A new report from the Australian Council of Social Service (ACOSS) recognises that welfare dependency has now expanded to cover 18% of working-age Australians, but it denies this is a problem. Arguing that Australia still spends less on welfare than many other developed countries, ACOSS thinks we should be expanding welfare rather than worrying about it.
But welfare dependency of this scale is a problem, not only financially, but in the debilitating effects on claimants themselves. The growth of long-term welfare dependency among competent and capable adults over the last 40 years has been a major policy failing.
The ACOSS report claims Australia is ‘mean’ because we spend less on income support payments than many other countries do, but the comparisons it draws are misleading.
Australian welfare spending is lower than is common in the European Union, but higher than in the other two major world economies, America and Japan. Seen in this light, we are spending too much, not too little.
The claim that we are ‘mean’ also ignores the fact that Australia diverts a bigger proportion of its welfare budget to poorer sections of the population than almost any other OECD country. While we spend less in total than many EU countries, the poorest 30% of the population gets a bigger net share of welfare spending than is the case even in Sweden.
The ACOSS report claims that welfare benefits are insufficiently generous to allow families and individuals to meet their ‘essential living costs.’ But it bases this claim on a measure of ‘minimum budget standards’ which is hugely inflated. Nearly all welfare payments are above the very generous Henderson Poverty Line, which ACOSS used to use as a measure of adequate income. This means benefit levels are adequate to keep claimants out of poverty even when poverty is generously defined. It is unfortunate that ACOSS should publish a report complaining that Australia is not spending enough on benefits when the pressing policy challenge is to reduce welfare dependency, not to expand it. We need stronger work incentives, not higher benefits.
We need more people leaving welfare, not increased welfare spending. The aim of social policy should be to get as many people as possible living at a decent standard through their own efforts without relying on government income transfers. ACOSS appears to have lost sight of this basic objective.
Peter Saunders is Director of Social Policy Research at The Centre for Independent Studies (CIS) and author of Australia’s Welfare Habit and How to Kick It (Duffy&Snellgrove/CIS, 2004).