Let’s trial an Australian basic income for all

MARK CARNEGIE, THE AUSTRALIAN

FEBRUARY 10, 2016 12:00AM

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.