Via MacroBusiness, here's the TL;DR of the Business Council of Australia's submission to a 2012 Senate inquiry into social security allowances:

• "The rate of the Newstart Allowance for jobseekers no longer meets a reasonable community standard of adequacy and may now be so low as to represent a barrier to employment.
• "Reforming Newstart should be part of a more comprehensive review to ensure that the interaction between Australia’s welfare and taxation systems provides incentives for people to participate where they can in the workforce, while ensuring that income support is adequate and targeted to those in greatest need.
• "As well as improving the adequacy of Newstart payments, employment assistance programs must also be reformed to support the successful transition to work of the most disadvantaged jobseekers."

Not only did the BCA's confederacy of Scrooges suffer unaccustomed pangs of sympathy, the Liberal Party senator chairing the inquiry also agreed that Newstart is excessively miserly. However, he failed to recommend raising the allowance, saying:

"There is no doubt the evidence we received was compelling. Nobody want's [sic] to see a circumstance in which a family isn't able to feed its children, no one wants to see that in Australia. But we can't fund these things by running up debt."

Sigh. (Here we go…) There is no need to "fund these things", whether it be by "running up debt" or any other means. The Federal Government creates money when it spends. We, as a country, run out of the capacity to feed our children when we run out of food. We cannot run out of dollars, since we can create the dollars without limit.

The government does however, at the moment, have a purely voluntary policy of matching, dollar-for-dollar, all spending with government bond sales. There's no good reason for this; as Bill Mitchell says, it's just corporate welfare. Even so, selling bonds is not issuing new debt. Bonds are purchased with RBA credits (or "reserves", if you prefer). The purchasing institution simply swaps a non-interest-bearing asset (reserves) at the RBA for an interest-bearing one (bonds), still at the RBA. It's just like transferring some money from a savings account to a higher-interest term deposit account at a commercial bank; do we say that this is a lending operation? Of course not.

There is no fiscal reason why the government should punish the unemployed to the extent that they become an unemployable underclass. Even if we are generous and assume the good senator and his colleagues on the inquiry are just ignorant about how the economy works, we are still bound to conclude that there must be some (not so ignorant) people in government, who do want to see people suffering for no just reason.