Welfare looms as a budget no-win for Chalmers - The Centre for Independent Studies
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Welfare looms as a budget no-win for Chalmers

We are now in the rapid run-up to next week’s budget, with each day bringing a new announcement as the government seeks to squeeze whatever political sustenance it can from its budget buffet.

The ALP has a lot of work to do after the budget lead-up was effectively derailed twice. First by its own ill-conceived committee’s recommendation for a massive increase in the JobSeeker payment and then by the Reserve Bank’s surprise resumption of interest rate rises last week. Both led to calls for immediate government intervention, which had to be hosed down.

The government loses face any time the Treasurer is forced to defend what isn’t in the budget, rather than try and sell what is. In part, this is a problem of the government’s own making. In opposition, they advanced deceptively simplistic arguments about budget ‘fairness’ — continually criticising the previous government’s attempts to introduce economic reform (such as bringing our corporate tax rates in line with the rest of the world) or restrain expenditure as deeply unfair.

Now many on the left are acting as if Labor can simply wave the budget wand and make everything fair again — but it’s far from that simple.

Take JobSeeker for example. There is an argument that JobSeeker needs reform, given it was originally devised as a payment to support people who were unemployed for short periods.

However, any worthwhile reform needs to extend beyond simplistic slogans of ‘raise the rate’. For those who are unemployed for short periods, who don’t face impediments to re-entering the workforce and can supplement it with savings or a termination payment, JobSeeker is sufficient. Of course, not everyone is in this category.

A sustainable reform to unemployment benefits cannot be centred on contestable moral claims of how much the unemployed ‘deserve’. It must instead be focused on how to get people off welfare and into work; both for cost and moral reasons.

But here there are deeper problems. Mutual obligation requirements are largely ineffective at developing skills or getting people back to work, and many short-term unemployed people do not need such stringent requirements.

Others need very different types of support, but activists cannot bring themselves to acknowledge that long-term unemployment is typically caused by both structural (economic) factors and personal ones (ranging from minor disabilities and caring responsibilities, through to issues of anti-social behaviour and substance abuse).

Absent a structure with appropriate incentives and penalties — which provides the necessary support to address both personal and structural issues — and successful reform seems remote.

Still, politics has to be layered on top. It seems quite clear that the general public takes a very different, and far more negative, view on long-term or repeated unemployment than do many in policy circles; or what you might call more broadly the elite.

In large part, this is driven by serious misunderstandings, but it’s also driven by different priorities. Right or wrong, many ordinary people simply do not want more of their tax dollars to go to the unemployed — especially against a backdrop of 11 increases in interest rates in 12 months, and when real wages are going backwards against spiralling cost of living.

A government seeking to reform this aspect of welfare would need to work hard to change the understanding and experience of unemployment by the general public.

This isn’t going to happen in the fortnight before the budget.

Even less scope exists for a more ambitious reform; say, where superannuation could serve as a form of personal social insurance, supplementing welfare benefits in tough times as well as in retirement.

In one sense, this is a weakness of the Australian system where much of the government’s policy agenda for the year is effectively announced on one night. This problem is further exacerbated by the primary focus of the budget being the cost, rather than the outcome, of the policies announced.

The government is now in an unfortunate position. Whatever it does in the welfare space will now be seen by advocates as inadequate at best, a betrayal of principles at worst. Ultimately this will undermine the political benefits and exaggerate their cost.

Of course, these aren’t the only challenges facing a government perched in very delicate economic circumstances.

The ALP needs to be very careful about creating future expectations it may not be able to meet. For example, the recent decision to intervene in the pay of aged care workers will likely create an expectation for similar intervention in a number of other areas; with childcare and disability sector workers probably leading the charge.

It will also encourage businesses in these regulated, unionised sectors like health care, to push more of their wage costs onto the government. Creating an expectation that government will intervene in semi-private industries and markets to fund massive wage hikes could be incredibly expensive.

The government is also under considerable pressure to expend its predicted windfall tax receipt gains on the schemes of vested interests or to provide cost of living relief to ordinary households.

However, the political gains of such actions are always short-lived — almost no-one will remember this budget at the next election — and may be undermined by economic forces anyway.

Having already held one budget since taking office, it seems likely that this one might be a quiet affair — with any major ‘goodies’ squirreled away for the pre-election budget.

Reading the tea leaves, that means this budget will provide ‘targeted’ (read limited) relief, while the next one or two will provide ‘substantial’ relief (read election bribes).

All in all, the Treasurer has got quite a difficult job ahead of him. Though he would not admit it, one suspects he would be happy to get to the end of next week in one piece.

Simon Cowan is Research Director at the Centre for Independent Studies.

Photo by cottonbro studio.