Welfare - Income management

Budget Review 2010-11 Index

Budget 2010–11: Welfare

Income management

The Budget includes $410 million over six years for a new scheme of income management in the Northern Territory.

This funding supports changes the Rudd Government is seeking to make to the system of income management of welfare payments—a system originally introduced by the Howard Government in 2007 as part of the Northern Territory Emergency Response (NTER). On 25 November 2009, the Government announced that it would replace the existing income management scheme for prescribed NT Indigenous communities with a broader scheme targeted at ‘vulnerable regions’ and ‘individuals at risk’.[1] From 1 July 2010, the new scheme will be introduced throughout the Northern Territory as a whole, including urban, regional and remote areas. According to the Government, this is to be the ‘first step in a national roll out of income management in disadvantaged regions’.[2]

The income management reforms are to apply to people in the following categories:

  • people aged 15 to 24 who have been in receipt of Youth Allowance (other), Newstart Allowance, Special Benefit or Parenting Payment for more than three of the last six months
  • people aged 25 and above who have been in receipt of specified payments, including Newstart Allowance and Parenting Payment for more than one year in the previous two years
  • people referred for income management by child protection authorities and
  • people assessed by Centrelink social workers as requiring income management due to vulnerability to financial crisis, domestic violence or economic abuse.[3]

Affected income support recipients will have 50 per cent of their regular payments (70 per cent in child protection cases) and 100 per cent of lump sum payments quarantined in a separate account that may only be used for the purchase of ‘the essentials of life’, such as food, clothes and rent. The Government expects that around 20 000 individuals are expected to be covered by income management in the Northern Territory when it is fully implemented.[4]

Funding committed to this measure includes the cost of operating the income management scheme; provision of complementary services such as budgeting, financial counselling, financial education; and incentive payments for those who can demonstrate a pattern of savings.

The Rudd Government argues that income management is necessary to ensure that more of income support recipients’ money is spent on priority items and in the interests of children and families, rather than on alcohol and gambling.[5] Further, the reforms are intended to improve welfare recipients’ ability to move out of welfare dependence and into economic and social participation.[6]

The Government has argued that evidence obtained from various reports provides support for the continuation and expansion of income management. For example, the Government has highlighted an evaluation of income management in the Northern Territory undertaken by the Department of Families, Housing, Community Services and Indigenous Affairs which found that more than half of parents interviewed reported their children were eating more (62.5 per cent), weighed more (57.4 per cent) and were healthier (52.1 per cent).[7]

These changes are being made through a Bill currently before the Parliament, the Social Security and Other Legislation Amendment (Welfare Reform and Reinstatement of Racial Discrimination Act) Bill 2009. For a description and analysis of the Bill (including detailed background discussion of income management), see the Parliamentary Library’s Bills Digest


The proposed changes to income management have attracted some public support, but also substantial criticism.

One supporter, Cape York Indigenous leader, Noel Pearson, has described the new scheme as the most fundamental and important reform in the history of Australia’s welfare system, arguing that ‘black and white Australians who are in disadvantaged situations can only benefit from these changes’ and that there have been ‘tangible benefits’ from the income management system currently in place in Cape York Peninsula.[8]

Criticisms have included:

  • claims by the Opposition that the new scheme amounts to a ‘watering down’ of the old scheme because it will no longer apply to all welfare recipients in prescribed Indigenous communities (only those in the ‘at-risk’ categories outlined above)[9]
  • while the Government claims that the introduction of income management to the whole of the NT represents the precursor to a national roll-out of the scheme, it is by no means clear, based on available information, to what extent this will in fact be the case[10]
  • although the proposed new arrangements are more targeted than the current system, they may still be regarded as arbitrary in that the new scheme includes entire categories of income support recipients, with the burden of proof placed on these recipients to demonstrate that they are socially responsible if they are to be excluded from income management[11]
  • many commentators regard the relatively indiscriminate application of income management arrangements as detracting from, rather than supporting, income support recipients’ ability to exercise responsibility[12]
  • some argue that evidence presented by the Government in support of income management has been flawed and has ignored evidence suggesting that compulsory income management has had negative consequences[13] and
  • some have raised concerns about the substantial cost of the scheme—that is, over $400 million to bring 20 000 people under income management.[14] Further, some have noted that this money would be better spent on more directly providing people with the opportunities and resources necessary for social participation.[15]

An issue of note in relation to the cost of the scheme is that Budget Measures: Budget Paper No. 2: 2010–11 refers to a funding amount of only ‘$6 million in 2014–15’.[16] The Office of the Minister for Families, Housing, Community Services and Indigenous Affairs has since clarified that the difference in funding between 2013–14 and 2014–15 ‘reflects the fact that one component of the funding (the $6 million for the Department of Human Services) is the only aspect of the funding package that extends into a sixth year—beyond the usual 5 year forward period. This amount is included to reflect particular contractual obligations over that period’.[17] The Minister’s Office adds that ‘as is usual, funding for the other elements of the new income management system beyond the five year period has not yet been considered by Government’.[18]

[1].     J Macklin (Minister for Family Affairs, Housing, Community Services and Indigenous Affairs) and W Snowden (Member for Lingiari), Major welfare reforms to protect children and strengthen families, media release, 25 November 2009, viewed 13 May 2010, http://www.jennymacklin.fahcsia.gov.au/internet/jennymacklin.nsf/content/welfare_reforms_protect_children_25nov2009.htm  

[2].    Ibid.

[3].    Ibid.

[4].    Ibid.

[5].   J Macklin, ‘Second reading speech: Social Security and Other Legislation Amendment (Welfare Reform and Reinstatement of Racial Discrimination Act) Bill 2009’, House of Representatives, Debates, 25 November 2009, p. 12783, viewed 13 May 2010, http://parlinfo.aph.gov.au/parlInfo/genpdf/chamber/hansardr/2009-11-25/0046/hansard_frag.pdf;fileType=application%2Fpdf

[6].    Ibid.

[7].    J Macklin add titlesand W Snowdon, Children eating healthier food in NTER communities, media release, 15 December 2009, viewed 13 May 2010, http://www.jennymacklin.fahcsia.gov.au/internet/jennymacklin.nsf/content/children_eat_healthier_food_15dec2009.htm. For a copy of the report, see Australian Institute of Health and Welfare (AIHW), The evaluation of income management in the Northern Territory, AIHW, 2009, pp. 4–6, viewed 13 May 2010, http://www.fahcsia.gov.au/sa/indigenous/pubs/nter_reports/Documents/nt_eval_rpt/NT_eval_rpt.pdf

[8].    Noel Pearson, quoted in J Kelly, ‘Noel Pearson hails welfare quarantining extension’, Australian, 31 March 2010, viewed 14 May, 2010, http://www.theaustralian.com.au/politics/noel-pearson-hails-welfare-quarantining-extension/story-e6frgczf-1225848138079

[9].    The Opposition has, nonetheless, said that it will support the Bill. See P Kelly, ‘Tony Abbott backs ALP welfare management bill’, The Australian, 16 March 2010, p. 5, viewed 14 May2010, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2F446W6%22 

[10]. Ibid.

[11]. For example, J Falzon, ‘Macklin’s measures a far cry from fairness’, Canberra Times, 1 December 2009, p. 13, viewed 14 May 2010, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2FVRCV6%22

[12]. Ibid.

[13]. For example, E Cox, ‘Data without destiny: Macklin fudges evidence’, Crikey, 18 December 2009, viewed 13 May 2010, http://www.crikey.com.au/2009/12/18/data-without-destiny-macklin-fudges-evidence/

[14]. For example, Frank Quinlan, Executive Director of Catholic Social Services Australia, quoted in J Massola, ‘Welfare bodies oppose income quarantining’, Canberra Times, 26 November 2009, p. 8, viewed 14 May 2010, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2FBZAV6%22

[15]. For example, Ibid. See also S Dunlevy, ‘Help those on welfare to help themselves’, Daily Telegraph, 18 March 2010, p. 46, viewed 14 May 2010, http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22media%2Fpressclp%2FNA7W6%22

[16]. Australian Government, Budget measures: budget paper no. 2: 20010–11, Commonwealth of Australia, Canberra, 2010, p. 170.

[17]. Email correspondence from Office of Jenny Macklin MP, 14 May 2010. 

[18]. Ibid.