Social policy overview


Budget Review 2010-11 Index

Budget 2010–11: Social Policy Budget Overview

Matthew Thomas and Luke Buckmaster

The 2010–11 Budget has been widely described as a ‘no-frills’ Budget. Arguably, this was to be expected in the current economic and political environment.

Australia’s political culture has become one in which sound economic management is viewed (or portrayed) as being perhaps the key political virtue. This appears to be especially so in the wake of the 2008–09 global financial crisis and in the face of emerging pressures on federal finances that are largely caused by the need to support an ageing population. In this setting, and under sustained pressure from the Opposition, the Government has focused much of its energy on returning the Budget to surplus in as short a time as possible. This has involved reining in stimulus spending, but also making some attempts to increase workforce participation and reduce the number of people reliant upon income support.

However, the degree to which the Budget may be understood as being ‘tight’ and ‘fiscally conservative’ is open to question with regard to social policy areas. 

For example, while there may not have been significant (or any) increases in spending in the areas of housing and community amenities, social security and welfare and education in this year’s Budget, substantial funding has been allocated for health reforms—although it should be noted that a considerable proportion of this funding is coming from the states and territories through ‘claw-back’ of GST funding. Also, as is the case with all budgets, funding has been reallocated across and within social policy areas in line with changing needs and priorities. Put simply, this Budget’s spending in social policy areas may not have been broad, but it was certainly deep in the case of health.

It is also the case that the Government has in its previous two budgets (and, indeed, between budgets) spent sizeable amounts and implemented more or less comprehensive reforms in some key social policy areas. For example, the Government has invested heavily in public housing and education (both higher education and school infrastructure) and in increasing the rate of the pension, while also undertaking significant policy reform. This signals the importance of not treating individual budgets in isolation. It also highlights the potential limitations of singling out who were the Budget’s ‘winners’ and ‘losers’ on an annual basis.

It is also important to bear in mind that fiscal responsibility should refer as much to the nature as it does to the quantum of the spending. 

Thus, for example, questions could be raised as to whether or not the Government has exercised sufficient fiscal responsibility in relation to the establishment of a National Health and Hospitals Network. Has the government spent too much in gaining the support of the premiers for this reform, especially given that there is some debate as to whether or not the reform will achieve its stated objectives?[1] In relation to savings measures, it could be asked whether or not more significant savings might have been made by the Government in what it pays for medicines.[2] Arguably, the Government could also have undertaken deeper reform and realised greater savings in relation to Disability Support Payments,[3] and through the introduction of further cuts to middle class welfare. In short, the Government could have been more fiscally conservative than they actually were.

It is also worth noting that, to some extent, perceptions that the Government has underspent in social policy areas in this year’s Budget may also reflect raised community expectations associated with the Government’s objective of a more inclusive Australian society. As a consequence, a number of commentators have expressed disappointment that, as they see it, the Budget does not include a significant range of measures capable of promoting the ideal of a more inclusive society.[4]

Certainly, the Government did not want for social policy ideas to choose from. The pressure for fiscal conservatism comes at a time in which the Government has, in the report of the Australia’s Future Tax System Review (Henry Tax Review), a wealth of policy reforms that it could potentially have implemented. These include:

  • improved alcohol and gambling taxation arrangements
  • refined housing assistance measures, including increasing the maximum rate of Rent Assistance to assist renters to afford an adequate standard of dwelling
  • more consistent payment relativities for income support aimed at reducing the gap between the amount paid to the unemployed or students and those in receipt of a pension
  • new, more comprehensive and rationalised means testing arrangements for income support recipients
  • substantial changes to family assistance aimed at, for example, more directly reflecting the costs of raising children and avoiding unnecessarily high disincentives for working
  • rationalisation of child care assistance payments and
  • improved funding arrangements for aged care based around the principle of user-directed funding.[5]

The Australian Council of Social Services has been broadly supportive of the Henry Tax Review’s proposals in the areas of superannuation, housing affordability, Newstart and community services.[6] 

Unsurprisingly, given the above agenda, the Government has chosen to employ few of the Henry Tax Review recommendations in this Budget, and those that it has selected are more or less in line with its overall objective of ‘balancing the books’.

Significant social policy measures in the Budget include:

  • substantial expenditure in health, including $7.3 billion over five years related to the Government’s health and hospitals reform agenda
  • new savings and revenue measures in health, including cuts in the amounts paid to pharmaceutical companies and pharmacies for Pharmaceutical Benefits Scheme medicines, increasing the tobacco excise, and increasing the threshold for the medical expenses tax offset
  • reforms to the Disability Support Pension under which some claimants will be asked to demonstrate they cannot work by participating in employment assistance or rehabilitation—estimated to realise savings of $383.4 million over four years
  • $410 million over six years to establish the new scheme of income management in the Northern Territory announced by the Government in November 2009
  • a restructuring of Commonwealth vocational education and training (VET) programs, under which expenditures will be offset by the cessation or redirection of funding from other VET programs—resulting in a decline in VET expenditure of 10.7 per cent from 2010–11 to 2013–14
  • $273.7 million to support the introduction of the National Quality Framework for early childhood education and child care and
  • reinstatement of the cap on the amount of Child Care Rebate that can be claimed for each child in care to the 2008–09 level of $7500 per annum and suspension of further indexation until July 2014—expected to achieve savings of $86.3 million over four years.

On the other hand, the social policy budget does not include:

  • significant commitments or reforms in aged care, mental health, Indigenous health, dental health or health workforce
  • a substantial initiative capable of fundamentally addressing the inexorable growth in the numbers of people receiving DSP
  • major new directions or new funding allocations in the area of Indigenous affairs and
  • any of the Henry Tax Review recommendations for changes in areas such as alcohol and gambling taxation, income support, means testing, family assistance, housing assistance or aged care.  

In summary, while it is certainly the case that the 2010–11 Budget lacked significant announcements across a range of social policy areas, one area in particular, health (and, more specifically, hospitals) has received a substantial investment. As discussed above, this reflects a number of factors, including the electoral cycle, fiscal constraints, expenditure already committed in other areas of social policy in previous budgets and the Government’s identification of health and hospitals reform as a major priority. As with most reforms of this nature, the costs and benefits of the Government’s approach will most likely be the subject of much debate for decades to come. 


[1].    See the Hospitals article in this Budget Review.

[2].    See the Pharmaceuticals article in this Budget Review.

[3].    See the Disability Support Pension article in this Budget Review.

[4].    See F Quinlan, ‘The budget of social exclusion’, Eureka Street, vol. 20, no. 9, 12 May 2010, viewed 21 May 2010, http://www.eurekastreet.com.au/article.aspx?aeid=21227 ; E Cox, ‘Social welfare: disadvantaged take a back seat to boy stuff’, Crikey, 12 May 2010.

[5].    Australia’s Future Tax System Review, Australia’s future tax system: report to the Treasurer: part one – overview, Commonwealth of Australia, Canberra, 2010, pp. 95–101, viewed 20 May 2010, http://www.taxreview.treasury.gov.au/content/downloads/final_report_part_1/00_AFTS_final_report_consolidated.pdf  

[6].    Australian Council of Social Services, A Fairer Tax System: Some important steps but further to go, media release, 2 May 2010, viewed 21 May 2010, http://www.acoss.org.au/media/release/a_fairer_tax_system_some_important_steps_but_further_to_go

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