Universal Basic Income for Australia

Michael Haines has spent over 50 years working at senior levels across construction, manufacturing, and logistics. In 2011, he set up a not-for-profit to work with major companies across the property, construction, and facilities management sector, along with global technology providers, to develop a governance framework for the emerging Digital Built Environment. Its purpose is to reduce complexity, while maintaining privacy and security, to deliver better outcomes more quickly, at less cost, and with less risk.

Since his retirement in 2019, he's been working with an advocacy group Basic Income Australia. The group's aim is to have a Universal Basic Income fully implemented in Australia by 2030, to eliminate systemic poverty, and to provide a new tool to help balance the labour market, as automation, virtualization, and AI change the job landscape.

A seemingly impossible possible task: How to Implement a UBI without Extra Tax, Debt or Inflation, or Negatively Impacting Welfare Recipient, and all with little risk?

Our objective is pretty simple; to introduce a Universal Basic Income (UBI), paid to all adult Australian residents every week, at or above the Henderson Poverty Line by 2030. The current target is $500 AUD per week per adult, starting with a low initial payment in 2025, or sooner if possible.

A UBI addresses a system failure. Once, it was the birthright of every person to live off the land. With property rights, money, and the system of paid work, this is no longer possible. "Humans are now the only species that need money to survive (Scott Santens)"

This system has delivered huge benefits for the majority. Left a significant minority destitute: those who cannot do paid work, and have no savings or family support Around 3.2 million Australians 12–14% of the population Mostly women, kids, the aged and disabled, and some between jobs.

Poverty is largely a system problem. Most people are poor, not because they are lazy, but because they cannot earn money. Without money, they are invisible to the market, so the market can never respond. This is bad for them, bad for business, and ultimately, bad for society. Yet, we have unlimited money: we create the stuff. In Australia at least, we also have the resources and organizational capability to meet everyone's basic needs (and much more).

Welfare is not the answer; it's part of the problem. Welfare cannot suffice, as it is deliberately set below the poverty line to encourage people who can work to take the available jobs. We can't fix this by paying more - the higher the rate, the more rational it is for people to take the benefit, in lieu of a low-paid job…

A UBI provides a system solution to the system failure. A UBI restores each person's birthright, by providing the money they need to survive. It avoids the welfare trap, because people do not lose their UBI if they take on paid work. A UBI provides a floor to stand on, not a ceiling to achievement.

It does this with a four-tier income. The first is the Universal Basic Income, for basic needs of every adult citizen and permanent resident. The second is earned income for the 50% of the population able to do paid work at any time, to better themselves. The third is welfare to meet additional costs of living (e.g., incapacity, childcare, aged care). The fourth is passive income, for those fortunate enough to have their own savings or family support.

Despite paying the UBI to everyone we can effectively target it to the neediest by phasing in recovery of the UBI on taxable earnings up to A$80,600 per annum. Above that, the full UBI would be Recovered. A UBI would replace welfare benefits below
the level of UBI. The benefits above the UBI level would be retained to ensure no one is worse off

This will directly Benefit 75% of the population, on a sliding scale up to an income of $80,600 per annum. The rest would benefit from additional economic activity and living in a less fearful and hostile society. Targeting reduces the amount required to fund the UBI, while benefiting those who need it most. By offsetting the UBI against benefits, the benefits will 'naturally' phase out as the rate is raised, so no person worse off.

Paying it and recovering it may seem inefficient. But it makes the payment Universal, so there is no stigma for receiving it, it has minimal administration and provides Basic Income Insurance, if you lose your income for any reason. For example, if you get divorced, sick, or injured, your business fails or there is a natural disaster, there are economic and political impacts,
your car breaks down and you can't afford to get it fixed so you can't get to work, you have to take care of kids or parents, or for any other reason at all!

A UBI shift resources from compliance to support to achieve better outcomes in study, work, and life. It eases societal adjustment
when masses of people are impacted at the same time. A UBI provides assurance to meet basic needs; there is no delay, no need to apply. There is no bureaucracy to prove that you qualify. It provides more time to look for work and look after your family.

To give an example, if someone has no income, the UBI would pay $500, and recover $0, therefore the net UBI would be $500 and their net income would be $500. If someone was earning $52000 per annum, their net income after tax is $838 per week. The UBI would be $500 minus $322 recovered, leaving a net UBI of $178, and a total net income of $1016. If somone was earning $1550 per annum, their net income after tax would be $1200 per week. All of the UBI would be recovered, and their net income would remain at $1200.

The purpose of the UBI is to ensure everyone has money for each week. Paying first, and then recovering the UBI, as required, achieves this objective. Now there would need to be audits and penalties for people who try to game the system by artificially
phasing their income 'high' and 'low'. An audit must disclose why any amount was to be repaid, with the ability to have the
decision independently reviewed.

To give a welfare example, a person on the youth allowance, 18-22 years old. This age group covers the transition from dependency to full participation as a contributing member of society. This is not always an easy transition. The conditional benefit of $265 would be reduced due to the unconditional UBI of $500, a leaving a total net weekly $500, making them much better off. A weekly jobseeker aged 22-67 receives a conditional benefit of $334 per week, which also is reduced with the unconditional UBI of $500. By eliminating "conditionality", the resources devoted to assessing and controlling benefits can be redirected to achieving better outcomes for each individual. The weekly pension and diability allowance of $513 would be reduced to $13 with a UBI, but with the UBI added, the net result is the same - $513 per week.

Further, there's a good argument to be made that once the UBI is implemented, the rental allowance could be increased substantially. They would continue to get healthcare card. No-one is worse off. The UBI is recovered based on 32.26% of passive income up to $80,600 per annum, which is more generous than current phasing.

Funding the UBI can be achieved without changes to tax, increased debt, taking from other programs, or increasing inflation.

Injection Less Costed Offsets AMOUNT ($ Billions)

Gross Amount of UBI per annum (Assuming payment to 20 million Adults)520
Less Offsets:
- Recovery of UBI based on Earned Income - 213
- Welfare and Administrative Savings by Offsetting the UBI against Benefits -142
- Extra Tax Collected at Normal Rates on Additional Revenue Generated by UBI -35
- Net Outflows of Profits into the Financial and International Economies -30
- Technological Deflation of 1% pa (Automation, Virtualization & AI) - 20
- Savings from Improved Health, Lower Crime and Increased Productivity - 20

Residual UBI to fund wellebing growth at 2.5%

There is no change to tax or welfare, no increase in cebt, or cuts to other programs. These methods could be used, but by leaving our current systems untouched, no one can complain that they are disadvantaged. Instead, Fund the Residual UBI by issuing new Australian Dollars.

There's nothing magic about how money is created, allocated, and spent into the economy. There is just a lack of common understanding, despite the now famous 2014 Bank of England paper "Money Creation in the Modern Economy", explaining:
"the majority of money in the modern economy is created by commercial banks making loans". Borrowers then spend the new Australian
dollars to meet their needs. Underpinning both growth and (ideally minimal) inflation. No natural law that says commercial
bank lending is the only way new money must be created and allocated. Thus one can replace some new commercial bank lending with new UBI money from the Reserve Bank.

Importantly, it replaces some debt with sovereign money, helping to stabilise the economy. Overall economic activity should remain
at full capacity, but more would be directed to meeting Basic Needs, and less on other spending by simply: increasing interest rates to damp new borrowings for non-essential' spending, and by offsetting money flows, there should be no additional inflation pressure due to the UBI. If inflation remains a problem, as a last resort, a flat percentage spending tax paid by end consumers can be applied, combined with UBI increased to maintain its real value as the tax is imposed. Despite everyone receiving the same UBI, and paying the same % tax on spending, the net effect is steeply progressive. Tax circulates back to people via the UBI. Unlike interest, it would have a more immediate impact without feeding inflation.

There are three main ways to inject new money into te economy. (1) Universal Basic Income - for individual citizens needs,
as their 'birth-right', fixing the system failure (2) Government Deficit Spending - for additional public goods and services and (3)
Bank lending – for borrowers' needs. Of the three ways: given people must have money, providing a UBI for survival must take precedence.

A new authority is required to manage UBI, with its own Charter. It would liaise with the Reserve Bank, the tax office, and welfare
Its purpose would be to set and manage the UBI, similar to how the Reserve Bank manages interest rates. In small steps a phased introduction can pilot the scheme universally, starting as small as $10/week. This may not seem like much, but to a
person in poverty, it is food for a day. The rate can be increased by $A25/week each quarter, over 5 years until the target rate of A$500 per week is reached, adjusted for inflation in the basics.

Piloting and phasing mitigates inflation and societal risks. It establishes and test the administration systems, giving the supply chain time to adapt, without creating shortages that drive inflation. It giives organizations and people time to adapt
to shift from 'compliance' to 'support'. It deals with with uncertainties, such as the need to monitor inflation, assess labour market impacts, and behavioural changes. If adverse impacts appear, the increase in the UBI can be halted until they are
countermeasured. A gradual increase in the UBI could provide an effective wage rise, without cost to employers and avoiding 'Cost Push' inflation as well as benefiting those without a job who are also suffering from rising prices, providing a big win for unions and employers, similar to the 1983 Hawke-Keating Accord.

UBI provides a powerful tool to balance the labour market. Everyone has a different desire and ability to take paid work. As the UBI is increased some will choose to stop looking for, or will drop out of paid work, or they will reduce their hours, leaving an opening for someone who wants the work. The job market will cycle in a new dynamic balance. Most vacancies filled within standard recruitment times, and most people not in paid work, and most in paid work, doing it by choice.

A UBI is not, however, a silver bullet. From government we still need to ensure supply of adequate housing, health, and education, along with other public goods and services. From unions, we still need better share productivity, a shorter work week, mutual flexibility, work from home options, etc. From NGOs we also need need to provide life-Skills and tools
(eg parenting, budgeting applications) and support to help people thrive, not just survive

A UBI could be transformative with benefits for individuals, business, the economy, the government, and the community. Theorising, modelling and piloting have shown us the possibilities of universality. It elimates systemic poverty, it provides an effective wage increase for low-paid, some compensation for unpaid work, Basic Income Insurance for the rest, a new tool to help balance the labour market, less anger and fear in the community, more productive effort and entrepreneurship, less crime, and better health and education.

The only way to prove it is to do it, starting small to minimise risk.

Derived from the presentation given to The Isocracy Network at the Kensington Town Hall, December 3, 2002