Social security

Budget Review 2021–22 Index

Michael Klapdor

This article examines changes in expenditure on social security and major social security budget measures.

Total expenditure on payments

Budget Strategy and Outlook: Budget Paper No. 1 2021–22 shows that estimated expenditure on the main social security and veteran payments will decline by 11.1% from 2020–21 to 2021–22: from around $173.9 billion to $154.6 billion (pp. 174–178). Total expenditure will remain stable over the forward estimates, increasing slightly to around $158.4 billion in 2024–25. This total includes spending on pensions, payments for job seekers, family assistance payments, Paid Parental Leave, veterans’ payments, and other small social services programs, but excludes spending on student payments (which are included under the education category of expenses in the budget papers), the National Disability Insurance Scheme and aged care services. The main reason for the decline in expenditure from 2020–21 to 2021–22 is the withdrawal of temporary measures in response to COVID-19, including the Coronavirus Supplement for most working-age payments and lump-sum Economic Support Payments for other payment recipients.

The Age Pension (and Veterans’ Service Pension) is the largest component of social security expenditure, representing around a third of estimated social security payment expenses in 2021–22. Family assistance is the second largest component, followed by income support for job seekers. However, expenditure on job seekers is expected to decline over the forward estimates. Revised projections of the number of people receiving unemployment benefits and their payment rates since the 2020–21 Mid-Year Economic and Fiscal Outlook have seen a decrease in estimated expenditure on job seeker payments of $5.4 billion over the four years to 2023–24 (Budget Paper No. 1, p. 83).

Figure 1: estimated Australian Government expenditure on social security and welfare ($ billion)

Notes: excludes student payments, National Disability Insurance Scheme and aged care expenses.

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2021-22, pp. 164, 174–178.

Decrease in unemployment benefit recipient numbers

Australian, state and territory government measures to slow the spread of COVID-19 in 2020 led to job losses and an economic downturn (Budget Paper No. 1, p. 107). The number of people receiving the two main unemployment benefits, JobSeeker Payment (formerly Newstart Allowance) and Youth Allowance (Other) doubled from around 816,000 in February 2020 to around 1,636,000 in May 2020. Part of this increase is due to policy measures to temporarily expand eligibility for these payments but other measures, particularly JobKeeper, reduced the number of people who may have claimed benefits (pp. 5–9). Improving labour market conditions have contributed to a decrease since August 2020, as has a withdrawal of COVID-19 measures which expanded eligibility (pp. 7–10). However, as at the end of April 2021 there were still around 360,000 more people in receipt of these payments than in February 2020.

Figure 2 shows JobSeeker Payment and Youth Allowance (Other) recipients compared to the Australian Bureau of Statistics’ measure of unemployed persons. There has been a significant divergence in the two measures indicating payment recipients have withdrawn from the labour force or are working part-time and not being captured by unemployment statistics. A 2020 Parliamentary Budget Office paper found the two measures have historically been close but policy changes can lead to a divergence (pp. 4, 29). It is possible that expanded eligibility to social security has contributed to the large and persisting divergence.

Figure 2: number of JobSeeker Payment1 and Youth Allowance (Other) recipients compared to unemployed persons2, March 2020 to April 2021

Notes: (1) JobSeeker Payment replaced Newstart Allowance, Sickness Allowance and Bereavement Allowance from March 2020—these payments are included in the totals. (2) Seasonally adjusted.

Sources: Department of Social Services (DSS), ‘JobSeeker Payment and Youth Allowance recipients - monthly profile', website; DSS, 'Income support payments by state/territory and Statistical Area Level 2, as at 30 April 2021', provided to Senate Select Committee on COVID-19 on 12 May 2021; Australian Bureau of Statistics (ABS), Labour force, Australia, ABS, March 2021.

Budget measures

$50 per fortnight increase for most working-age payments

The 2021–22 Budget includes the previously announced and legislated $50 per fortnight increase in the rate of JobSeeker Payment, Youth Allowance, Parenting Payment, Austudy, ABSTUDY Living Allowance and other allowance payments. This measure will cost an estimated $9.5 billion over five years and includes several other policy changes (Budget Measures: Budget Paper No. 2: 2021–22, pp. 181–182):

  • an increase in the amount of income a payment recipient can earn before their payment is reduced under the income test—applies to JobSeeker Payment, Youth Allowance (Other), Parenting Payment Partnered, Widow Allowance and Partner Allowance
  • an extension to two COVID-19 response measures to 30 June 2021: a waiver of the one-week ordinary waiting period which applies to some social security claimants, and eligibility criteria for JobSeeker Payment and Youth Allowance (Other) claimants self-isolating or caring for others due to COVID-19
  • $197.0 million to implement a requirement for job seekers to undertake work for the dole activities after six months of unemployment (down from 12 months) or undertake intensive short courses
  • $12.0 million to allow for a $2,000 upfront incentive payment under the Relocation Assistance to Take Up a Job program and to expand eligibility criteria for the program
  • $1.5 million for changes to mutual obligation requirements and reinstating face-to-face meetings between employment service providers and job seekers and
  • $2.5 million to set up a phone line for employers to report job seekers they believe are not genuine in their search efforts or who have declined offers of work.

Most of the changes were announced on 23 February 2021 (the relocation assistance measure was announced on 14 April 2021). The legislation providing for the increase in payment rates, changes to the income test and the extension of the COVID-19 response measures was passed by the Parliament on 18 March 2021. Further information on the measures in this legislation are provided in the Bills Digest.

The Coronavirus Supplement, the main social security measure for those affected by the COVID-19 economic downturn, was withdrawn on 31 March 2021. The supplement, paid to most working-age payment recipients other than Disability Support Pension and Carer Payment recipients, was initially paid at a rate of $550 per fortnight for the period 27 April 2020 to 24 September 2020. It was extended at a reduced rate of $250 per fortnight until December 2020 and then extended again at a reduced rate of $150 per fortnight until 31 March 2021 (pp. 6–7, 9, 14).

The $50 per fortnight increase in payment rates following the withdrawal of the Coronavirus Supplement (and a long campaign from the community sector and business groups to increase payment rates (pp. 6–7) was the largest single percentage increase in unemployment benefit rates since 1982 (the Prime Minister stated it was the largest ‘year-on-year’ increase since 1986). It was criticised by the Australian Council of Social Service (ACOSS) as ‘measly’ and a ‘decision that shows a complete lack of humanity and empathy’. The Business Council of Australia welcomed the increase but called for reform of the way payment rates are adjusted to narrow the gap between JobSeeker Payment and pension rates.

Four-year migrant waiting period extended to family and carer payments

The 2021–22 Budget includes one significant savings measure in the Social Services Portfolio: setting a four-year newly arrived resident’s waiting period for Family Tax Benefit (FTB) Part A and B, Parental Leave Pay (PLP), Dad and Partner Pay (DAPP), Carer Payment and Carer Allowance from 1 January 2022. The measure is expected to provide savings of $671.1 million over five years (Budget Paper No. 2, p. 179).

Those subject to a newly arrived resident’s waiting period are not eligible to receive certain social security or family assistance payments for the duration of the period. The waiting period applies to new permanent residents and commences when they are granted a permanent visa or when they arrive in Australia, whichever is later (many people are resident in Australia on temporary visas before they are granted a permanent visa). The Age Pension and Disability Support Pension have ten-year residency period qualification requirements rather than a waiting period. Some people are exempt from waiting and residency periods, including refugees, Australian citizens, some temporary humanitarian visa holders, and certain individuals in special circumstances.

The current newly arrived resident’s waiting periods are:

  • four years for JobSeeker Payment, Youth Allowance, Austudy, Parenting Payment and Special Benefit
  • two years for Carer Payment, PLP and DAPP and
  • one year for FTB Part A and Carer Allowance.

The budget measure will extend the waiting periods for Carer Payment, PLP, DAPP, FTB Part A and Carer Allowance to four years. A four-year waiting period will be applied to FTB Part B. The new waiting periods will apply to those granted a relevant visa after 1 January 2022.

A 26-week newly arrived resident’s waiting period was introduced from January 1993 for some working-age payments and then extended in 1997 to 104 weeks and to a wider range of payments. The 2017–18 Mid-Year Economic and Fiscal Outlook included a measure to extend existing two-year waiting periods to four, and introduce a three-year waiting period for Family Tax Benefit, PLP, DAPP and Carer Allowance (pp. 8–9) (these payments were not then subject to a waiting period). The 2018–19 Budget proposed extending this three-year period to four years (pp. 172–173). Some of these proposed waiting periods were opposed by Labor who negotiated with the Coalition Government to legislate the current periods starting from January 2019 (the proposed waiting period for FTB Part B was removed). Those granted a visa prior to January 2019 were exempt from the changes. The revised explanatory memorandum for the legislation stated the measures would provide savings of $1.3 billion over the forward estimates (p. 2).

The Department of Social Services stated that an estimated 13,200 individuals and 45,000 families would be affected by the 2021–22 budget measure. ACOSS is opposed to the change which it described as ‘brutal cuts’ (p. 4). Committee for Economic Development of Australia senior economist Gabriela D’Souza also criticised the measure as ‘a blatant money grab from people who can’t vote’.

Prior to 2019, the newly arrived resident’s waiting period applied only to income support payments which assist people not earning enough income from work to support themselves. The 2019 measures not only extended the duration of the waiting period, it extended the categories of payment subject to a waiting period to include those that assist with the costs of children or caring for someone with a disability or serious illness. Many claimants of these payments work (individuals need to meet a work test for PLP and DAPP), and the payments are means-tested. This budget measure will mean new permanent residents will need to wait even longer for access to government support for the costs of caring.

Fraud and integrity

The Budget provides an additional $27.6 million to extend the joint Services Australia and Australian Federal Police (AFP) fraud taskforce, Taskforce Integrity, and to cease compulsory third-party verification of single parents’ relationship status (Budget Paper No. 2, p. 180). The costs of the measure will be partially offset from debt recovery and compliance and will have an estimated net cost of $3.2 million.

Taskforce Integrity is one component of Services Australia’s compliance regime and focuses on serious fraud and identity crime. As at January 2021, the taskforce consisted of 62 Services Australia staff and eight ‘embedded’ AFP officers. In 2019–20, the taskforce had a budget of $10.7 million and helped recover $9.2 million in welfare payments. The taskforce referred 16 matters for prosecution in 2019–20.

The mandatory third-party verification process for single parents receiving Parenting Payment and Newstart Allowance was announced in the 2017–18 Budget and commenced from January 2018 (pp. 91–92). The process required a referee to validate new and existing claimants’ relationship status. From 1 January 2018 to November 2019, around 76,000 reviews of existing payment recipients were conducted with 950 found to be partnered. The Government had anticipated over 14,000 people would have their payments reduced or cancelled under the measure.

The mandatory third-party verification process has been on hold since the 2019–20 bushfires and will now cease. Payment recipients and claimants will still need to provide the contact details of a referee who Services Australia will contact if deemed necessary to verify the person’s relationship status.

The measure will also implement mandatory reviews of the relationship status of couples separated but living in the same home to be completed after 13 weeks (with ongoing reviews every 13 or 26 weeks) (p. 2). There is currently no mandatory review period.