Economist Matt Cowgill has written a great article today in The Guardian defending Australia’s system of welfare, which he argues has been largely successful in providing a safety net to vulnerable Australians:
Usually when we hear about the welfare system, the focus is on the negative: the budgetary cost, the “unsustainable” number of recipients, or the small number of “bludgers” or “rorters” who obtain payments through fraud or deception. But we forget that these payments exist for a reason – to share risk, to protect from poverty, to help people who need it. No one ever ran a front page story to announce the fact that a single mum was able to buy school shoes thanks to family payments, or that disability support helped someone live independently without relying on charity, but those hidden human stories are out there and too often forgotten.
This might be at risk now, threatened by Kevin Andrews’ determination to reform the system…
By far the most prevalent payment is the Age Pension, with 2.2m recipients. When you take age pensioners out of the picture, that leaves 12.1% of the population on an income support payment. That’s lower than in any year of the Howard government. If we’re in crisis now, the crisis must have been more acute in the early 2000s.
We spend less on welfare (by which I mean cash payments to households) than just about any other advanced economy. Last year we spent 8.6% of our gross domestic product on welfare. That’s less than Canada (9.1%), less than the US (9.7%), New Zealand (9.8%), the UK (12.2%), and every other member of the EU. Even in 2005, well before the financial crisis sent unemployment soaring in most OECD countries, our welfare spending was below all of these countries, including the infamously frugal US…
We use means testing much more aggressively than any other country. While it’s always possible to tinker around the edges, it’s just not true that there’s a lot of middle-class welfare to cut.
Our problem, to the extent we have one, is that our governments don’t collect enough tax. We’re one of the very lowest taxing advanced economies in the world, with revenues about $30 billion a year lower than they were when John Howard left office…
If we go down that track, Australia will slowly become a very different place. Income support helps to make talk of “equality of opportunity” more than just a hollow charade. It won’t be possible to roll back the welfare state without harming the poor and making social mobility a less likely prospect in the future.
As someone that has a child with special needs and a sick wife, I agree wholeheartedly with Cowgill’s view. It is only when one falls on hard times – be it medically, job related, or something else – that that you realise how lucky you are to live in Australia.
In my case, while I am not a significant recipient of welfare through the payments system, my family are currently big users of the public health and education systems, which would simply not be available if we lived somewhere like the United States.
Further, as noted by Greg Jericho recently (as well as by Cowgill above), the percentage of the population on welfare has also fallen significantly over the past decade:
Moreover, 71% of the increase in welfare payments from 2007 to 2012 was in the age pension payments – precisely the area ruled-out for cuts by the Coalition:
The Aged Pension aside, the bigger issue for the Budget is not the blow-out in welfare payments, but the sharp reduction in taxation revenues, which according to the Parliamentary Budget Office fell by by around 5 percentage points of GDP in structural terms between 2002-03 and 2011-12, whereas expenditures rose by only 1% over the same period:
The bottom-line is that Australia’s Budget is suffering to a large extent from a revenue problem, which will only get much worse as Australia’s population ages and proportion of workers supporting non-workers shrinks.
While reforms should certainly be made to areas like the Aged Pension (e.g. by raising the retirement age and/or means testing benefits to include the owner-occupied home), reducing superannuation concessions to upper income earners, and winding-back the Abbott Government’s paid parental leave scheme, there isn’t a lot of fat to trim from disability support pensions and Newstart – areas specifically targeted for cuts by the Coalition.
Further, serious question marks have to be raised over whether removing such safety nets is desirable anyway?
