
The reason the proposal has become part of the MMT is that it relies on the fact that a government can’t run out of money.
The money created to pay the people employed under a job guarantee can’t cause inflation or debase the currency because by definition it involves mopping up slack in the economy — it generates both the wages to be spent on goods and services, and the goods and services themselves.
A flint-eyed Treasury official would no doubt protest that a job guarantee at the minimum wage would simply involve increasing the unemployment benefit from $565.70 per fortnight (pre-the $550 coronavirus supplement) to $1481.60 (the minimum wage).
Yes, but instead of requiring the recipient simply to look for work, the job guarantee would actually be work — after all, as Scott Morrison often says, the best form of welfare is a job.
Obviously, there would have to be some effort put into making the work useful, but there is so much important unpaid work done at the moment that it shouldn’t be too difficult, and as Kelton says, that could be left to local communities to figure out.
Of course, doing this would require an acceptance that deficits and debt are not a burden on future generations and do not have to be repaid as quickly as possibly through lower spending and higher taxes — that is, that MMT is correct, and Milton Friedman’s dictum that excess money causes inflation was a gigantic mistake.
We are still a long way from that acceptance, particularly among conservative politicians, but MMT is gaining momentum around the world as the only logical way forward.
As Kelton told me: “It turns out (inflation is) much more complicated than (Friedman thought) … you can get too much money in concert with too few goods, but it’s really the too few goods part that people are missing. It’s your supply, your productive capacity has been undermined, and you couldn’t produce the output and that led to hyperinflation.”
In any case, it comes back to the question of what the Morrison government is going to do come September: sit back and allow high unemployment to cause a financial crisis, or do something truly creative?
Alan Kohler is the editor in chief of Eureka Report
Minister for Employment & Workplace Relations, Bill Shorten. Picture: Aaron Francis
EMPLOYMENT Minister Bill Shorten has backed a controversial argument being put by his senior mandarins that the dole should be kept low to encourage the unemployed to take badly paid jobs.
A submission from four federal departments to a Senate inquiry into the Newstart Allowance says the OECD acknowledges that a rise in the base rate from $245 a week “has the distinct disadvantage of reducing employment incentives, especially for those who can only obtain low-paying employment”.
A spokesman for Mr Shorten said: “The submission is obviously the government’s position” despite it previously saying it had a more open mind. “I’d also point you to what the minister had to say about this to you on Sky Agenda at the end of last month.”
In the interview, Mr Shorten said he wanted to look at what could be done to break intergenerational cycles of long-term unemployment. “Intergenerational unemployment is a disaster for generations of people.
“But by the same token, I am fully aware that trying to get along on $249 a week is an incredibly difficult ask.”
Mr Shorten is coming under pressure from the union movement to overhaul the welfare system. The ACTU will today declare major reform of the income support system is vital to help unemployed people find decent, secure work. ACTU president Ged Kearney said reform must start with a $50-a-week rise to Newstart, which had not increased in real terms since the early 1990s and was barely enough to live on, let alone pay for the costs of finding a decent job. “The rate . . . is just 18 per cent of average wages . . . and is widely regarded as a major cause of entrenching people in long-term poverty, with insecure work playing a large role,” she said.
The ACTU wants Newstart raised to the level at which the payment starts to be withdrawn when people begin work, and a wider independent inquiry into the effects of insecure work on welfare.
Unions NSW has called for the Youth Allowance to be increased by $50 a week and indexed in line with pension payments. It wants the income threshold to be increased by $25 a week, allowing Youth Allowance recipients to earn $450 a fortnight before their payments are reduced. The government submission claims an increase to the dole would not assist in maintaining the “fundamental character of Newstart Allowance as a payment that predominantly supports work re-engagement”.
“Work incentives are built into the design of Newstart Allowance and a substantial increase in Newstart payment rates would reduce the incentive for some recipients to move off payment and into self-supporting work”.
The Senate inquiry follows lobbying by business and welfare to increase Newstart, as single mothers face losing an average $50 a week after being shifted from the parenting payment to the dole from January.
The joint submission — from the Department of Education, Employment and Workplace Relations, the Department of Families, the Department of Human Services and the Department of Industry — seeks to blunt support for a $50-a-week rise to the dole.
Peter Whiteford of the Crawford School of Public Policy at the Australian National University argues that since 1996 payments for the single unemployed have fallen from 23.5 per cent of the average wage for males to 19.5 per cent.
Wayne Miller and Tracey Cox. Picture: Russell Millard
Mick Haynes leans forward and stares into the eyes of his dead teammates. They gaze back at him, young, strong and proud, their smiles forever frozen in a team photo on the wall of the Koonibba footy club.
“There I am,” says Haynes, pointing to the young bloke sitting in the middle of the Aboriginal team from 1982. His finger then moves slowly over the 20 men in the photo. Dead … Dead … Dead … Haynes looks away and shakes his head. “There’s only about six of us still left,” he says. “In some way or other alcohol contributed to cutting them down.”
Photos of other teams and former players line the walls of the country’s oldest Aboriginal footy club in Ceduna, South Australia. Their surnames — Betts, Davey and Wanganeen — are household names to AFL fans. But the photos inside this proud club also reveal the tragedy of this small town. “If I talk to these boys, they won’t talk back to me — I will be standing on their grave,” says Peter Miller, a tribal elder and former halfback for the Koonibba Roosters in the 1970s. “Lots of them drank pretty heavily — there are only five left from my team.”
Miller adjusts his bush hat and wonders whether much has changed in his hometown since he was a boy, when alcohol abuse was rife. “This morning I saw a girl about 19 years old crossing the road with a bottle of Jack Daniel’s and I said to myself, ‘It’s only bloody 10 o’clock.’ I see it every single day. But you know what? She wouldn’t have been able to buy that bottle if her money was on that card.”
Peter Miller. Picture: Russell Millard
“That card” is now the talk of the town in Ceduna and may soon become the talk of the nation. The 4000 residents of the Ceduna region are the first in Australia to undergo a controversial 12-month trial that Canberra hopes will revolutionise the fight against alcohol abuse by those on welfare in rural and regional Australia, especially among Aboriginal people. If the trial goes well, the card will be rolled out to other regions across the nation.
On March 15, those on welfare in Ceduna — indigenous and non-indigenous — will no longer receive all their benefits in cash. Instead they will be issued a small silver card, similar to a credit card. Eighty per cent of their welfare payments will go onto the card, with only 20 per cent available as cash. The card can be used for anything anywhere in the country with two glaring exceptions — alcohol and gambling.
This will leave most welfare recipients (aged care pensioners are exempt) with only $60 to $150 in cash a week, depending on their circumstance. “It’s so important because in many areas of regional Australia, particularly indigenous areas but not exclusively so, there is very significant alcohol, gambling and drug harm that is paid for by the welfare dollar,” says Alan Tudge, Assistant Minister to the Prime Minister, who has led the Government’s push for the so-called cashless welfare card. “When you’ve got communities that are awash with grog it’s so hard to make progress on any other front.”
In Ceduna the card will apply to around 950 welfare recipients, of whom two-thirds are indigenous, although the Government maintains that the card is not specifically directed at Aboriginal communities. In April it will be trialled for 12 months in the East Kimberley communities of Kununurra and Wyndham and options are being considered for a third site. Another Kimberley community, Halls Creek, rejected the trial, saying the card was indiscriminate in its targeting and would not work.
To its supporters, cashless welfare promises a new era in the fight against welfare abuse by making it much harder to blow welfare payments on grog or gambling. Its critics say it is an overly paternalistic intervention in people’s lives which undermines personal freedoms and is unlikely to achieve its aims. “[It] will disproportionately affect Aboriginal and Torres Strait Islander people and claw back our hard-won rights and freedoms,” says Aboriginal and Torres Strait Islander Social Justice Commissioner Mick Gooda. “Our mob are once again the guinea pigs in a trial program lacking any evidence base.”
Ceduna Mayor Allan Suter. Picture: Russell Millard
Ceduna mayor Allan Suter sits at his dining room table and shakes his head at such claims. He says his town has been in deep trouble for much of the past decade, blighted by alcohol abuse, domestic violence, gambling and more recently the drug ice. “This card,” he says, “is desperately needed by some people, including some who are against it. We have had huge issues in this town with lawlessness, unsociable behaviour, people drinking to excess and dying.” He says Ceduna, which is around 25 per cent indigenous, has 68 times the national average rate of hospitalisation from assaults. In 2014, the town’s sobering-up centre had 4667 admissions from a population of 4000.
In 2011, a coronial inquest into the deaths of six Aboriginal people in Ceduna found a “severe and intractable culture of excessive alcohol consumption” among transient Aborigines who visit from communities to the west of the town, such as Yalata and Oak Valley. Suter says Ceduna has tried everything possible to end the scourge of alcohol abuse, from bans on grog sales to dry areas to safety patrols, but the problem still exists.
Tracey Cox and Wayne Miller. Picture: Russell Millard
“I’ve seen things in Ceduna that I would never want to see,” says Tracey Cox, a 26-year-old indigenous mother of two, speaking at a barbecue at Suter’s home. “I used to work as a domestic violence support worker and I’ve seen first-hand the alcohol and drug use and how the children suffer from it.” Her voice trails off before her fiance Wayne Miller, 26, interjects: “We need to try something now. These same things have been happening for 40 or 50 years, we’ve heard it from our uncles, aunties and parents and we just need to change things. I don’t see why this card won’t work.”
Miller, an up-and-coming indigenous leader, and Suter, mayor for the past eight years, have been targeted because of their role in promoting their hometown for the trial. Suter has been parodied and abused on social media while some other indigenous leaders have accused Miller of seeking to disempower his own people.
Leeroy Bilney. Picture: Russell Millard
“Wayne Miller has great potential to be a good leader but he has been mentored and manipulated in the wrong way,” says Leeroy Bilney, an indigenous local. “We need to give some kind of ownership and responsibility back to our communities and this [card] is no different to listening to my pop talk about how they used to walk around with ration cards.”
The idea of the cashless welfare card was born out of the review of the welfare system in 2014 by mining billionaire Andrew Forrest. The card is far more ambitious and sweeping than previous attempts at income management of welfare recipients in Australia. Since the 2007 intervention in the Northern Territory, successive federal governments have experimented with income management, also known as welfare quarantining, with mixed results. Almost 26,000 people — 20,000 of whom are in the NT — are currently on the BasicsCard in which 50-70 per cent of spending is quarantined for essential items. Ninety per cent of those on the card are indigenous. But the BasicsCard card can only be used at selected retailers, is limited in scope and almost useless outside areas where it has been rolled out. The new cashless welfare card quarantines 80 per cent of payments and is connected to the national EFTPOS system so it will automatically reject attempts to buy alcohol or bets anywhere in the country. The trial does allow welfare recipients to apply to have the percentage of cash lifted from 20 per cent to as high as 50 per cent, but only with the approval of a community panel.
Mick Gooda claims that previous attempts at income management have achieved results that are only “modest compared to their stated objectives”. “For many, income management results in few or no benefits, and a sense of loss of control, shame and unfairness,” he says.
Alan Tudge disputes this. He argues the BasicsCard has had a “positive impact” in the NT but believes the more comprehensive cashless welfare card will achieve better results. “Two-thirds of people who come off the BasicsCard on a compulsory basis choose to stay on it on a voluntary basis,” he says. “That fact proves that many people find it useful for them.”
In late 2014 and early 2015, when Tudge was casting around for potential places to trial the Forrest welfare card idea, mayor Suter called his local federal MP, Rowan Ramsey, and said Ceduna might be interested. “I said our council would support a trial provided that our community supported the idea, so we began a consultation process,” says Suter.
Tudge knew that such a radical and controversial initiative could only be introduced with the full support of local leaders and indigenous elders. But more than this, he wanted the leaders in
Mick Haynes. Picture: Russell Millard
Ceduna to play a frontline role in shaping how such a card might work. “First of all, we were like ‘Whoa’,” says Mick Haynes, the former Koonibba Roosters player and now head of the Ceduna Aboriginal Corporation. “We were a little bit sceptical about how this card was going to work, so we said to Alan Tudge, ‘Leave it with us and we will talk about it’.” Haynes was part of a regional leadership group comprising both indigenous and non-indigenous leaders, which was set up to determine whether the card could work in a town like Ceduna.
The Ceduna group was forthright and clashed with the authorities several times in the first half of last year. They disagreed with Forrest’s call for a 100 per cent cashless card, saying it was impractical in a small town like Ceduna. “We thought that if a family goes to the footy or something and they want a pie or a pastie you’ve got to have some cash because some places won’t take cards,” says Haynes. The Government initially wanted the card to be a 90/10 per cent split while the Ceduna leaders wanted a 70/30 split; a compromise of 80/20 was finally reached.
“They [the Ceduna leaders] not only helped to shape the card, they co-designed the entire effort,” says Tudge. Haynes says there was a lively debate about the card inside the Aboriginal communities around Ceduna, but that the vast majority — some 95 per cent — eventually supported the idea.
Card critic Leeroy Bilney disputes this figure. “A lot of people in our [Aboriginal] communities won’t come forward and say what they really feel until the card comes in and starts to impact on them and their family,” he says.
Another indigenous local, Sue Haseltine, claims the issue has divided Ceduna and that at least 30 people, indigenous and non-indigenous, have left the town because of the upcoming trial. “I don’t believe they have the right to target everyone [on welfare],” she says. “They wanted to target a few people and so they killed our human rights and took our freedom away.”
The opponents of the card in Ceduna are a small but vocal group who accuse the Government of foisting the idea on the community without proper consultation. They argue that the card is an invasion of personal freedom; that it is demeaning to those on welfare; that it won’t stop the true addicts; and that it will lead to increased violence as people steal to get cash.
The card trial has bipartisan support from the Government and Labor but is opposed by the Greens. “It will make people feel worthless and it is damn insulting to me,” says Ceduna local David Pav, a disability support pensioner who will be given the new card. “I feel like I may as well dig a hole and die because there is no reward for good behaviour, no way to get off the card.”
On this day Pav has been joined at the local pub by six other opponents of the card. Each is non-indigenous and each has their own reason for opposing it. Grant Thiselton runs a waste management company, Ceduna Skip Bins, which he says is a 70 per cent cash business which will take a hit when the cashless card is introduced. Next to him is Jocelyn Wighton, who claims she is being unfairly targeted. “I am on a disability pension, I don’t gamble, I don’t drink much … I’ve done nothing wrong but I still have to be on the card,” she says.
When I ask an older lady who is sitting quietly on the other side of the table what she thinks, she pulls out some paper and reads nervously from a prepared script. “It was alcohol that blinded the mind of our son’s murderer [in Ceduna] three years ago,” reads Colleen Martin. “Yet it is not the alcohol that caused the loss of our son, it is the needs that caused the ongoing drinking in the first place. A cashless people in our community will not solve the problem, it will only make it worse … [and] create more violence to get the cash they currently need. It is too late for our family, but it’s not too late for many,” she says.
She folds up the paper as tears well in her eyes and in the eyes of her adult daughter Jodi, who is sitting next to her, squeezing her hand. Colleen’s son Tony, 33, was stabbed to death in an alcohol-fuelled attack in Ceduna in November 2013.
Opinions are divided about whether addicts — alcohol, drug or gambling — are more likely to rob, steal and fight in order to get cash that will be denied under the welfare card. Some argue that a true addict will simply find a way to get cash, illegal or otherwise. “We have discussed the fact that it may be an issue and the police are very much aware of it,” says Suter. “In Coober Pedy when they brought in strong restrictions on alcohol they did have a crime spurt but it wasn’t an ongoing thing.” Tudge is confident that crime will fall as a result of the card. “The expectation of senior police is that crime will decrease because so much of the crime in the community is related to alcohol consumption,” he says.
The biggest divide over the card is whether it tramples on personal rights in seeking to dictate the behaviour of those on welfare. The arguments are similar to those over the 2007 intervention. “Any possible benefit of the card must be weighed against the sense of disempowerment our people already face,” says Gooda. “It must be weighed against the stigma our people continue to face and the restrictions placed on our basic rights and freedoms we fought so hard for.”
It’s an argument that makes Mick Haynes furious. “I don’t think it is a breach of human rights,” he says. “What about the rights of kids when parents are spending their welfare money on alcohol or gambling?” he asks, thumping his hands on his desk. “Is it the right of a kid to have a safe home?” Thump. “Is it the right of a kid to have clean sheets and a bed?” Thump. “Is it the right of a kid to have food on the table and to go to school?” Thump.
“This card is very much thinking about the rights of children and the rights of women to live safely in their community,” says Tudge. “A person who is on this card can spend their welfare payments on absolutely anything they like but they can’t spend more than 20 per cent of it on gambling and drugs. Now, how that is a breach of their human rights I do not know.”
Ryan Edmonds. Picture: Russell Millard
“Look at this mess,” says Ryan Edmonds as he steers his paddy wagon along a rough bush track on the outskirts of Ceduna. He stops the car near an abandoned humpy, gets out and picks up an empty bottle of Jack Daniel’s. Around him are more than a dozen other whisky bottles and empty silver wine cask bags. A broken television, a filthy mattress and a burnt-out car lie among shoes, rags and other debris, making this popular drinking spot look more like a rubbish tip than a slice of Australian bush. “Bottles, bottles and more bottles everywhere you look,” says Edmonds, who runs Ceduna’s council-funded Community Safety and Security Patrol.
We are at a place called 18 Tank, described as “a flat, desolate and pitiless area of land” by deputy state coroner Anthony Schapel in his 2011 report. “They bring with them their sicknesses and morbidities, all aggravated by continual self-neglect and the excessive consumption of locally accessed alcohol — some of them have perished as a result,” Schapel wrote.
Edmonds patrols Ceduna and its outskirts every few hours, moving people on from illegal drinking spots and reporting dangerous drunken behaviour to the police or to the local hospital. The patrols, which cost the council $250,000 a year, were introduced in 2008. Edmonds says as many as 60 indigenous people often gather at 18 Tank and a handful of other bush spots outside town where they can drink legally, unlike in Ceduna itself where public drinking is banned.
As we drive back to town, the 31-year-old former miner, fisherman and oil rig worker recounts tales of alcohol abuse here. “Someone was run over on this road a while back because they were drunk and fell asleep,” he says. “They’ve been passed out on the railway track also.” One local truck company has had so many near-misses with locals falling asleep on the road that it produced its own safety video to teach people not to lie on roads when drinking.
“When I first heard about this welfare card, I wasn’t sure to be honest,” Edmonds says as he drives down another bush track littered with bottles. “But I’ve seen so many people drink it all away that I now think it might actually help.”
“I’ve seen first-hand what alcohol does to this town,” says Mick Haynes. “Our community is disintegrating and our Aboriginal culture is slowly being eroded. Lots of things have been tried but they’ve failed and this [card] could be a circuit-breaker.”
About 10km out of Ceduna, in Denial Bay, Mick’s brother Joe Miller rises unsteadily from a chair on his veranda, using his left hand to raise his immobilised right hand so I can shake it. Joe, 62, was by his own admission a heavy drinker when two massive strokes hit him in 2012, robbing the once-robust mining worker of his career and a normal life. “I don’t know, it may have been the alcohol, but I also smoked a lot,” he says when asked what might have triggered such a life-changing event.
Joe doesn’t know what to think of the welfare card idea. It won’t affect him because his wife Lois works as a schoolteacher, giving them enough cash to buy what they want. Joe worked all his life until the stroke and says he can’t understand someone being on welfare and then complaining about it. “I’ve had to work all my life to get this house, to achieve my dreams,” he says. But Lois wonders whether the card will actually work. “I think it’s a good idea in theory but practically I don’t think it will address the root of the problem,” she says. “I think if people really want to get cash, they’ll get it somehow.”
Greg Limbert points to the bush opposite Ceduna’s Highway One roadhouse, which he ran for 20 years. “In the morning, you would often see people literally crawling across the road from the town camp to come [to the roadhouse] to see how much money they had in their account so they could buy alcohol,” he says. He believes the card will help some people but says it may also affect “some of the people who need it the least”.
An alcohol-fuelled fight in Ceduna. Picture: Russell Millard
The irony is that the card is being introduced into Ceduna at a time when local police and ambulance officers say there has been a slight fall in the incidence of alcohol abuse since December. That is when fresh restrictions were placed on buying takeaway alcohol, including a complete ban on sales of alcohol to Aborigines visiting Ceduna from outlying communities. Even so, as I am writing up notes in the local hotel, a fight erupts outside between two clearly intoxicated women with one throwing wild punches and kicks. I later see ambulance officers tending to the bruised face of the woman who was bashed.
The Government has flagged that if the trials in Ceduna and East Kimberley prove effective, the card is likely to be introduced into other rural and regional areas, including non-indigenous communities. “A logical step would be to continue to roll it out to the regions that have requested it,” says Tudge, although he baulks at suggestions it might eventually be used in capital cities. “To be honest we are not at that stage of our thinking.”
Rodger Kerr-Newell, chief executive of Halls Creek Shire, which rejected the trial, has accused Tudge of peddling a “zombie-apocalypse” picture of Aboriginal communities to win support for the trials.
But Tracey Cox, the former domestic violence worker and mother of two daughters, Halle, four, and Maddison, 18 months, says the problems in Ceduna are all too real. “I’ve seen enough of it,” she says, her eyes flashing with anger. “We see kids coming to school with no food each day because Mum or Dad has gone and spent the money. These kids have a right to learn and to eat — they are our future. Some people don’t have the strength in them to make the right decisions and this card could make it for them. For the better.”
She pauses and reflects on the tough choices facing her hometown and her people. “If it doesn’t work then we can try another way,” she says finally. “But at least we can say that we tried.”
As we go into the new political year, I am putting out a request to our sitting leaders: the Australian “innovation nation” desperately needs some innovative policy.
Our stagnant political environment has got to respond to a changing economy by looking at radical ideas and trying new things.
I have one such idea. Let’s trial an Australian basic income.
An Aussie version of the universal basic income would be a payment made to every citizen, no matter how rich or poor.
At $1000 a month, it would cover one’s primary needs and create a floor for living standards. It would be netted off from existing government programs such as the pension and Newstart, as well as from the tax deductions received by the rich.
Such a program would really make a meaningful difference to the lives of people struggling in the new world of Uber and the changing nature of work.
Growth in the so-called “gig economy” — driven by changes in technology and shifting demand and supply relationships in the labour market — means that thinking about unemployment and welfare needs to change.
Employment is becoming increasingly unstable, with a growth in casual, part-time or short-term roles.
The ABI would allow everyday people to continue to plan and engage with the labour market, to make the economy grow strongly and fairly for decades to come.
Australia needs this because our welfare system is broken. It’s well known that means-testing welfare payments warps the incentive to work.
For every dollar a jobseeker on Newstart earns over $102 a fortnight, they are penalised 50 per cent via reductions in their welfare. Above $252, it is 60c in the dollar.
This is a higher effective rate than that paid by the richest in the land. It’s little wonder that people get stuck on welfare.
While removing the disincentive to work, the ABI also allows the unemployed to take risks and engage fully in the fluctuations of the gig economy. It would promote economic dynamism and individual responsibility, and break dependency cycles.
Importantly, with such a program in place, people will be able to start businesses or join start-ups knowing there is a safety net there during the no-income early phase.
The payments allow people to participate with dignity in society. Evidence from Britain is that this radically improves the engagement of those at the bottom of the social ladder and brings people back into employment — it does not get them to sit on the sofa watching television.
This idea has a history of support by some on both the Left and Right and has been gaining traction recently in Canada, Switzerland and The Netherlands.
The biggest splash came from Finland, where a trial is being implemented next year.
We cannot wait for the rest of the world to take the lead on this. To begin with, we should trial our own version of the program with a group of 50,000 people in Tasmania or South Australia.
Such a trial would tell us how such a scheme could provide for a uniquely Australian context.
By creating the momentum for change, it would give us a chance to overhaul the Australian concept of welfare.
And it would allow us to show the world we are the innovative nation we claim to be.
The real problem with the ABI is its cost: even on a net basis, the ABI undeniably needs a major increase to tax levels. Where would the money come from?
As I have advocated before, changes to negative gearing, land taxes, superannuation, GST and company tax would all be good places to start.
Australia is one of the world’s wealthiest countries, with some of the lowest rates of taxation. We are in a unique position to try out a truly new idea, and make it our own.
For too long, Australian politics has tinkered with tax and transfers as though our democracy were powerless to make a change.
If the Prime Minister wants an innovative economy, he’s going to need the innovative policy to match.
Mark Carnegie is an investor and founder of MH Carnegie & Co.