Coalition Senator’s generally do not endorse the recommendations contained within the Committee’s report.
Coalition Senators recognise that providing targeted, comprehensive income support to unemployed Australians is consistent with community expectations and is an important element of the social security safety net that supports Australians who cannot support themselves.
Income support for unemployed people in Australia does not function as a wage replacement or as part of contributory or time limited schemes, as is the case in some other countries. Accordingly, Newstart Allowance (now JobSeeker Payment) and related payments are generally set at a rate in recognition of their role as a safety net payment and consistent with policy settings that encourage seeking out and maintaining paid employment.
Further, Coalition Senators appreciate that income support payments, including Newstart Allowance, must be fiscally sustainable and preserve incentives to find and maintain paid employment. Ensuring that Australia’s social security safety net is sustainable is important in providing an assurance to Australians that the comprehensive and targeted support offered through our taxpayer funded income support system will be available to those who meet eligibility criteria.
As income support payments constitute a significant component of the Commonwealth budget and those programs are generally demand driven, it is critical that the Commonwealth Government support employment growth, engagement with the workforce, and policy settings that promote a targeted and sustainable income support system. This is in order to ensure that general reliance on welfare is limited and income from employment is the primary mode by which individuals and families support themselves.
The committee heard evidence that Newstart Allowance and related payments are one element of the support provided by Government to unemployed Australians. Supplementary payments, concession cards, emergency relief, publically funded initiatives associated with health, education and employment, and settings within the tax system complement the highly targeted support delivered through the direct cash assistance provided through income support payments.
Coalition Senators recognise that numerous elements of the Australian social security and welfare system, specifically in respect of Newstart Allowance and related payments, work to provide comprehensive support to jobseekers. These include:
a high degree of means testing;
significant arrangements associated with supplementary payments and supports; and
Income support that is neither time limited nor contributory.
Further, over recent years the proportion and rate of Australians in receipt of working age income support, and Newstart Allowance and related payments, has decreased, which reflects well on the Morrison Government’s record on economic growth and job creation. This trend demonstrates the approach taken by successive Governments, which promotes the fiscal sustainability of Australia’s income support system.
Coalition Senators note that the Government consistently reviews policy settings on an ongoing basis, and that specific reviews of the tax and transfer system and income support have occurred periodically.
Finally, Coalition Senators recognise that a sustainable welfare system and prudent budget management enables Government to make decisions in response to extraordinary circumstances, such as recent events associated with the Coronavirus outbreak.
Purpose and role of income support payments for the unemployed
The Committee heard evidence that Newstart Allowance is a safety net payment for people who cannot support themselves through work, savings or other means.
Newstart Allowance is not meant to be a salary or wage replacement. Newstart is set at an appropriate level with regard to the purpose of the payment. It is a safety net for people while they look for work, set to a minimum standard to support living rather than a payment set to a replacement level or otherwise tied to wages or income.
This is consistent with the way that income support payments such as Newstart Allowance are increased over time. Newstart Allowance, and now JobSeeker Payment, are increased regularly, as rates are indexed by CPI in March and September every year.
The operation of the welfare system, specifically Newstart Allowance, as a safety net is situated within the context of broader social and economic policy. Additional factors, separate from the absolute rates that income support are set at, inform the scope and functioning of the numerous supports the Government provides to unemployed Australians.
Coalition Senators recognise the importance of ensuring that income support systems, including the rate of payment, must support engagement with the workforce and remain fiscally sustainable.
Consistent with the purpose of Newstart Allowance as a safety net payment, the allowance is set at a rate that it is not a replacement for paid employment. Over recent years the Government has focused on supporting and encouraging economic growth and employment growth, as creating additional jobs provides unemployed Australians the best opportunity to move into the workforce, improve their material circumstances and support themselves and their families.
More broadly, settings associated with Newstart Allowance are geared towards encouraging engagement with the workforce and pathways to employment. Mutual obligations play an important role in incentivising participation and remaining work ready.
Rates of income support, and public expenditure on programs associated with social security and welfare, are set in the context of a desire for fiscal sustainability and the impact of such programs on the budget. In the medium to long term, increases in the level of support provided by Government would have to be funded through an increase in taxation revenue or a reduction in spending on other programs.
Accordingly, Coalition Senators recognise that any responsible approach to policy making in relation to social security and welfare must pay sufficient regard to the cost associated with policy settings and the trade-offs that increased expenditure require.
Any consideration of changes to payment rates must properly engage with the role that Newstart Allowance plays within the broader income support system, possible incentive and disincentive effects in respect of engagement with the workforce, and how the costs associated with any change would be managed in a budgetary sense.
Targeted features of the income support system and additional supports
Importantly, Jobseeker Payment is not the only payment or support that job seekers receive. It is part of a broader social security system comprising of payments, services, concessions, childcare, housing and employment services and associated programs.
Coalition Senators note that differential rates of JobSeeker Payment are paid to recipients, aligned with their circumstances and consistent with the principles associated with means testing arrangements central to the Australian social security system.
Further, the amount of income support a person receives is based on individual circumstances, including payment type, age, residence status, relationship status, housing tenure, whether they have dependent children, and their level of income and assets.
Coalition Senators note that Newstart Allowance is one element of the welfare system and that supplementary payments (including Commonwealth Rent Assistance and Family Tax Benefit Part A and B), concession cards and public expenditure on housing, employment services, health, education and associated programs also assist jobseekers in receipt of NSA and related payments. In its evidence, the Department of Social Services noted that:
In addition to the main Newstart payment, there are a range of supplements that recipients can receive: pharmaceutical allowance; rent assistance; family tax benefit; telephone allowance; carer allowance; mobility allowance; pensioner education supplement; language, literature and numeracy supplement; approved program of work supplement; and remote area allowance. I should reflect that not every recipient receives all of the supplements, and each of the supplements are subject to eligibility.
It is also important to note that additional publically funded supports are provisioned to Australians in general, including those on income support.
Australian Approach and International Comparisons
Coalition Senators recognise that many of the key features of Australia’s social security and income support system are relatively unique in an international context. Australia’s income support system is means tested, non-contributory and not time limited. Individuals are paid for as long as they are eligible, regardless of the income they have previously earnt. The rate of previous earnings does not contribute or otherwise relate to their payment of income support.
In general, Australia has not adopted the social insurance approach to transfer payments that is characteristic of almost all developed nations. These systems require contributions from employers and employees and assistance can be time limited for working age recipients and families with children.
Australia relies heavily on means testing and not does provide income replacement or universal transfer payments. Australia targets a higher proportion of its social security spending to low income households compared to other countries in the OECD.
Payments in Australia are set at flat rates so the same maximum rate applies for all recipients, irrespective of previous earnings or taxes paid. Assistance is paid for as long as the recipient meets the eligibility criteria.
Income support in Australia is not supplemented with mandatory social security contributions. Australia and New Zealand are unique among developed nations in not applying a social security levy on employers and employees.
Many OECD countries pay relatively high rates of assistance in the initial phase of unemployment, which reduces or ceases as the period of unemployment increases, while a consistent level of assistance in Australia is provided for as long as the recipient meets the eligibility criteria.
Coalition Senator’s note that these features support the comprehensive, targeted nature of Australia’s income support system and are fundamentally related to the scope, scale and purpose of payments.
Trends over Time
Coalition Senators note the significant reduction, in both real and relative terms, in the number and rate of Australians on working age welfare payments, including the changes over time in the number and rate of Australians on Newstart Allowance (now JobSeeker Payment).
As at June 2019, the proportion of working age Australians dependent on welfare had fallen to 13.5 per cent, the lowest level in more than 30 years.
In June 2019, there were 2.2 million people of working age receiving income support (such as Newstart Allowance, Parenting Payment and Disability Support Pension). This was a decrease of around 100,000 from June 2018.
Over the same time, the working age Australian population, aged 16 to 64 years, has increased from 16 million people in June 2018 to 16.3 million people in June 2019.
This trend in a reduction of working age people in receipt of income support has occurred over the period June 2014 to June 2019, which coincides with strong employment growth over the term of the Liberal National Government.
While it is encouraging to see that close to two thirds of Newstart Recipients leave payment within twelve months, it is clear that some income support recipients have complex and challenging circumstances that may present as barriers to employment, including the impact of age discrimination, mental health issues, and substance abuse issues.
Targeted Support to encourage employment
Coalition Senators recognise that there are a range of targeted supports designed to assist income support recipients in engaging with the workforce and removing barriers to employment, including the programs detailed in the Cross Government submission.
Coalition Senators also note additional initiatives currently underway that can be characterised as innovative approaches to address the sometimes complex barriers to work that some income support recipients may experience. Furthermore, these programs can provide opportunities for individuals to gain personal confidence and further develop skills necessary to re-enter the workforce.
Stronger Places Stronger People initiative
The Government has committed $35 million over five years to support 10 communities across Australia to adopt a place-based, local approach to help break entrenched disadvantage, which some families and children may be enduring. This program aims to interrupt the intergenerational cycle of disadvantage that is concentrated in particular communities around Australia. Through partnering with communities and their leaders, local organisations, policy makers and funders, the aim is to create stronger futures for children and their families in these communities and provide them with mentoring and confidence that they can take with them in their future endeavours.
Social Impact Investing
The Government is also seeking to trial Social Impact Investing which is a collaborative program between all levels of government, service providers, businesses and the community. Social impact investing is an innovative model of financing social services and provides an opportunity to capitalise on philanthropy. The program aims to foster positive outcomes for all Australians and ensure everyone Current Social Impact Investing programs are improving the outcomes of youth at risk of homelessness and other vulnerable groups this is also important for the wellbeing and future generations of working class Australians. Coalition Senators know from sector feedback that there is a need to build organisations’ capability to better understand, define and measure their outcomes and social impact.
Employment services model
In March 2019, the Australian Government announced a new employment services model will be introduced from July 2022 to deliver better outcomes for job seekers and employers as part of the Australian Government’s plan for a stronger economy. The new model will transform the way employment services are delivered.
For job seekers, the new model will provide service options to support them to find a job, a better digital platform and more flexibility to meet mutual obligation requirements:
Digital First - job seekers who are job-ready and digitally literate will enter Digital First and self-service online. These job seekers will be able to access online tools to help them make informed choices about their job search, as well as a contact centre to help answer questions and provide advice via phone or email.
Digital Plus - job seekers who need extra support will be able to access digital services and receive face-to-face support from an employment services or training provider as needed. This may include training to help use the digital service, work skills training, or funding to pay for a wage subsidy, tools or a licence. Support from the contact centre will also be available.
Enhanced Services - the most disadvantaged job seekers will receive Enhanced Services delivered through employment services providers. Providers will help address a job seeker’s barriers to work through services such as career guidance, mentoring, vocational training, assistance in accessing non-vocational services such as counselling, work experience, job placements and post-placement support. Taking into account the findings of the Employment Services Expert Advisory Panel, payments for providers delivering Enhanced Services will support greater targeted and tailored servicing of disadvantaged job seekers.
Furthermore, as part of the 2019-20 Budget, the Government has announced $5 million for the establishment of a Social Impact Investing (SII) Taskforce. The Taskforce has been established to develop a strategy for the Commonwealth and provide input to the SII market, drawing on international, private sector and state and territory government experience.
The strategy will identify a way forward for Commonwealth investments in social impact investing, including how SII can provide additional solutions to address entrenched disadvantage, achieve measurable social impact and facilitate private capital investment in the SII market. These findings will ideally relate to a better understanding regarding collaborative cross-sector work relationships, which will be beneficial for all jurisdictions and communities across Australia.
Additionally, the Government’s commitment to the Priority Investment Approach is producing detailed data and analysis of cohorts of income support recipients, with a focus on how to understand the lifetime costs associated with income support. Drawing on this analysis is the Try Test and Learn Program. The objective of the Try, Test and Learn Fund is to generate new insights and evidence into what works to reduce long-term welfare dependence.
The Government has invested $96.1 million to trial innovative approaches to assist some of the most vulnerable in society onto a path towards stable, sustainable independence. The fund will allow the Government to identify approaches that work, and use this evidence to transform our investment in existing programs or make the case for new investments. The Try, Test and Learn Fund takes an open and collaborative approach to policy development. This approach is focused on seeking new ideas from and collaborating with a diverse range of stakeholders, including the community sector, business, academia and the general public, in order to develop new ways of tackling complex social challenges.
The fund allows trials to be implemented and findings from those trials will help the Government maximise its investment in policies that work well. Stakeholders, such as individuals, academics, businesses, representatives of the community services and government sectors have been involved in the design and implementation of the Try, Test and Learn Fund, including through co-development of the trials. As at 17 July 2019, more than 2,000 people have benefited through projects supported through the Try, Test and Learn Fund, including:
700 people attending over 3000 mentoring sessions; and
1,000 people completing education and skills training sessions.
In order to ensure that welfare spending is targeted and sustainable into the future, Coalition Senators believe that Government should continue to focus on how innovative approaches and interventions can assist in promoting the transition from welfare to work.
Budget considerations and fiscal management
Coalition Senators recognise that ensuring the long term sustainability of the social security and welfare system is a key focus for the Australian Government, and that this is in the interest of the Australian public and individuals who engage with the income support system, for now and into the future.
Further, Coalition Senators note that prudent management of the budget allows for a sustainable, comprehensive and targeted social security and welfare system.
Australia’s broad, comprehensive welfare system is a significant component of the Commonwealth budget. In 2018-19 the Australian Government spent around $172 billion on social security and welfare, or around a third of all Government spending. This commitment demonstrates the scope and scale of taxpayer funded assistance provided to the Australian community.
It is important to note that social security payments are non-contributory in nature, so all public expenditure associated with income support programs are funded out of general revenue, without regard to any sort of prior contribution recipients may have made in respect of income or other tax.
As expenditure on income support must be balanced by considerations of fiscal sustainability, the degree to which payments are means tested and targeted is an important consideration. Ensuring that payments are directed to individuals most in need, allows for the significant investment the Government makes in terms of income support while balancing the sustainability of the system.
Coalition Senators note that income support is not a replacement for employment, and that considering the rate or quantum of income support in the context of a wage replacement does not reflect the role or purpose of income support payments like Newstart Allowance.
Coalition Senators recognise the extraordinary circumstances that have arisen in recent months in relation to the Coronavirus outbreak, and the impacts that COVID-19 has had on the Australian economy.
In response to the Coronavirus outbreak, the Government has made temporary changes to Australia’s social security safety net in order to offer additional support and assistance to Australians negatively impacted by the economic impacts of COVID-19.
From 12 March 2020, the Government has announced a range of temporary measures to expand eligibility and offer increased support to Australians interacting with the social security safety net, specifically JobSeeker Payment. These changes have included, to date:
an Economic Support Payment of $750 to around 6.6 million payment recipients and concession card holders from 30 March 2020, with a further Economic Support Payment of $750 to around 5 million payment recipients and concession card holders in July 2020;
a temporary payment of a Coronavirus Supplement of $550 per fortnight from 27 April 2020 to recipients of JobSeeker Payment, Youth Allowance, Parenting Payment, Student Payments and a range of related payments;
expanded eligibility and qualification for JobSeeker Payment and Youth Allowance to assist Australians who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests as a result of the Coronavirus;
reduction and removal of waiting periods including the Ordinary Waiting Period, the Liquid Asset Waiting Period, the Seasonal Work Preclusion Period, and the Newly Arrived Residents Waiting Period; and
temporary changes to means testing arrangements, including removal of the assets test and a temporary change to the JobSeeker Payment Partner Income Test.
These measures, and the anticipated increase in recipients, will significantly increase expenditure associated with government support for the unemployed.
Importantly, Coalition Senators recognise that a sustainable welfare system and a strong and balanced budget has allowed the Government to react in a timely and proportionate manner to the unprecedented and unexpected circumstances, such as the Coronavirus Outbreak.
Coalition Senator’s recognise that the Government’s commitments in respect of social security and welfare, and specifically in respect of enhanced support for the JobSeeker Payment, are possible because of the significant improvement to the Commonwealth budget in recent years.
The significant increase in additional, targeted support Government is providing on a temporary basis through the income support system to Australians impacted by the Coronavirus outbreak demonstrates how flexible existing systems are, and how the social security system can provide enhanced support to Australians under these extraordinary circumstances.
Senator Wendy Askew
Senator Hollie Hughes