Don Arthur
From 20 March 2020, the Government will introduce a new
JobSeeker Payment to replace seven existing working age payments. These are
Newstart Allowance, Sickness Allowance, Wife Pension, Partner Allowance,
Bereavement Allowance, Widow B Pension, and Widow Allowance. The cost of this
measure combined with measures to strengthen participation requirements for job
seekers is $84.1 million over five years.[1]
According to the Department of Social Services: ‘These
measures reflect the Government’s commitment to reforming Australia’s welfare
system, using the recommendations from the 2015 McClure Review as an essential
blueprint.’[2]
The problem of complexity
Australia’s social security system is made up of around 20
income support payments and 55 supplementary payments. Each payment has its own
eligibility rules and the way income and assets tests work can vary between
payments.
The way that payments like Newstart Allowance and Family Tax
Benefits interact with each other and with the tax system is so complex that
policy experts need sophisticated software to work out how much better off an
individual would be if they earned an extra dollar from work.[3]
The 2015 report of the Reference Group on Welfare Reform (the
McClure review) described the system as an inequitable and incoherent ‘patchwork
quilt’.[4] According to the review,
the lack of coherence can undermine the system’s ability to help people into
paid work.[5]
One of the most significant problems is the gap between Newstart
Allowance and the Disability Support Pension (DSP). For a person with some
level of disability, minor differences in impairment can translate into major
differences in the amount of money they get, the amount of income they get to
keep if they work part time, and the mutual obligation activities in which they
are expected to take part. A single adult DSP recipient can get around $888 a
fortnight while a Newstart allowee will only get around $544.[6]
While the budget changes do not address the complexities
that have the most serious impact on work incentives, they do remove some
unnecessary payment categories from the system. The changes tidy up the system
rather than reform it.
Payments to be replaced
This budget measure replaces Newstart Allowance with a new
JobSeeker Payment and closes off a number of existing payments that have
already been closed to new entrants or restricted. It also replaces Bereavement
Allowance. According to the Department of Social Services: ‘For the first time,
there will be one set of rules for working age income support payments.’[7]
The new JobSeeker Payment stops short of being a single
payment for people of working age. Disability Support Pension, Carer Payment,
Parenting Payment, Youth Allowance, the Farm Household Allowance, and Special
Benefit will continue to be available to people of working age.
JobSeeker Payment will not be restricted to people who are
required to look for work. For example, some students who are temporarily
unable to continue their studies because of illness or injury will be able to
claim the payment. For most recipients, the new payment will share the same
rates of payment and mutual obligation requirements with the current Newstart
Allowance.
Table 1: How the changes affect
recipients of existing payments
| Existing payment |
Destination
payment |
Number of
recipients |
Is recipient
better or worse off? |
| Newstart Allowance |
JobSeeker Payment |
800,000 |
Same |
| Sickness Allowance |
JobSeeker Payment |
8,400 |
Same |
| Wife Pension |
JobSeeker Payment |
2,900 |
JobSeeker Payment lower
than Wife
Pension but existing recipients will
have their payment rate
grandfathered to ensure they are
not worse off |
| Age Pension |
2,250 |
Same |
| Carer Payment |
2,400 |
Same |
| Partner Allowance |
Age Pension
(when recipients reach
qualifying age) |
Not available |
Same |
| Bereavement Allowance |
Bereavement Allowance
(existing recipients) |
Not available |
Same
(existing recipients will finish their
14 week period without change) |
| Widow B Pension |
Age Pension |
323 |
Same |
| Widow Allowance |
Age Pension
(when recipients reach
qualifying age) |
Not available |
Same |
Source: Department of Social
Services (DSS), Welfare reform—2017 Budget, fact sheet, DSS, Canberra, May 2017, pp. 1–2.
According to the Department of Social Services more than 99
per cent of people affected by the changes will receive the same rate of
payment or a higher rate.[8]
Newstart Allowance
While Newstart Allowance was created as a payment for people
who were unemployed and looking for full-time work, it now includes a much
broader group. According to the McClure review:
There are now people receiving Newstart Allowance with little
or no capacity to work full time, following the inclusion of people with
disability with partial capacity to work and principal carer parents who are no
longer eligible for Parenting Payment.[9]
Around 40 per cent of recipients do not have job search as
their main activity.[10] Some of these recipients
are undertaking training or other activities, while others are temporarily
incapacitated due to illness or injury or have some other exemption from the
activity test (for example, a major personal crisis).[11]
There are a small number of people on Newstart Allowance with serious medical
conditions, such as cancer or acquired brain injury.[12]
Sickness Allowance—restricted since
1996
The budget measure affects around 8,400 current recipients
of Sickness Allowance.[13]
Sickness Allowance was created for people who were
temporarily unable to work due to illness or injury. Before 1996, Newstart allowees
would transfer to Sickness Allowance if their inability to work was likely to
last more than 13 weeks. New claimants in the same situation could also claim
Sickness Allowance until they recovered.[14]
After 20 March 1996 the rules changed so that the only people
who could get Sickness Allowance were new claimants who have a job or course of
study to return to once they recovered. Replacing Sickness Allowance with
JobSeeker Payment will mean current recipients move to the new payment. This
will have no significant impact on their rate of payment or obligations.[15]
‘Dependency’ payments for women
Until relatively recently, the income support system
reflected an expectation that women would depend on a male breadwinner for
support. A number of payments were created to support women whose husbands or
partners were absent (due to separation, imprisonment or death) or who were
unable to earn an income.[16] These payments include
Wife Pension, Partner Allowance, Widow B Pension and Widow Allowance.
As social norms about women’s participation in work changed,
policymakers closed off or restricted access to these payments. For example,
the Widow B Pension and Wife Pension were closed off to new entrants in the
1990s while access to Partner Allowance and Widow Allowance has been restricted
to women born on or before 1 July 1955 (under the budget changes it will close
to new entrants on 1 January 2018).[17]
Most of the women affected by these changes will move to the
Age Pension rather than the new JobSeeker Payment. However, around 2,900 Wife
Pension recipients will transfer to JobSeeker Payment but will receive their
existing rate of payment (which is higher than the normal JobSeeker Payment).[18]
Bereavement Allowance
Bereavement Allowance has its origins in a temporary
allowance paid to widows. From 1947 to 1989 this was known as the Widow C
Pension. It was replaced by a Widowed Person’s Allowance in 1989 and
eligibility was extended to both men and women. In 1995 it was renamed
Bereavement Allowance.[19] It is paid at the Age
Pension rate (which is higher than Newstart Allowance).
Under the changes announced in the Budget, newly bereaved
people will receive the new JobSeeker Payment with ‘a triple fortnights pay in
the first fortnight to reflect the fact that newly bereaved people have higher
upfront costs such as medical bills and funeral expenses’.[20]
[1].
Australian Government, Budget
measures: budget paper no. 2: 2017–18, p. 168.
[2].
Department of Social Services (DSS), Welfare
reform—2017 Budget, Fact sheet, DSS, Canberra, May 2017, p. 1.
[3].
D Arthur, ‘Why can’t we
have a simple welfare system?’, Australian Review of Public Affairs,
September 2014.
[4].
Reference Group on Welfare Reform, A
new system for better employment and social outcomes, DSS, Canberra,
2015, p. 10.
[5].
Ibid., p. 10.
[6].
Problems caused by the large gap between Newstart and DSP were
discussed by the McClure review. See: Reference Group on Welfare Reform, A
new system for better employment and social outcomes: interim report, DSS,
Canberra, 2014, p. 47.
[7].
DSS, op cit., p. 1.
[8].
DSS, op cit., p. 1.
[9].
Reference Group on Welfare Reform, A
new system for better employment and social outcomes, DSS, Canberra,
2015, p. 57.
[10].
DSS, Newstart
Allowance payment trends and profile report, data.gov.au website, 18
January 2017.
[11].
Ibid.
[12].
DSS, ‘Mutual
Obligation requirements for NSA/YA Job Seekers/YA Students - Exemptions -
Temporary Incapacity’, Guide to social security law, 8 May 2017.
[13].
DSS, Welfare
reform—2017 Budget, op. cit., p. 1.
[14].
DSS, ‘Sickness
Allowance (SA) - Description’, Guide to social security law, 3 January 2017.
[15].
Ibid.
[16].
P Whiteford, ‘Is
welfare sustainable?’, Inside Story, 26 November 2015.
[17].
Department of Human Services (DHS), A
guide to Australian Government payments:20 March–30 June 2017, DHS,
Canberra, 2017.
[18].
DSS, Welfare
reform—2017 Budget, op. cit.
[19].
C Ey, Social
security payments for the unemployed, the sick and those in special
circumstances, 1942 to 2012: a chronology, Background note, Parliamentary
Library, Canberra, 4 December 2012.
[20].
DSS, Welfare
reform—2017 Budget, op. cit., p. 2.
All online articles accessed May 2017.
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