Calls to increase Newstart Allowance

ONE of the nation's biggest business groups has called for an increase in the Federal Government's largest welfare payment, the Newstart Allowance.

The Business Council of Australia called for the allowance to be increased as part of a submission to a Senate inquiry into whether people on welfare are being encouraged to seek work.

Payments of $35 a day were "likely to erode the capacity of individuals to present themselves well or maintain their readiness for work", the submission reads.

The BCA's recommendation lends more weight to the debate, joining the Henry tax review, the Greens and the social service industry in calling for an increase.

The submission also highlighted the struggle of those relying on Newstart and the rental allowance to keep up with rental payments.

"While the combined Newstart and rental allowance may tide people through relatively short periods of unemployment, for those out of work for long periods of time, such low levels of support greatly increase the risk of homelessness," it reads.

"Once homeless, job seekers are severely disadvantaged in their ability to maintain active job search and present themselves decently for job interviews."

The business lobby also recommended the Senate committee should reform the allowance as part of a wider review of the welfare and tax systems.