Future budgets are going to have to spend more on welfare, which is fine. It's spending on us

This is part of a major series called Advancing Australia, in which leading academics examine the key issues facing Australia in the lead-up to the 2019 federal election and beyond. Read the other pieces in the series here.

Spending on social security and welfare accounts for more than a third of the Commonwealth budget.

Because of its size, it has been one of the main targets of proposed cuts in every Coalition government budget since 2014.

Despite this, social security and welfare spending has continued to grow. In fact the best way to describe the approach of the Coalition’s past five budgets is attempted rather than actual austerity, with the Senate rejecting or never considering repeated cuts. More than A$10 billion of these were served up again and again in budgets as so-called “zombie measures”.

Whoever wins government will continue to face pressure to further increase welfare and social security spending as the National Disability Insurance Scheme ramps up and a royal commission and demographic shifts build the case for more spending on aged care.

It is also widely recognised that Newstart, the main payment for unemployed Australians, is increasingly inadequate. It has slipped relative to pensions and wages each year because it is indexed to the slower-growing consumer price index. Payments for single parents are also inadequate, having been cut as a result of specific government decisions.

They say it’s us versus them…

The Coalition has responded with policy proposals that stigmatise recipients, such as drug-testing. It has introduced programs such as Online Compliance Intervention (“robodebt”) and ParentsNext that have arguably overreached in clawing back payments and imposing sanctions.

In 2014, the new Coalition government’s first budget speech classified people whose main source of income was support payments as “leaners not lifters”. In 2017, the human services minister described welfare dependency as the most pressing problem facing Australia’s social security system, likening it to “poison” for the unemployed.

And yet most of us are recipients at one time or another or have family members or friends who become recipients because of unemployment, ill health or family breakup.

… but we are them

During any fortnight, more than 5 million Australians, or roughly a quarter of the adult population, receive an income-tested social security payment. This includes an age pension, a disability support pension, Newstart, a carer’s payment, a parenting payment or one of seven other categories of income support.

Family tax benefits supplement the incomes of around another 855,000 families. And 900,000 or so families, many of them not receiving social security benefits or other family payments, are assisted with childcare costs.

As we look over longer periods, receipt of social security payments becomes ever more common.

The social services minister has used point-in-time administrative data to show that in 2018 the share of working-age Australians on welfare fell to 15.1%, “the lowest rate of welfare dependency in over 25 years”.

But the longitudinal Household, Income and Labour Dynamics in Australia (HILDA) Survey finds that over the course of an entire year (2016) about one-third of working-age households contained someone who received an income support payment for some of it.

The longer the time period, the more common becomes the receipt of payments.

Between 2001 and 2015 around 70% of working-age households included someone who received an income support payment at some point (not including the age pension or family payments).

It is one of the most important lessons of longitudinal surveys like HILDA – we, our family or friends are in this together.

While the likelihood of receiving support is greater than acknowledged, that support is less intense than is commonly believed. HILDA shows that 70% of working-age households received some social security benefits over a 15-year period. However, only around 1% of working-age households receive the bulk of their income (90%) from benefits for 10 years or more.

These were people with deep and persistent disadvantage. They were highly likely to be Indigenous Australians or people living in areas with limited job opportunities or people with long-standing disabilities or educational disadvantages.

As the 2016 HILDA report notes:

The welfare system does indeed provide temporary rather than long-term support for most recipients, and is potentially playing a very important safety net role.

The social security system is among the core institutions of contemporary Australian society. And it can be regarded as one of the main levers of not just social policy but economic policy. Australian governments have used the social security system to stimulate household spending during recessions or to avoid recessions — as happened during the global financial crisis.

An effective social security and welfare system is an essential underpinning of a modern economy, not least because security when people are in work requires security during periods when people are looking for work or outside the labour market.

Immediate priorities…

The first welfare priority for a new government has to be to increase the Newstart unemployment benefit. Opposition Leader Bill Shorten has promised that, if elected, Labor will do this via a “root-and-branch review”.

Crossbenchers Rebekha Sharkie and the departing Cathy McGowan want to go further. They have introduced a private member’s bill that would create an independent commission to examine the adequacy of all social security payments other than family payments and payments to veterans. The commission would make recommendations rather than set rates.

The review promised by Shorten and the ongoing commission proposed by crossbenchers need not be mutually exclusive. An immediate review could be used to increase payments in the short term, while an ongoing commission could examine longer-term priorities.

Another urgent priority should be to reform the employment services network. It operates more like a system of penalties than an employment service, requiring participants to apply for 20 jobs a month or go on Work for the Dole programs rather preparing them for work.

… and beyond

There is a case for going further. We are overdue for a comprehensive review of Australia’s social security system. This should be undertaken in an integrated fashion and include tax, family payments and payments for childcare and to support people who study and work.

Looking further ahead, the ageing of Australia’s population is going to force us to spend more on health and aged care.

Population ageing and increased life expectancy represent a fundamental challenge that will inevitably be met by collecting and distributing more of our economy in tax and benefits than at present.