This Bill seeks to extend the Cashless Debit Card to the Federal electorate of Hinkler in Queensland, an area that includes Bundaberg and Hervey Bay. As well as specifying the location of the new trial site, the Bill sets out criteria that determine which income support recipients will be required to participate in the trial. It also sets out details of how the trial will be administered in the Hinkler trial site.
The Bill also makes some changes that affect the Cashless Debit Card Scheme as a whole. It includes provisions that will ensure merchants are able to decline Cashless Debit Card transactions where the cardholder tries to use the card for gambling, alcohol, or gift cards and other cash-like products. While these provisions allow merchants to decline these transactions, they do not require them to.
The Cashless Debit Card is currently operating in three locations: Ceduna (South Australia), the East Kimberley (Western Australia), and the Goldfields region (Western Australia).
The Cashless Debit Card was one of the recommendations of the 2014 Indigenous Jobs and Training Review (the Forrest Review). The review argued that eliminating spending on alcohol, illicit drugs and gambling would give income support recipients ‘the capacity to stabilise their financial arrangements to ensure secure housing, payment of regular bills and food on the table.’ This in turn would reduce reliance on income support by enabling recipients to concentrate on returning to work.
According to the review: ‘If a cashless welfare system is effectively and smoothly introduced, it will render the cash system that preceded it an irresponsible social experiment.’
The problem of blocking particular goods
While the Forrest Review stressed the scheme’s potential, it also identified some unresolved challenges. Although it is relatively straightforward to stop cardholders making purchases at particular categories of merchant (for example, bottle shops or casinos), there is currently no way to automatically stop them from buying particular goods. This is a problem when dealing with mixed merchants who sell goods policymakers want to allow (such as groceries or meals) alongside goods they want to block (such as alcohol or gift cards).
The Government’s approach in the existing trial sites has been to allow mixed merchants to accept the card if they agree not to process Cashless Debit Card transactions that include excluded goods. At the same time, the Government has been looking for a technological solution that will enable merchants to automatically block purchases of excluded goods.
Extending and expanding the trials
In the 2017–18 Budget, the Government announced that it would seek to extend the trials in Ceduna and East Kimberley and add two new trial sites. With the Social Services Legislation Amendment (Cashless Debit Card) Bill 2017, the Government sought to repeal section 124PF of the Social Security (Administration) Act 1999 (SSA Act). This would have removed any legislated end date for the trial sites as well as enabling the Government to expand the trial to new sites by making a disallowable legislative instrument.
The Senate rejected this approach. The Bill that passed allowed the Government to extend the trials until 30 June 2019 and to add the Goldfields site (this is explained in the Supplementary explanatory memorandum).
The proposed Hinkler trial
The Bill specifies the location of the new trial site and sets out which groups of income support recipient will be required to participate in the trial. It would allow the trial to continue until 30 June 2020 at the Hinkler site.
The trial site
The Bill sets out that the trial will take place in the area within the boundaries of the Division of Hinkler (as those boundaries were in force on 31 May 2018).
In 2016 Hinkler had a population of almost 142,000. According to the Minister’s second reading speech , the trial will affect around 6,700 people. This would make it the largest of all the Cashless Debit Card trial sites. Subsection 124PF(3) of the SSA Act currently limits the number of trial participants across all sites to 10,000. The Bill increases this to 15,000.
The Bill sets out criteria that determine which income support recipients will be required to participate in the trial.
The trial will only apply to income support recipients who are under 36 years of age. It will include recipients of Newstart Allowance, Youth Allowance (other), and Parenting Payment. It will not include Youth Allowance recipients who are studying full time or are taking part in a New Apprenticeship.
Unlike other trial sites, the Hinkler trial will not allow people to volunteer for the Cashless Debit Card. According to the Minister’s second reading speech: ‘This will allow the Government to test the impacts of the Cashless Debit Card trial exclusively for the selected group, as has been asked for by the community.’
Allowing merchants to refuse transactions
In order to be able to accept the Cashless Debit Card, the Government requires mixed merchants to agree not to process transactions that include excluded goods. The Government appears to be concerned that this practice could be challenged under the restrictive trade practices provisions of the Competition and Consumer Act 2010. However, neither the Bill’s Explanatory Memorandum nor the second reading speech explain how refusing to process transactions would contravene these provisions.
The Bill authorises merchants to decline transactions where the cardholder tries to use a Cashless Debit Card for gambling, alcohol or cash-like products such as gift cards for the purposes of subsection 51(1) of the Competition and Consumer Act 2010 (the CCA). Subsection 51(1) of the CCA provides for exceptions to Part IV of that Act, which deals with restrictive trade practices. This exception will join the current exception to Part IV of the CCA that applies to transactions declined by financial institutions (section 124PQ of the SSA Act).
This provision of the Bill applies across all trial sites. While the Bill authorises merchants to decline transactions involving excluded goods, it does not require them to.
Gift cards may pose a challenge for the expansion of the Cashless Debit Card because large supermarket chains such as Coles and Woolworths commonly sell gift cards that can be used at bottle shops. According to the card provider Indue:
Merchants who sell Excluded Goods and Services and have the ability to prevent the sale of Excluded Goods and Services will be required to enter into a Merchant Agreement with Indue in order to be eligible to participate in the Trial and accept the Cashless Debit Card.
This suggests that any future expansion of the Cashless Debit Card to large urban centres will depend heavily on the cooperation of retailers.
Stakeholder comments on the expansion of the trial as well as the policy position of non-government parties and independents has been discussed in the bills digest for the Social Services Legislation Amendment (Cashless Debit Card) Bill 2017.
Social Services Legislation Amendment (Cashless Debit Card) Bill 2017
Social Services Legislation Amendment (Cashless Debit Card) Bill 2017
Alcohol abuse in Ceduna: findings from the cashless debit card trial
BasicsCard and Cashless Debit Card: what's the difference?
'The computer says no': automatic product blocking for the Cashless Debit Card
Evaluations (Department of Social Services)
Cashless debit card - Evaluation Framework and Reports
Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.