Författare: Peter Whiteford Professor Crawford School of Public Policy A

The government’s Economic Inclusion Advisory Committee has just published its second report. It was set up by Treasurer Jim Chalmers and Minister for Social Services Amanda Rishworth in 2022 to provide:

non-binding advice on boosting economic inclusion and tackling disadvantage, including policy settings, systems and structures, and the adequacy, effectiveness and sustainability of income support payments.

I am one of the members.

This year, the report tackled a burning question: why has the gap between unemployment payments and age pensions widened?

Unemployment and related payments for working-age people were given a welcome increase in the 2023–24 budget. But they remain well below pensions, and far from adequate on all measures.

Way below the pension

After the latest regular indexation increase in March, a single jobseeker gets about A$258 per fortnight less than a pensioner in basic payments, and $345 per fortnight less than a pensioner on payments including supplements.

It’s important to understand what’s led us to this point.

The committee’s first report last year noted that the amounts paid are set through a complex historical process that has involved “long periods of inaction” interspersed with “bursts of activity” to address the previous inaction.

The amounts paid out are regularly increased, typically via “indexation” to either wages growth or inflation (prices growth).

Indexation of pensions and benefits was enshrined in legislation in 1976, but at times of high inflation was suspended.

By 1982, unemployment payments were about 80% of the single pension.

From 1983 onwards, the Hawke government increased unemployment payments relative to pensions so that by the time Paul Keating left office as prime minister in March 1996 the rate for a single adult facing unemployment had climbed to 92% of the basic pension.

What widened the gap?

The gap began to widen increasingly quickly from 1997, when the Howard government “benchmarked” pensions to 25% of “male total average weekly earnings”.

This means that although pensions increased in line with the consumer price index, as did unemployment payments, they had to be lifted further to ensure they couldn’t fall below 25% of male total average earnings, whereas unemployment payments did not.

By the early 2000s, the single unemployment payment was worth around 87% of the support for a pensioner, including supplements.

Read more:
Boosting JobSeeker is the most effective way to tackle poverty: what the treasurer’s committee told him

As real wages grew strongly during the mining boom of the early 2000s, the gap widened further to $142 per fortnight ($179 including supplements) by 2009.

And then, although wages were growing less strongly as a result of the global financial crisis, the gap widened again.

The Rudd government lifted single pensions substantially following the recommendations of the 2009 Harmer Review.

Support for unemployed singles fell from 79% of the single pension to just 68% – the biggest gap so far. For couples, the gap fell from 83% to 81%.

The pandemic sparked a brief reprieve

The gap continued to widen until early 2020, when the temporary $550 a fortnight Coronavirus Supplement almost doubled the effective JobSeeker payment, lifting it above the age pension for a short period.

In April 2021, after the gap returned, the Morrison government helped narrow it by lifting JobSeeker by $50 per fortnight, and in 2023 Treasurer Jim Chalmers lifted it a further $40 per fortnight.

But over the past 30 years, the gap has still widened significantly, mainly as an effect of deliberate policy choices to lift support for pensioners.

But from here on, things are set to get worse

Under current indexation and benchmarking arrangements, it is inevitable this gap will continue to widen.

This can be seen in all of the projections of the Intergenerational Reports prepared for the government since 2002.

The latest 2023 report assumes average earnings will increase by 3.7% per year and prices by 2.5% per year over the next 40 years. If this happens, the single rate of JobSeeker will fall to less than half of the pension by 2063.

The improvements achieved through payment increases in 2022 and 2023 would be undone by 2035.

This would lead to much higher rates of relative poverty among working-age benefit recipients in the future. Child poverty would also increase substantially.

What needs to change

The committee has recommended the government commit to a substantial increase in the base rates of JobSeeker and related working-age payments as a first priority, and spell out the time frame in which it will happen.

To ensure this doesn’t need to keep happening, we have also recommended the government improve the indexation arrangements to make sure payments for the unemployed don’t fall behind.

It would still need to regularly review and monitor the relationship between working-age payments and widely accepted measures of community living standards, including wages, but not nearly as often. Läs mer…

The Daily Telegraph and Herald Sun carried an exclusive story on Sunday headed “Half a million extra on welfare”. It was subheaded: NDIS blowing the budget.

The story said the number of Australians on welfare had leapt by 425,000 since 2018, with much of the increase coming from the National Disability Insurance Scheme.

It quoted the Institute of Public Affairs, which published its data on Monday.

Those data are incomplete. Only four of Australia’s income support payments are included: the Disability Support Pension, JobSeeker, Youth Allowance (Other) and Youth Allowance (Student and Apprentice), as well as the National Disability Insurance Scheme, which is not an income support payment.

This means the quoted data cover only about three-quarters of the working-age Australians receiving income support payments and none of the older Australians receiving the age pension.

40,500 more on benefits, not 425,000 more

Department of Social Services figures show the total count of people receiving the four payments in mid-2018 was 1.765 million, climbing to 1.805 million by mid-2023. That’s an increase of around 40,500, or just over 2% in a period in which Australia’s population grew by more than 5%.

The institute presents only a grand total for its (incomplete) list of the number of Australians receiving welfare, rather than a figure for each payment, but it is apparent that all but 40,500 of the claimed increase of 425,000 on welfare must have been in the one extra scheme – the National Disability Insurance Scheme.

But the NDIS isn’t welfare. While it is a very significant spending program, it doesn’t pay cash to its participants or help with their ordinary living costs. It provides services related to their disability.

Including the NDIS leads to double counting

Many NDIS participants most certainly are on welfare. About 70% get the Disability Support Pension. Others may get payments like JobSeeker.

This means the Institute of Public Affairs has counted these people twice.

The NDIS is designed to get people off welfare.
Mick Tsikas/AAP

Rather than being “welfare”, many NDIS programs are specifically designed to get people off welfare and into jobs. The share of NDIS participants on the Disability Support Pension fell from 77% to around 70% between 2018 and 2022.

The NDIS is also able get carers of people with disabilities into employment.

Also, many of the NDIS participants are children. More than 278,000 NDIS participants are aged 14 and below, and another 58,000 are aged 15 to 18. It is simply not correct to add children to the number of adults on benefits.

And the growth in the NDIS doesn’t tell us much about growth in the provision of disability services.

When the scheme was rolled out nationally in 2017, about 70% of the recipients were moved from services previously provided by state governments or the Commonwealth government.

What’s really happening

The table below sets out the Department of Social Services count for the four payments identified by the institute alongside what the institute says is the total including participants in the NDIS.

The institute’s totals are less than the department’s figures in the years leading up to 2018, and much more than the department’s figures from 2019 on.

While much of this is due to the national rollout of the NDIS from 2017, an oddity is that the institute’s totals suggest the NDIS had negative 69,100 participants in 2018, which it obviously didn’t.

As mentioned earlier, if we simply look at the number of people receiving the payments the institute deems important and don’t double-count NDIS participants, the increase since 2018 is about 40,500 rather than 425,000.

But much of even this increase is an artefact.

JobSeeker messed with the figures

In March 2020 the Newstart unemployment payment was renamed JobSeeker and broadened to replace seven more-minor payments that ceased to exist.

In 2018, about 30,000 people received these minor payments. By excluding them from its count before 2020 and including them (as part of JobSeeker) afterward, the institute might have helped create about three-quarters of the apparent increase of 40,100 in the number of Australians “on welfare”.

More importantly, the Age Pension age climbed from 65 to 67 from 2017.

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The age increase means recipients now continue to receive the Disability Support Pension and JobSeeker until they are 67.

My calculations suggest that had it not been for the increase in the age pension age, the number of Australians on the benefits the institute includes in its numbers would have fallen by more than 50,000 rather than increased by 40,500.

This means the institute’s decisions about what to count and what not to count have masked a decline in the number of Australians on payments.

Excluding the age pension (which the institute wants to do), the share of the population aged 16 to 64 on all other payments slipped from 15.2% to 14.4%.

Including all income support payments, the share of the total population on payments fell from 24.6% to 23.4% between 2018 and 2023.

Including the age pension and all payments, around five million Australians receive some sort of income support. It’s a substantial proportion of the population, but it isn’t increasing. Läs mer…