Social policy Overview

Budget Review 2009-10 Index

Budget 2009 10: Social policy


Dr Matthew Thomas and Dr Luke Buckmaster

The task of managing Federal Government finances into the future is a difficult one, and one that has been further exacerbated by the global financial crisis, recession and increasing rates of unemployment. The Rudd Government is confronted with the need to keep spending under control and to increase the proportion of the population taking part in the labour market if it is to sustain economic growth. Without on-going high rates of economic growth, the nation will struggle not only to support an ageing population but also, according to economist Professor Bob Gregory of the Australian National University, a substantial increase in the number of people relying on income support. According to Gregory, based on his analysis of changes in the welfare population following the 1990–92 recession, the expected rise in unemployment is likely to be followed by increases in the number of people on disability and carer payments, and/or on sole-parent pensions.[1]

Early in its term, the Rudd Government signalled its intention to tackle the rising cost of social security benefits by, in part, winding back what has come to be known as ‘middle class welfare’.[2] In its first Budget, the Government introduced a new means test on the baby bonus, and limited access to Family Tax Benefit Part B to those earning less than $150 000. In the lead-up to the 2009–10 Budget, the Government indicated that it would be introducing further measures to wind back middle class welfare.

Much of the commentary immediately following the Budget observed that the Government’s ‘attack’ on middle class welfare was not nearly as tough as was expected.[3] It is possible that this is at least partly due to the Government’s balancing the need to institute long-term cuts in welfare expenditure with the need to avoid measures that could further reduce economic demand. It may also be the case that the Budget signals ‘round one’ in the reforms to middle class welfare, with ‘round two’ to follow. It is anticipated that the Henry Review of the taxation system will examine instances in which tax benefit payments that advantage people on higher incomes could be reduced.

In the making of the 2009–10 Budget, the Government was also faced with balancing a number of other (potentially irreconcilable) objectives, including:

  • making significant increases in expenditure, either as part of efforts to stimulate the economy or the implementation of policy commitments
  • making significant reductions in some areas of expenditure in order to offset increases in other areas and
  • embarking on significant (and potentially very expensive) policy reform in a range of areas, some of which were identified by the Government when it was in opposition.

The difficult nature of this challenge was nowhere more evident than in the area of social policy where, for example, the Government had the task of simultaneously increasing the pension, whilst reducing funding through a variety of mechanisms, such as eligibility changes, means testing and caps on welfare expenditure. At the same time, the Government was faced with implementing commitments to reform key social policy areas such as higher education, welfare payments, paid parental leave and health—that is, not simply spending more or less but changing overall policy frameworks.

Social policy contributions to this Budget Review examine the policy context for a range of measures in social policy-related portfolios in the budget. They seek to provide a clearer understanding of the background, rationale and policy direction for these measures and therefore a better understanding of the budget from a social policy point of view. In addition to the question of whether funding commitments are adequate, the types of issues examined include how funding will be spent, whether particular measures are consistent with previous approaches, the apparent rationale for particular measures and the likely success of particular measures.

Overall, the contributions highlight the tensions described above—that is, the tensions associated with combining increased expenditure in some areas with reduced expenditure in others, whilst also undertaking significant reform. The following points are particularly noteworthy:

  • as indicated above, while the Government raised expectations about significant cuts to ‘middle class welfare’, changes to entitlements based on income were relatively modest. These included means testing of the Private Health Insurance Rebate, tightened indexation of Family Tax Benefit Part A and returning the pension taper rate to 50 cents in the dollar. However, critics have suggested that this has left a range of other areas of middle class welfare relatively untouched—for example, child care tax rebate, more stringent tightening of superannuation concessions and pension asset testing
  • the Government has commenced significant structural reform through investments and/or administrative changes in some areas such as higher education, pensions and paid parental leave but not others such as health (where reform will probably have to wait until after the final report of the National Health and Hospitals Reform Commission has been released)
  • a number of budget commitments continue changes in policy direction that have been ongoing since the Rudd Government came to office—for example, changes in areas such as immigration policy (abolition of the 45 day rule) and Indigenous affairs (funding aimed at forging ‘a new relationship with Indigenous Australians’) and the health workforce (making greater use of nurses through enabling nurse practitioners and midwives to access Medicare Benefits and the Pharmaceutical Benefits Scheme)
  • there has been a continuation of the tendency for greater generosity towards some income support recipients than to others—for example, pensioners have gained an increase in their benefits, while similar increases in income support rates have not been passed on to sole parents, students or the unemployed and
  • commencement of a number of measures has been deferred to a later date, such as increasing the age at which people can access the age pension and the introduction of demand-driven funding in higher education.

Generally speaking, from a social policy perspective, the 2009–10 Budget is a cautious one. Arguably, given the current economic circumstances and the complexity of the social policy environment, this is to be expected. While the Government has introduced some significant reforms, some tough decisions have yet to be made if the broad goal of shoring up economic growth and sustainability are to be realised.

Unfortunately for the Government, the 2009–10 Budget is a mid-term budget, where, arguably, opportunities for reform are typically greatest. As a result, it may be the case that the Government’s strongest opportunity for major reform has been lost.

[1].    Quoted in D Uren, ‘One in four workers to go on welfare’, The Australian, 31 March 2009, p. 4.

[2].    ‘Middle class welfare’ may be broadly described as welfare that may be accessed by people other than the poor. For an analysis of key issues in the debates about middle class welfare, see L Buckmaster, Money for nothing? Australia in the global middle class welfare debate, Research paper, no. 31, 2008–09, Parliamentary Library, Canberra, 2009, viewed 21 May 2009,

[3].    See for example, M Brissenden, ‘Budget fails to match tough talk’, ABC 7.30 Report, 13 May 2009, viewed 22 May 2009,