Economics Opinion

Universal basic income for a more prosperous Australia

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(Cartoon by Mark David / @MDavidCartoons)

A universal basic income will not only benefit those suffering from poverty, but will also provide a more stable economy for all Australians. William Bourke reports.

*Also listen to the audio version of this article on Spotify HERE.

AUSTRALIA IS HEADED in the wrong direction.

Recent research shows that we have reached a stage of shocking inequality. Australia’s wealthiest 20% are now worth 90 times the country’s poorest 20%. Australians of all ages are feeling the pain. In October 2022, a Parliamentary Inquiry found the “face” of homelessness is ‘an older person aged over 55 — particularly women’.

This extreme divide is not due to laziness or “dole bludging”. It’s mainly due to successive federal governments operating a crony form of capitalism, with a range of very deliberate policies that spur wealth inequality and “disproportionately benefit those with the most”.

For example, modelling on the distribution of the 50% capital gains tax discount indicates that the top 10% of households by income receive nearly three-quarters of the benefit. Further, the top 1% of taxpayers receive about 14 times as much in superannuation tax concessions as the bottom 10% of income earners.

We need big, bold change.

The biggest and boldest change we can strive for right now to claw back some of the excesses of their crony capitalism is an unconditional universal basic income (UBI). A UBI is a payment from the state to every citizen with no strings attached, like a “citizen dividend” for being a “shareholder” in Australia. But the main reason we should introduce a UBI is not our extreme wealth inequality.

To coin a phrase: It’s the environment, stupid.

The environment is the most important reason because it is our life support system. But with a growing number of consumers dependent on the finite and non-renewable resources it provides, we need to take action to lighten our individual and collective footprint.

We need to put our environment first, and therefore allow it to sustain our health, economy and quality of life. That’s where a UBI comes in. There have already been many UBI studies and trials around the world.

Developed world studies show important results including:

  • Positive effects on economic and general well-being. Treated households enjoyed better physical and mental health, educational performance, and homeownership rates.
  • A modest reduction in work effort. Primary earners worked about 5-10% less and were unemployed for longer stretches of time. The reduction in working hours was much larger for secondary and tertiary earners (15-30%), who devoted more time to childcare and education.

While these findings may present challenges for some, they should be welcomed. Tapering off our working hours will help us to rebalance our economy and environment. This should lead to a tapering of spending on “stuff” and hence, the overconsumption degrading our planet.

How much?

Every Australian should be entitled to a minimum basic income – or citizen dividend – of $500 per week, being $26,000 per year (indexed). Importantly, this is not a “comfortable” income, but a “basic” income. A UBI would also not replace special needs payments required by some, such as disabled Australians. No Australian welfare recipient would be worse off.

There are around 18 million adult citizens in Australia. At $26,000 per person, you reach a figure of around $470 billion per year. This is affordable.

The main benefits of a UBI

The benefits of a UBI are so profound that we can only touch on them here.

In no particular order, a UBI will:

  • increase our equality, health, well-being and happiness;
  • provide greater financial security and relieve the cost-of-living crisis;
  • reduce homelessness;
  • simplify our bureaucracy;
  • help fix our punitive and conditional welfare system;
  • give us more time to study and/or upskill;
  • help Australian casual staff rent housing in areas where casual labour is most needed, thereby resolving many skills shortages;
  • allow senior citizens to work a day or two a week without losing their pension-now-UBI, thereby also resolving many more skills shortages;
  • encourage economic entrepreneurship, innovation, dynamism and risk-taking by financially supporting people to set up new businesses because they have greater income security;
  • provide an additional safety net for those seeing downward wage pressure from AI, automation and globalisation, at a time when real unemployment and under-employment in Australia is already around 3 million people;
  • help increase volunteering and charitable donations; and
  • allow for more personal freedom to be who we want to be.

What are the cons?

No society is perfect and therefore no social system is perfect. There are legitimate questions. Will it be affordable? Will people waste it or drink it away? Will taxes go up for some? Will it be inflationary?

The research shows there is a modest reduction in labour input, as noted above. We should face up to this and understand that this is in our collective best interests. Research also shows no noticeable increase – and frequently a decline – in consumption towards “temptation goods” (such as alcohol).

The short answer is that the sky won’t fall in.

Regarding inflation, the tax and funding mix will be important. Stabilising Australia’s population at the same time will help to offset the significant inflationary impacts on everything of rapid population growth.

How do we fund a UBI?

Funding a UBI is simply a matter of priorities and here are some of the choices, in no particular order:

  • a UBI would provide significant savings by replacing a range of welfare payments, which alone would likely cover around 25% of the UBI;
  • a UBI would be subject to income tax at standard marginal rates, meaning up to around 20-25% could come straight back;
  • phase out all superannuation-related tax concessions, currently costing up to $45 billion a year;
  • abolish negative gearing;
  • abolish the 50% capital gains tax discount on taxable assets, including Australian property;
  • introduce an economy-wide super profits tax;
  • end multinational tax avoidance;
  • increase tax on all excessive personal income, through a more progressive tax system, meaning multi-millionaires would not be net beneficiaries of the UBI;
  • introduce a (say, 10%) inheritance tax on wealthy estates; and
  • broaden the base of the 10% GST.

Do Australians support a UBI?

When Anglicare polled Australians in 2021 on the question ‘Should every Australian have an income level above the poverty line?’ 77% supported the concept. The COVID pandemic also demonstrated that lifting people above the poverty line was possible and indeed preferable.

An unconditional UBI provides a simple and eloquent foundational step to resolve many of our growing environmental, economic and social problems. We don’t need more trials, as some others propose in Australia. It’s time to go “all in” on a UBI. That’s what the Sustainable Australia Party is doing. You will soon see “universal basic income” on federal election ballot papers.

Everyone has the right to share in the wealth of our country. It’s time to demand your dividend.

What do you think?

This is an abridged version of William’s essay you can find here.

*This article is also available on audio here:

William Bourke is a Councillor and Deputy Mayor at North Sydney Council and founder of the Sustainable Australia Party.

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