Is Australia’s welfare system working? Recent data overwhelmingly suggests that it is not.
A new report by accounting firm PricewaterhouseCoopers (PwC) found that Australia is racking up a $160 billion welfare bill every year, based on 15 years’ of data.
Using actuarial analysis, PwC identified the three main groups most at risk of getting caught in the welfare trap: young carers, single parents under 18, and some students.
The report detailed how long individuals from these groups were likely to spend on welfare, along with the overall cost to the taxpayer.
According to the report, there are 11,000 young carers (aged 15-14) in Australia and each will spend 43 years on welfare, costing the taxpayer $5.2 billion, or $500,000 each. Young single parents (under 18), of which there are 4,370, will spend 45 years on welfare, costing $2.4 billion. And 6,600 students (who moved from student payments onto working age payments) will remain on some kind of welfare for 37 years, at a cost of $2 billion.
Social Services Minister Christian Porter said a “revolutionary change” was needed to break the welfare dependency cycle. He suggested that rather than implementing programs created by bureaucrats, Australia needs to “crack the back” of long-term welfare reliance by investing in education and training services.
“We already spend $160 billion on direct welfare payments and what this new data is telling us is that for too many people inside the system the money flows but nothing changes and lives are not improving,” he said.
The Government aims to implement programs targeting at-risk group with The Australian Priority Investment Approach, which is all about intervening early and ensuring the groups most at-risk groups have access to training and jobs.
A $96 million Try, Test and Learn Fund will also allow states and territories, the non-government sector, academics and stakeholders to test out ideas for reform.
These programs mirror New Zealand’s controversial Job Ops and Community Max program, pioneered by Paula Bennett in 2009.
Mr Porter said that changes to the welfare system have been based on “intuition”, but with solid data now providing a framework, decisions will now be “evidence-based”.
“What we’ve been doing largely to this point is acting on something that looks a bit like intuition – we do things that we think will work, because we understand the mechanics of why they should work.
“The money will flow as the results flow.”
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Opinion: Change starts somewhere
The Australian Council of Social Services (ACOSS) has been quick to criticise the Government’s approach, claiming that it focuses on young people while neglecting an entire group of older Australians already in the welfare spiral.
New figures from the Department of Social Services (DSS) reveal that the number of older Australians on welfare is rising, with 31.5 per cent of the 768,000 Australians on Newstart aged over 50.
In his maiden speech to the National Press Club, Mr Porter announced that he wouldn’t support ACOSS’s recommendation to increase the Newstart allowance by $53 per week. A move that would cost the Federal Budget $7.7 billion, rather than the $96 million the new welfare program is set to cost.
While the focus on younger groups is important, it’s necessary for the success of any welfare system overhaul that changes are made to help all groups. Figures show that almost half of over-50s on Newstart stay on it for two years, and 20 per cent stay on it for four years. Comparatively, younger people generally move off the payment much more quickly.
Mr Porter claims the data collected in the $34 million report (commissioned by Mr Porter’s predecessor Scott Morrison) from PwC, meant the Government could predict what will happen to all at-risk groups in the future.
Mr Porter claims the data collected in the $34 million report from PwC, meant the Government could predict what will happen to all at-risk groups in the future.
“That allows us to predict what will happen to groups going forward, and not just large groups, not for instance everyone on Newstart – it allows you to drill down into very, very small groups of people who share similar characteristics,” he said.
Despite older Australians on welfare also being in need of assistance programs, when you consider that the three at-risk groups identified in the PwC report are likely to remain on welfare for a number of decades, it makes sense why the Government is implementing programs to assist them first.
Overhauling the welfare system is a huge task. If the Government’s first priority is to save money rather than simply create support systems to help people, then it is correct to start with programs to get Australia’s most at-risk groups into training and jobs.
Hopefully, similar programs to help older welfare recipients will follow shortly.
What do you think? Is the Government right to focus on the younger at-risk groups? Do you think a New Zealand-style welfare program will be helpful in Australia? If you’re on welfare, do you feel more could be done to support you?
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