Welfare expenditure: an overview

Budget Review 2018–19 Index

Michael Klapdor

Social security and welfare expenditure in 2018–19 is estimated to total $176.0 billion, representing 36 per cent of the Australian Government’s total expenses.[1] This administrative category of expenditure consists of a broad range of services and payments to individuals and families. It includes:

  • most income support payments such as pensions and allowances (for example, the Age Pension and Newstart Allowance)
  • family payments such as Family Tax Benefit and the new Child Care Subsidy
  • Parental Leave Pay
  • funding for aged care services
  • the National Disability Insurance Scheme (NDIS) and
  • payments and services for veterans and their dependants.

Other programs associated with the welfare state such as health and education (including income support for students) are not included in the welfare category reported in the budget papers.

While total expenditure on social security and welfare is expected to increase from around $162.6 billion in 2017–18 to $194.3 billion in 2021–22, there are different trends within sub-categories of expenditure.

Figure 1 provides a breakdown of the welfare expenditure category showing key sub-categories including major payments and services.[2]

Figure 1: estimated Australian Government expenses on social security and welfare, $m

Figure 1: estimated Australian Government expenses on social security and welfare, $m

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2018–19, pp. 6-23-6-27.

Key drivers of expenditure increases

The biggest driver of growth in social security and welfare in coming years is the NDIS. Total funding for the scheme is projected to increase from $7.8 billion in 2017–18 to an estimated $23.6 billion in 2021–22, with just over half of this expenditure contributed by the Australian Government.

Overall expenditure on assistance to people with disabilities is projected to increase by 26.9 per cent in real terms (adjusting for inflation) from 2017–18 to 2018–19 , with most of this driven by the NDIS. In contrast to the NDIS, expenditure on the Disability Support Pension (DSP) is estimated to decrease by 2.3 per cent in real terms from 2017–18 to 2018–19.

The biggest component of social security expenditure, the Age Pension and other income support for seniors, will increase from $45.1 billion in 2017–18 to $53.8 billion in 2021–22 (an increase of 6.9 per cent in real terms from 2018–19 to 2021–22). Aged care services expenditure will also increase from $16.6 billion in 2017–18 to an estimated $22.1 billion in 2021–22. According to the budget papers, this is largely the result of demographic factors rather than policy decisions.[3]

Expenditure on payments for job-seekers (including Newstart Allowance and Youth Allowance (Other)) will increase slightly from $11.1 billion in 2017–18 to $11.9 billion in 2021–22.

A number of areas are expected to see a decline in expenditure:

  • A decrease in the number of veterans and their dependants will result in a 17.5 per cent decrease in veterans’ community care and support expenditure in real terms from 2018–19 to 2021–22.
  • Family Tax Benefit expenditure will decrease from $18.5 billion in 2017–18 to $17.9 billion in 2021–22 despite population growth—primarily as a result of policy measures to restrict eligibility and freeze the indexation of payment rates and income test thresholds.
  • Parenting Payment expenses will decrease by 3.5 per cent in real terms from 2018–19 to 2021–22 as    a result of enhanced compliance measures.

Parameter changes

Since the Mid-Year Economic and Fiscal Outlook was released in December 2017, there have been some major revisions to estimated expenditure on a number of social security payments based on changes to the parameters used in calculating the estimates. Expenditure on DSP has been revised down by $4.5 billion over the four years to 2021–22 due to a reduction in the number of expected recipients. The impact of changes made to the pension qualifying age in 2009 has also been revised, producing a decrease in expenditure on the Age Pension of $2.3 billion over the four years to 2021–22.

No increase in allowance payment rates

Despite a concerted campaign from community groups, supported by key business lobby groups, the Government did not announce any budget measures to raise the level of support for those on Newstart Allowance or Youth Allowance.[4] In fact, the Government will proceed with its proposal to close the Energy Supplement—a reduction in the level of assistance to new recipients of these allowance payments, and to new recipients of all income support payments.[5] Media reports prior to the Budget suggested the Government would reverse this 2016–17 budget measure.[6]

An Australian Greens 2016 election policy, costed by the Parliamentary Budget Office, estimated a $55 per week increase in the single rate of Newstart Allowance and Youth Allowance would cost around $1.9 billion per annum, or $7.6 billion from 2016–17 to 2019–20.[7]

[1].          The budget figures in this brief have been taken from the following document unless otherwise sourced: Australian Government, Budget strategy and outlook: budget paper no. 1: 2018–19, pp. 3-24, 6-23-6-27.

[2].          The majority of expenditure on these payments and services is provided through special appropriations rather than the annual Appropriation Bills.

[3].          Ibid., p. 6-23.

[4].          Australian Council of Social Service (ACOSS), ‘Raise the rate’, ACOSS website; T McIlroy, ‘Westacott dismisses MP’s talk of living on $40 a day’, Australian Financial Review, 4 May 2018, p. 6.

[5].          M Klapdor, ‘Power play: will the Energy Supplement be saved’, FlagPost, Parliamentary Library blog, 27 March 2018.

[6].          S Martin, ‘Treasurer to backflip on pension cut’, West Australian, 2 May 2018, p. 8.

[7].          Parliamentary Budget Office (PBO), ‘Appendix G: Costing documentation for the Greens’ election commitments’, Post-election report of election commitments, PBO, Canberra, 5 August 2016, p. 563.


All online articles accessed May 2018.

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