3 min readApr 24, 2022

This is the second in a series that explores the pros and cons of a Universal Basic Income (UBI). It explores how a UBI can be funded without increasing taxes or debt, or taking money from other programs, or causing excessive inflation.

The first examined the need for a UBI and compared it with Welfare, and a Job Guarantee.

The third proposes a way to implement a UBI with very little risk

The fourth, fifth and sixth in the series identifies the Benefits for Individuals, for Business and the Economy, and for Government and the People

Imperative for a UBI

As this previous article explains, once it was the birthright of every person to live off the land.

With the advent of property rights, money and the system of paid work, this is no longer possible in the developed world.

As Scott Santens has observed, humans are the only species that now require money to survive!

Though we have the resources to meet the basic needs of every person in Australia, 12–14% of the population (over 3.2 million people) still live in poverty; a percentage that has hardly budged despite decades of growth.


The problem is that many people simply lack the money they require to give expression to their basic needs in the market. This is bad for them and bad for business, and ultimately bad for society.

Welfare has reached its limit for working-aged people as, if the benefits are too high, it is rational for people to forgo a low-paid job in favour of the benefit. This forces governments to keep benefits low — to force people to take the available work. Which unfortunately also forces many who cannot work into poverty: mostly women with young kids, aged and disabled, their unpaid carers and those between jobs, all of whom lack savings and family support.

No one should be denied the resources they need to live.

This is a system problem that requires a system solution.

If there is a choice between money for survival and money for other spending, survival must come first.

A UBI satisfies this imperative.

Funding the UBI

We have designed it so there is no need to change our current tax or welfare systems, or increase taxes or debt, or take money from other programs, or incur excessive inflation… and it’s not magic.

Most other approaches focus on funding a UBI via taxes.

Our approach uses newly created money. It recognises that most new money is injected into the economy via bank lending. The borrowers then spend the money into the economy, driving new activity. Though this money is created within the financial system governed by the Reserve Bank, we don’t regard it as ‘government spending’. We rightly regard it as ‘private spending’.

If/when lending becomes excessive it can lead to inflation, requiring a rise in interest rates to mitigate demand for loans, which reduces the amount of new money flowing into the economy which limits demand pressure and hence price rises.

This works ‘reasonably well’, but often causes periods of recession, even though there has been no reduction in people’s needs, or even in the capacity to produce. It is simply a function of the reduction in borrowing overshooting the level required.

We are proposing that new money also be injected via personal spending for basic needs. Our target is $500/week/adult (around the current poverty line)

As with new money generated via bank lending, the UBI should not be regarded as ‘government spending’ just because the money is sourced from the Reserve Bank. It is in fact, spending by the people. As such, it should not form part of the government deficit.

We are suggesting that a new Authority is set up with its own charter whose sole purpose is to manage the UBI to both get it to the poverty line, and once there, to use it to keep the labour market in dynamic balance. The Reserve Bank would issue the new money to each citizen and permanent resident under the direction of the new Authority.

There is a problem of course. If we simply pay $500/week to 20 million adults in Australia, it will cost $520 billion pa. Plainly this would be unsustainable.

This next article explores how we can implement a UBI with little risk.