Social security and welfare

Budget Review 2020–21 Index

Michael Klapdor

Key figures

Social security and welfare expenditure in 2020–21 is estimated to be $227.5 billion, representing 33.9 per cent of the Australian Government’s total expenditure (p. 6-9). Government measures in response to COVID-19 and a massive increase in the number of people receiving income support payments mean that expenditure on social security and welfare in 2020–21 is 21.8 per cent ($40.7 billion) higher than forecast in the 2019–20 Budget (p. 5-7).

This administrative category of expenditure consists of a broad range of services and payments to individuals and families including: income support such as pensions and JobSeeker Payment; family payments and child care; the National Disability Insurance Scheme (NDIS); and payments and services for veterans. Expenditure on the JobKeeper Payment is not included in this category but under the ‘Other economic affairs’ category. Figure 1 provides a breakdown of expenses in the social security and welfare category over the forward estimates.

This article provides further information on social security, family payments and disability expenditure. Separate articles in this Budget Review examine aged care and veterans’ affairs.

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

Bar graph showing estimated Australian Government expenses on social security and welfare png

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2020-21, pp. 6-10, 6-22-6-26.

Social security

The key drivers of social security payment expenditure increases in 2020–21 are:

  • government measures to limit the spread of COVID-19 which caused unemployment and underemployment and led to an increase in the number of income support recipients and
  • the Australian Government’s COVID-19 Economic Response measures—including the Coronavirus Supplement and Economic Support Payments.

Both these drivers have seen a marked increase in spending on social security payments, particularly JobSeeker Payment and Youth Allowance (Other). Expenditure on these payments in 2020–21 ($34.1 billion) is estimated to be more than three times the amount forecast in the 2019–20 Budget ($10.9 billion).

Increase in income support recipients

Table 1 sets out the number of recipients of the main income support payments as at December 2019 and as at 11 September 2020 (the most recent available).

Table 1: recipients of main income support payments, December 2019 and September 2020

Payment 27/12/2019 11/09/2020 % change
Age Pension 2 515 388 2 565 803 +2.0%
Austudy 27 634 45 530 +64.8%
Carer Payment 284 252 294 552 +3.6%
Disability Support Pension 751 773 752 727 +0.1%
Newstart Allowance (combineda)—JobSeeker Payment 733 704 1 449 194 +97.5%
Parenting Payment Partnered 68 087 95 796 +40.7%
Parenting Payment Single 228 606 245 355 +7.3%
Youth Allowance (Other) 85 316 169 872 +99.1%
Youth Allowance (Student and Apprentice) 134 456 235 152 +74.9%

(a) Newstart Allowance, Sickness Allowance and Bereavement Allowance were merged to form JobSeeker Payment from 20 March 2020. The December data is the combined total of the three merged payments.
Sources: Department of Social Services (DSS), ‘DSS Demographics December 2019’, website, last updated 21 April 2020; DSS, ‘JobSeeker Payment and Youth Allowance recipients monthly profile: August 2020’, website, last updated 18 September 2020; DSS, ‘Income support payment data by state and statistical area level 2 and by earnings and partner earnings as at 11 September 2020’, provided to Senate Select Committee on COVID-19 on 18 September 2020 (Additional information item no. 26).

COVID–19 response measures

In March 2020, the Government announced two packages of measures to support those needing assistance from the social security system which included:

  • two $750 lump sum Economic Support payments to some social security and veterans’ payment recipients
  • a Coronavirus Supplement of $550 per fortnight to recipients of JobSeeker Payment, Parenting Payment, Youth Allowance, Farm Household Allowance, Special Benefit, Partner Allowance, Widow Allowance and student payments and
  • improved access to income support through changed eligibility criteria for JobSeeker Payment and Youth Allowance; and the waiver of the assets tests and some waiting periods for certain payments.

On 25 September 2020, the Coronavirus Supplement was reduced to $250 per fortnight and the assets test was reinstated. The Supplement and other eligibility changes are set to end on 31 December 2020.

Funding for these measures was included in the 2020–21 Economic and Fiscal Update and totalled $28.2 billion over the forward estimates (pp. 160–163).

New social security measures

Two $250 Economic Support Payments

In the 2020–21 Budget the Government announced two further Economic Support payments to be paid at a rate of $250 to those receiving an eligible payment or holding an eligible concession card on 27 November 2020 and/or 26 February 2021. Eligible payments include pensions and veterans’ payments. Carers Allowance and Family Tax Benefit recipients can also receive the payments if they are not receiving an income support payment at the same time. The measure is estimated to cost $2.6 billion with around 5.1 million recipients and will require legislation.

Ahead of the Budget, there were calls from the Labor Opposition to address the lack of a pension rate increase in September 2020. Most social security payments are usually increased on 20 March and 20 September of each year but a decline in some of the indices used to adjust payment rates meant that rates remained static in September for the first time in more than 20 years.

Cashless Debit Card to receive ongoing funding

The Government announced that the current Cashless Debit Card (CDC) trials will receive ongoing funding from 2021. The budget papers did not publish the cost of the measure as the Government is still negotiating with potential providers. The measure will require legislation.

Recipients of some working-age social security payments in CDC sites have 80 per cent of their payment placed into an account that can only be accessed through the CDC—cash cannot be withdrawn from this account and the CDC can only be used at approved stores and online merchants. The Department of Social Services states the intent of the CDC is to test ‘whether reducing the amount of cash available in a community will reduce the overall harm caused by welfare fueled alcohol, gambling and drug misuse’.

The CDC is currently being trialled in the Ceduna region in South Australia, the East Kimberley and Goldfields regions in Western Australia, and the Bundaberg and Hervey Bay region in Queensland. A Bill before the Senate seeks to extend the trials and move those currently subject to income management in the Northern Territory and Cape York to the CDC. Income management also restricts how a portion of a person’s social security payment can be spent but uses different technology and policy settings.

As at 4 September 2020 there were 12,194 CDC participants and 25,456 income management participants in the Northern Territory and Cape York. On 25 March 2020, the Minister for Families and Social Services announced a temporary pause on new CDC participants. The large increase in income support payment recipients since March 2020 will mean that there are likely to be many more CDC participants once this temporary pause is lifted (no date for ending the pause has been announced).

The changes mean the CDC will no longer be a trial measure but an ongoing program, despite a second evaluation of the trials in Ceduna, East Kimberley and Goldfields regions still being in progress and only baseline data collection having been undertaken for the trial in Bundaberg and Hervey Bay. The first evaluation of the CDC trials in Ceduna and East Kimberly was criticised by stakeholders and the Australian National Audit Office (ANAO) found that the evaluation did not make use of all relevant data. The ANAO found that the Department of Social Services’ approach to monitoring and evaluation meant ‘it is difficult to conclude whether there had been a reduction in social harm and whether the card was a lower cost welfare quarantining approach’.

The budget measure also includes funding for a trial of ‘emerging payment acceptance technologies’. This may refer to a trial of product-level blocking (the card blocks specific products from being purchased rather than specific merchants) which commenced in December 2019.

Improved access to Youth Allowance independence

The Budget included two measures to make it easier for young people to be considered ‘independent’ for Youth Allowance and ABSTUDY. Those considered independent are not subject to a parental means test. Currently, young people under 22 can establish independence by working at least 30 hours a week for 18 months over a two-year period. Regional students can meet the criteria by working 15 hours a week for at least two years or earning 75 per cent of the National Training Wage Schedule for a 14 month period.

Under the first budget measure, those applying for Youth Allowance and ABSTUDY from 1 January 2021 will have the period between 25 March and 24 September 2020 automatically added to any consideration of independence under the work criteria, regardless of their actual work or earnings during this period. The measure is expected to cost $25.0 million and will require legislation.

The second measure will allow young people who earn $15,000 through employment in the agricultural sector in the period 30 November 2020 to 31 December 2021 to be considered independent. Only those whose combined parental income is below $160,000 (plus $10,000 for each additional child) will be eligible. The measure is intended to encourage young people to work in the 2020–21 harvest season prior to undertaking further study. The measure is expected to cost $16.3 million and will require legislation.

No commitment to JobSeeker Payment increase

Despite broad support for a permanent increase in the JobSeeker Payment rate from community sector and business groups, the Budget did not include any measure to increase the rate or continue the Coronavirus Supplement beyond December 2020. Treasurer Josh Frydenberg stated ‘we will make a decision about that level of payment closer to the end of the year when we have a better sense of the labour market dynamics’. It is unclear what new information on the labour market will become available to the Government in the next three months which will help determine the adequacy of the payment rate. Also, the calls for an increase in the JobSeeker Payment rate came well before the current recession and are not directly related to specific labour market conditions or the large increase in the number of payment recipients.

No measures for temporary visa holders

Most temporary visa holders are ineligible for social security payments. In March 2020, when the initial COVID-19 response measures were being introduced, the Government indicated it would extend eligibility for income support to some temporary visa categories ‘in the near future’. However, this is yet to occur and community groups have continued to raise concerns about the wellbeing of temporary visa holders in Australia whose incomes have been affected by COVID-19. No new assistance measures were announced in the Budget; however, the budget papers noted that any amounts of the Paid Pandemic Leave Disaster Payment paid to temporary visa holders would be refunded to the Commonwealth by state governments (p. 107).

Family payments

As part of its Second Women’s Economic Security Package, the Government announced changes to the Paid Parental Leave work test in response to COVID-19. Rather than requiring ten months of work in the 13 months preceding the birth or adoption of a child, eligible parents will qualify if they have ten months of work in the preceding 20 months. The measure will apply to those with births or adoptions between 22 March 2020 and 31 March 2021. The measure will cost an estimated $90.3 million and requires legislation.

Both Labor and the Australian Greens previously proposed changes to the work test to assist those whose work was interrupted by COVID-19—these were rejected by the Government at the time.

Disability services

Expenditure on the NDIS, which includes Commonwealth, state and territory contributions, is expected to increase from $18.7 billion in 2019–20 to $23.4 billion in 2020–21 due to a large number of people entering the scheme under transition arrangements with the states and territories (p. 6-23). In real terms, expenditure will decrease by 2.6 per cent from 2020–21 to 2023–24. The budget papers state that this is due to the payment arrangements previously agreed to with state and territory governments. State and territory contributions will increase from 38.7 per cent of total National Disability Insurance Agency (NDIA) expenses in 2020–21 to 44.3 per cent in 2023–24 (p. 168).

$798.8 million in additional funding for the NDIA and the NDIS Quality and Safeguards Commission was announced in the Budget but was not linked to any specific policy changes or new initiatives. Minister for the NDIS and Government Services Stuart Robert stated that $92.9 million of this funding would be allocated to the NDIS Quality and Safeguards Commission.

Significant changes to the NDIS were announced in August 2020, including the introduction of independent assessments of participant support needs, and the NDIS Participant Service Guarantee which sets out timeframes for the NDIA to develop plans, make decisions and deliver services.


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