Chapter 2Australia's social security system
Australia's social security system has long been thought of as inadequate and punitive — inadequate because the base rates of Australia's working-age social security payments have been below the poverty line for some time, and punitive because of the use of welfare conditionalities, more commonly called mutual obligations...
2.1The committee’s interim report covered the scope of Australia’s social security system, the various income support payments administered by the Department of Social Services (the department), and the substantial calls from submitters and witnesses to increase income support payments, such as the JobSeeker Payment, to reduce poverty rates.
2.2This chapter further explores the social security system. In particular, it explores the evidence received on the perceived punitive nature of mutual obligations and debt recovery mechanisms. The chapter then examines the evidence provided on the adequacy of various support payments, including their payment levels and eligibility criteria, in ensuring people do not live in poverty.
Key features of the social security system
2.3This section discusses the social security system and its various components. According to the department:
Australia has an extensive and targeted social security system. Australia’s social security system is non-contributory, and provides a strong safety net for Australians who are unable to fully support themselves due to age, disability, caring responsibilities or unemployment. It plays a key role in reducing and alleviating poverty in Australia.
2.4The system includes income support payments that ‘aim to provide: a minimum adequate standard of living for the working age population’ and ‘acceptable standards of living, accounting for prevailing community living standards, for pensioners and families’. It also includes supplementary payments that provide additional assistance for specific cohorts. The department stated the system is supported more broadly by a progressive income tax system and other subsidies of goods and services.
2.5The department also submitted that it is a system that requires balance between support and fiscal sustainability, and individual need and responsibility.
2.6In its submission, the department outlined key aspects of the system that reduce poverty and disadvantage, including:
income support payments (including indexation);
other services and supports for those experiencing financial hardship;
housing and homelessness programs;
education and skills programs;
employment programs;
place-based approaches; and
government supports for specific cohorts.
2.7Social policy and programs (including income support payments) are designed and administered by various government agencies, including the department and Services Australia (that itself includes Centrelink, Medicare, and child support programs). Employment policy and programs are designed and administered by the Department of Employment and Workplace Relations (including the Workforce Australia program).
Income support payments
2.8As at September 2022, around 5 million people receive income support payments, including:
JobSeeker Payment — for adults of working age;
Youth Allowance — for jobseekers aged 16 to 21 years;
Age Pension — for those aged 66.5 years or over;
Carer Payment — to reflect duties that reduce capacity for paid work;
Parenting Payment — for principal carers of young children;
Disability Support Pension (DSP) — for those with defined impairments to work; and
Student payments — for those in defined education and training, (including for students, Youth Allowance, Austudy, ABSTUDY).
2.9Of the approximately 5 million people receiving income support payments, over half of them (2.6 million) were older Australians over 65 receiving the Age Pension.
2.10According to the department, all income support payments are indexed to ‘ensure that payments maintain their purchasing power when the cost of living increases’. For example, adult allowance rates, including JobSeeker Payment, and Rent Assistance rates are indexed in March and September to the Consumer Price Index (CPI).
2.11The department told the committee that due to a large CPI increase in the six months to June 2022, the JobSeeker Payment base maximum rate for single recipients without children increased by $25.70 to $677.20 a fortnight (including the Energy Supplement).
2.12The department also explained the system includes other payments, benefits, allowances, and supplements such as Commonwealth Rent Assistance, Family Tax Benefit, Paid Parental Leave, Remote Area Allowance, and utilities and pharmaceutical allowances, as well as various concessions such as health cards.
2.13There are further payments and programs for specific cohorts including for families (including Child Support), people with disability (such as Disability Employment Services), and individuals (such as the Escaping Violence Payment for victim survivors of domestic and family violence).
2.14Supporting infrastructure such as payments systems, financial information services, flexible debt repayment services, consideration of vulnerable circumstances, and hardship advances are also features of the social security system.
2.15Aside from an increase after the Global Financial Crisis and later during the COVID-19 pandemic, the proportion of residential working age Australians receiving income support payments has declined from 24.4 per cent in June 1996 to 14 per cent in June 2022.
2.16However, the department advised there was a sustained increase in the number and proportion of long-term recipients of JobSeeker Payment between 2006 to 2022, suggesting trends of economic change, ageing population, and a changing labour market. Further, the department explained that policy changes moved recipients from other payments to JobSeeker Payment, including eligibility for DSP, and restrictions to the age definition for a Parenting Payment child are also likely to have contributed to this trend.
Employment services
2.17Through the Department of Workplace and Employment, the Australian Government targets employment services to those who ‘face greater labour market disadvantage’, including two key programs:
Workforce Australia — operates in urban and regional areas; and
Community Development Program — operates in remote areas only.
2.18The department explained the Australian Government also promotes fair employment through industrial relations policy such as setting appropriate minimum wages, job security, gender equality, and funds wage subsidies, training courses, and other services through the Employment Fund.
Housing and homelessness
2.19The interim report highlighted the links between housing and poverty, including struggles to meet basic living standards due to unsafe housing, vulnerabilities faced by people with disability and women, and costs associated with rent, energy, and transport.
2.20The department advised that the Australian Government delivers several programs to address housing and homelessness, including:
the Regional First Home Buyer Guarantee;
expansion of the remit of the National Housing Infrastructure Facility;
the National Housing Accord;
the Housing Australia Future Fund;
the Help to Buy shared equity scheme;
National Housing Supply and Affordability Council; and
the National Housing and Homelessness Agreement (worth $1.2 billion in 2022–23).
2.21In June 2023, the Australian Government also announced $2 billion in Social Housing Accelerator funding for state and territory governments.
2.22The department also outlined several other housing programs that are provided, including:
the Housing Policy Partnership, endorsed by the Joint Council on Closing the Gap, aimed at improving housing in Aboriginal and Torres Strait Islander communities;
$135.2 million in funding for homelessness services under the National Housing and Homelessness Agreement which is funding that is required to be matched by State and Territory governments;
$172.6 million in emergency accommodation for women and children leaving family and domestic violence; and
$124 million over five years to deliver the Reconnect program, aimed at supporting youth at risk of homelessness.
Early childhood education and care (ECEC)
2.23The interim report canvassed the interrelating linkages between lack of access to ECEC and poverty, including the lifelong impacts on education and employment outcomes, and limiting impacts on adults with caring responsibilities to participate in paid employment.
2.24The department provides programs to support education as a tool to address disadvantage, including a Child Care Subsidy (including supplements for low-income families), and the ongoing development of an Early Years Strategy, and a Youth Engagement Model.
2.25The department explained that the Child Care Subsidy helps support families to access early childhood education and care, and that it is ‘targeted to ensure more financial support is available to the families who need it most to access care’. It reported that for the 2021–22 financial year, expenditure on the Child Care Subsidy was approximately $9.8 billion.
2.26An additional Child Care Subsidy is also available for eligible disadvantaged and vulnerable families, which provides additional fee assistance for families and children facing barriers in accessing affordable early childhood education and care.
2.27The government is also developing an Early Years Strategy ‘to shape its vision for the future of Australia’s children and their families’ and the Productivity Commission is currently undertaking an inquiry into the early childhood education and care sector, with a final report due to the Australian Government by 30 June 2024.
2.28Alongside investment in schools through the National School Reform Agreement (led by the Department of Education), the Australian Government also spends on fee-free TAFE positions, is reviewing university arrangements with the view to support greater access for underrepresented backgrounds, and funds other equity-focused education programs.
2.29See Chapter 4 for further discussion on child poverty and the adequacy of support and programs aimed at reducing disadvantage.
Place-based initiatives and targeting specific cohorts
2.30The department runs programs such as Stronger Places, Stronger People that aims to address disadvantage in specific geographic regions using flexible, community-led designs. The department also advised it is establishing a National Centre for Place-Based Collaboration, and runs place-based programs for emergency relief, financial counselling services, and digital inclusion.
2.31See Chapter 5 for further discussion on how poverty is experienced in different geographic locations and the advocacy for place-based initiatives aimed at reducing localised poverty.
‘Complex’ and ‘difficult’ system
2.32This section covers submitters’ views on the overall complexity and the historically punitive nature of the social security system, including mutual obligations and debt recovery mechanisms. Chapter 3 covers income management and its impacts on First Nations people and communities.
2.33Submitters highlighted how the inherent complexity of the ‘social security system and legal framework can be difficult if not impossible for individuals to navigate,’ creating confusion and additional stigma and vulnerability for those seeking assistance. In support of this, the Commonwealth Ombudsman indicated an imbalance between the system as a whole and the individual seeking help:
The Social Security Act is a very complex piece of machinery, and there are a lot of moving parts. I think it's very difficult for individuals to understand necessarily how it's being applied to them, and certainly it can be difficult for our office to understand, unless we actually get the details and documentation that we can work through. We might get complaints from people who aren't themselves able to articulate what the problem is. They just know that there's something happening to them that they're unhappy with or that they can't get an explanation about from an agency.
2.34Going further into what this means for individuals who are often vulnerable, Ms Tsorbaris from the Centre for Excellence in Child and Family Welfare pointed out that individuals interacting with the system do not necessarily benefit from it, which can lead to further stigmatisation and exclusion:
The Commonwealth Government has a critically important and central role in creating a fairer, destigmatising welfare system, but this takes courage. The illegal Robodebt scheme… [has] only served to further entrench negative stereotypes about recipients of welfare payments. These damaging stereotypes further disadvantage Australians who need financial assistance at certain points in their lives to provide for themselves and their children.
2.35In a similar vein, Financial Counselling Victoria expressed:
At present, Australia’s social security system is falling short of providing social security to individuals and the community; instead of protecting and supporting the vulnerable it all too often traps them in poverty and debt. Significant and urgent change is needed.
2.36The Brotherhood of St Laurence argued that the social security system has ‘become a system out of time that does not meet community expectations or build people’s capability and confidence to achieve long-term economic security’. Similarly, the Australian Human Rights Commission contended that currently the system ‘tends to perpetuate poverty and social exclusion, rather than protect against it’. And according to FamilyCare, some opt out of potential income support altogether due to administrative barriers or compliance requirements.
2.37Given the continued outcomes of poverty and disadvantage for many Australians, some inquiry participants envisioned an entirely different social security system. Some were of the view the ‘social security system is unfit for purpose if it is difficult to access and puts those relying on it below the poverty line’.
2.38Some argued that changes were needed to the social security policy framework that can currently ‘completely exclude particular cohorts from income support, either through exclusions prescribed by legislative qualification criteria and waiting periods’ or systemic barriers.
2.39Economic Justice Australia suggested that such exclusions can arbitrarily prevent the most vulnerable in the community from accessing payments. It added that the following aspects of Australia’s social security framework must be addressed to ensure the ‘fundamentals of a fair and effective social security system’ are met:
Special Benefit access barriers
Disability Support Pension inequities
Compulsory income management
Anomalous social security debt waiver provisions
Services Australia staffing issues
Client advocacy barriers for legal services
Unmet need for social security legal help.
2.40Others pointed to international human rights conventions that should inform poverty reduction goals and the design of government systems that aim to achieve them. In practical terms, it was argued that a ‘deep review of the structure, rates, and associated conditions of social security payments’ was needed, or that a complete repeal of the Social Security Act 1991 and associated legislation should be accompanied with a new policy framework that centres human rights in line with the United Nations Covenant on Economic, Social, and Cultural Rights.
Employment services
2.41Inquiry participants considered the employment services system, including programs run by the Department of Employment and Workplace Relations such as Workforce Australia and program components such as mutual obligations, as not supporting the needs of disadvantaged jobseekers. These issues were also considered by the Select Committee on Workforce Australia Employment Services in its final report ‘Rebuilding Employment Services’.
2.42For example, Dr Travers McLeod from Brotherhood of St Laurence stated that:
we can't boost pathways for economic or social participation without fundamentally reforming our employment services system and how it supports those who have historically been marginalised in the labour market.
2.43The Brotherhood of St Laurence also provided as evidence their submissions to the House of Representatives Select Committee Inquiry into Workforce Australia Employment Services that explained how employment and training systems are ‘failing jobseekers, employers, industry and the community’, including how the employment services system has become ‘distorted by its competitive procurement processes and compliance focus’. The Brotherhood of St Laurence advocated for a ‘collaborative, people-centred, place-based, and industry-focused approach’ to employment and training services policy and program design.
2.44In support of this view, Anglicare Australia submitted that ‘the employment services system is doing little to help those with the greatest barriers to work and in some ways is actively causing harm’. Anglicare Australia also referenced a 2019 Senate inquiry into Jobactive (an earlier iteration of Workforce Australia), and stated that:
research also suggests that employment services have been failing in its aims for years, with a recent parliamentary inquiry reporting that “participants are gaining employment in spite of [the system], not because of it.”
2.45Jesuit Services Australia held a similar view that ‘Workforce Australia remains heavily focused on compliance rather than providing practical support for people that makes a difference, such as wage subsidies for employers and training that is relevant to career aspirations and employment opportunities’.
2.46Sacred Heart Mission pointed out that the ‘one-size-fits-all approach to employment services favours people who have stable housing and are job-ready, rather than working with people to build skills and genuinely support them into work.’ They advocated for a more ‘holistic employment support programs tailored to individual and cohorts of people who require additional support’, such as pre-employment supports and job readiness assistance.
2.47In reference to perceptions of the system, the National Council for Single Mothers and their Children considered the employment services system as an obstacle, and submitted that ‘employment services are not viewed as trusted places but entities that can suspect and control finances’.
2.48In support of the above views, Professor Peter Whiteford from the interim EIAC reiterated the importance of changes to income support payments ‘should be accompanied by… reform of the employment services.’ He advised that the EIAC would do further work on employment services going forward.
Mutual obligations
2.49Inquiry participants expressed significant concerns about a key feature of the employment services system: the mutual obligations requirements. These are described by the Australian Government as ‘tasks and activities you agree to do while you get some payments from us’, and where ‘penalties may apply if you don’t meet them’. These requirements apply to payments including JobSeeker Payment, Youth Allowance, Parenting Payment, and Special Benefit. Temporary exemptions can be sought in circumstances such as the death of an immediate family member, family and domestic violence, being homeless, illness, natural disasters, and having a baby.
2.50Income support recipients are required to earn points up to a target each month, where points are accumulated by doing tasks such as completing job searches, attending compulsory appointments, participating in training, attending job interviews, and accepting any job offers.
2.51The interim report highlighted evidence provided by many inquiry participants on how the employment services system and its mutual obligations requirements create further barriers to employment.
2.52For example, Dr Travers McLeod from Brotherhood of St Laurence spoke of how:
it's not actually an employment services system; it's really a system that polices the payment system and does so through a fairly punitive mutual-obligation requirement, which is not about mutual investment or investment in capabilities and confidence.
2.53In relation to the social security system’s compliance, Dr McLeod contended that:
Our Social Services system doesn't offer that peace of mind. It doesn't bounce people back into participation. It has elements of distrust, right? I think untangling the mutual obligation requirements in a way that is empowering and builds capability and confidence and that proactively links and other services and supports at the state and local level is the answer.
2.54In support of this view, Relationships Australia observed that mutual obligations ‘distracts and depletes the physical, mental, and emotional resources of individuals, hindering them from participating in genuine employment and education opportunities and maintaining family and other relationships’.
2.55Professor Peter Whiteford from the Interim Economic Inclusion Advisory Committee (EIAC) also stated ‘it’s not clear that [mutual obligations] has positive effects’ and that the idea that young people are not working hard to look for jobs ‘is a completely inaccurate representation of what reality is’.
2.56Further, in a study of changed circumstances during the COVID-19 pandemic where mutual obligations were suspended and income support payments increased, Dr Elise Klein from the Crawford School of Public Policy at the Australian National University (ANU) presented findings that showed this not only improved physical and mental wellbeing but also increased labour market engagement and economic participation, and care and community work.
2.57Similarly, Jesuit Social Services outlined their vision for non-compulsory ‘person-centred employment services’ that doesn’t police the welfare system, invests resources for the most disadvantaged, and is delivered by not-for-profit organisations.
2.58Anglicare Australia supported abolishing mutual obligations that are deemed ‘pointless and demoralising’ and instead focusing on investment and job creation in growth industries such as aged and disability care sectors.
2.59Many other inquiry participants, including the Antipoverty Centre and Centrecare, also called for mutual obligations to be abolished.
2.60There was also consideration of the specific needs for people with disability, which include access to a range of employment services that provide meaningful support for those who want assistance.
2.61The Australian Human Rights Commission also supported job creation that ensures ‘that new jobs are not limited to male-dominated industries’ and analysis of stimulus and economic initiatives include gender impact analysis. However, Dr Elise Klein from the ANU suggested any efforts on job creation might be ‘better served by providing people with a liveable wage’ and through ‘voluntary employment support, training, career advice, and guidance’.
2.62The Department of Employment and Workplace Relations countered this view of the negative impacts of mutual obligations by pointing to the ‘significant volume of international and Australian research showing the effectiveness of mutual obligations at speeding up the rate at which people on unemployment payments do find work’. The department referenced a study of mutual obligations for partner allowance recipients that indicated there was a reduction in the number of payment recipients by about 50 per cent, but acknowledged that this did not necessarily mean they found work.
Debt recovery mechanisms
2.63Inquiry participants also raised issues about the use of debt recovery mechanisms, including income apportionment and income averaging, and their devastating impacts on income support recipients.
2.64Income apportionment refers to a practice used by Services Australia where an income support recipient’s employment income was evenly divided across two or more fortnights to work out how much income support recipients were entitled to. Eligibility and payment rates may have been impacted if the actual days worked in those fortnights were not evenly spread. Debts were then issued based on the calculation. This practice was discontinued in December 2020.
2.65Similarly, income averaging (commonly referred to as Robodebt) was used to calculate and raise debts using averaged income information from the Australian Tax Office. This practice was discontinued in November 2019. A Royal Commission was established on 18 August 2022 to investigate this debt assessment and recovery scheme and a final report was published on 7 July 2023.
2.66Some submitters also raised accounting and administrative errors as reasons for income support payments to be suspended or underpaid for some recipients.
2.67According to the Antipoverty Centre, aggressive debt recovery measures were used.
2.68These debt recovery mechanisms were regarded by inquiry participants as opaque and complex, generating immense psychological distress, and feeding ‘into a narrative of shame and stigma experienced by so many who rely on income support to survive day to day’.
Income apportionment
2.69The committee heard evidence about the Australian Government’s use of income apportionment which impacted many income support recipients via debt collection mechanisms.
2.70The Commonwealth Ombudsman advised around 13,000 debt reviews were paused by Services Australia and 87,000 files that are also potentially impacted by use of income apportionment calculations. Commenting on the opaqueness of system processes and the confusion the incorrect calculations have caused for many already vulnerable recipients, the Ombudsman contended:
all government agencies can continue to work better at how they communicate—how simply and how clearly they communicate. Often people are just trying to understand what the decision is… If people don't understand the basis on which there's a penalty or an imposition or a debt, then that's extremely challenging.
Robodebt and income averaging
2.71Robodebts using income averaging were debts raised between July 2015 and November 2019 under the Income Compliance Program using a practice by Services Australia that averaged income information provided by the Australian Tax Office.
2.72The now well documented use of income averaging – since found to be unlawful – and the onus put on the customer to disprove debts is indicative of what inquiry participants discussed about the punitive nature and imbalance in the social security system.
2.73Commenting on the impacts of Robodebt on disadvantaged Australians, the Western Australian Association for Mental Health contended that it is ‘one example of a public policy initiative that caused high levels of psychological distress, anxiety, and depression and immiseration among thousands of Australians, many of whom lived in poverty’. Similarly, Financial Counselling Victoria wrote:
the Robodebt Royal Commission is hearing a sequence of horror stories about the impacts of a culture of victimising and stigmatising Centrelink payment recipients – how it distorts thinking and facilitates unconscionable decision making by Government officials, and can even be used to manipulate media reporting. To prevent a re-occurrence of Robodebt, there is a need to reshape the way Government thinks about poverty.
2.74The Antipoverty Centre elaborated on how Robodebt ‘demonstrated the immense human cost of seeking to recoup funds from people who do not have enough money to live’. They advocated for an end to Centrelink debt collection activities that are driven by administrative error and confusing rules.
Adequacy of the system
2.75This section outlines the evidence received from inquiry participants on the adequacy of key income support payments to ensure people do not live in poverty. It examines suggestions of adequate payment levels and the significant social benefits of increasing payments to alleviate poverty. The Parenting Payments are discussed in Chapter 4 of this report. This section also outlines recent Government measures, and the broader context of the cost-of-living challenges facing people living in poverty.
2.76Australia’s social security system includes income support payments. These payments, as described by DSS, aim to provide a ‘minimum adequate standard of living’ for the working age population and acceptable standards of living for pensioners and families, accounting for ‘prevailing community standards’. In regards to the evidence assessed in this section, it is noted that much of the evidence was received prior to the release of the 2023-24 Federal Budget.
Adequacy of JobSeeker Payment
2.77The interim report detailed the extensive evidence from inquiry participants on the adequacy of the key unemployment benefit, JobSeeker Payment, plus their longstanding calls for the rates to be raised to provide a reasonable standard of living for the lowest income Australians.
2.78The interim report also detailed evidence on the effects of the $550 COVID-19 Supplement and how the Australian Government directly reduced poverty rates by increasing income support payments for a short period. In reference to this, Professor Sharon Bessell of the Children’s Policy Centre said:
… we saw that during COVID in what turned out to be an incredible natural experiment about what happens when we increase benefits. We saw that children and their families were lifted out of poverty, the children were able to go to the dentist, to get health care and to get new underwear, to have the kinds of things that children need to have a minimally decent life.
2.79To illustrate this temporary effect, Financial Counselling Victoria presented analysis (Figure 2.1) by the Grattan Institute showing the impact of the COVID‑19 supplement on closing the poverty gap. The time series also highlights how the equivalent of the JobSeeker Payment tracked closely to the 50 per cent median household poverty line in the mid-1990s but has since diverged.
Figure 2.1Poverty lines and unemployment benefits (inflation adjusted 2021 dollars)
Source: Financial Counselling Victoria submission using Grattan Institute analysis
2.80Excluding the COVID-19 supplement, the prevailing base rates of JobSeeker Payment were considered too low to sustain a basic living standard. To illustrate this, the Australian Council of Social Service (ACOSS) submitted:
The base rates of JobSeeker, Youth Allowance and related payments are too low to sustain an adequate standard of living. These payments have fallen well behind pensions, wages, and community living standards. JobSeeker is less than half the minimum wage (just 42%) and the gap between JobSeeker and pensions is growing, having gone from being 80% of the pension in 1980, to 65% of the pension today (equating to a $175 per week difference). Youth Allowance is just 34% of the minimum wage and 54% of the pension. JobSeeker remains the second lowest unemployment payment in wealthy nations as a proportion of average earnings.
2.81ACOSS argued these payments result in people going without basic goods and services every day, forcing them to make difficult choices between paying for rent, food, healthcare, debt, and other basic needs.
2.82The Brotherhood of St Laurence supported this view by indicating how the minimum wage mechanism has no equivalent for the ‘social wage’, resulting in income support payments that are ‘well below the [Henderson] poverty line’. To support this, the Melbourne Institute provided analysis from 2001 to 2014 showing payments were ‘well below the [Henderson] poverty line for the whole period and go further below the poverty line over time’ due to payments only increasing by inflation.
2.83Many inquiry participants discussed the direct link between the JobSeeker Payment level and rates of poverty in Australia. For example, the Melbourne Institute said the level of income support ‘to a large degree determines the level of poverty in Australia’.
2.84Professor John Quiggin, a Senior Fellow in Economics at the University of Queensland, said at a hearing that:
research around the world, both in terms of policy within developed countries and the policy, has reached the simple conclusion that the best way to help poor people is to give them money. I think this has been established in a wide variety of settings. Attempts at conditioning aid of all kinds are almost always counterproductive. So I think this is critical if we're going to fix it. The reason people are poor in Australia is primarily because income support is inadequate.
2.85Similarly, Emma King from the Victorian Council of Social Service highlighted that ‘by far the most effective policy change the federal government could make to combat poverty is to raise the rate of JobSeeker’ because ‘JobSeeker is so low that it traps people in poverty’. Dr Greg Jericho from the Australia Institute also highlighted that ‘it’s a policy choice and we can set payments at a certain level’ to change the levels of poverty.
Adequacy of Youth Allowance (YA)
2.86With a similar argument to JobSeeker Payment, submitters highlighted how low levels of unemployment benefit provided to young people results in poverty and negative impacts on their lives. For example, the Youth Affairs Council of South Australia raised that ‘young people experience a vastly different economic situation to older generations’ and how many young people are impacted by their ineligibility for adequate income support.
2.87Inquiry participants highlighted that YA is designed to only be indexed once a year while other allowances are indexed twice a year, resulting in a discrepancy between Youth Allowance and JobSeeker Payment. Equality Australia highlighted the need to remove barriers experienced by young people living in unsafe homes to access Youth Allowance.
2.88Submitters singled out increasing JobSeeker Payment and Youth Allowance as ‘the single most effective way to address poverty in Australia’ and explained how this would help address the most urgent poverty problems.
2.89Chapter 4 provides further discussion of Youth Allowance and payments such as Austudy and ABSTUDY.
Adequacy of Commonwealth Rent Assistance (CRA)
2.90The interim report highlighted the intimate link between housing insecurity and unaffordability with poverty. Several submitters and witnesses referenced the need to increase CRA to assist with housing costs that are often the largest fixed costs for most households. For example, Anglicare submitted:
CRA is supposed to help people manage the cost of housing. But it is not keeping up with soaring rent, and people on the lowest incomes are locked out. Only one in three people on the JobSeeker Payment, and on in ten young people out of work is eligible for the payment. 46 percent of people who get rent assistance are still in rental stress.
2.91Centrecare supported this view and wrote:
Given the high cost of rental accommodation and the fact that renters are significantly more likely to experience poverty, there is a clear case for raising rent assistance.
2.92Submitters argued Commonwealth Rent Assistance (CRA) should be increased to a level that reduces rental stress and immediately assist those on lowest incomes who are more likely to go without food, medical care, or medicine.
2.93ACOSS recommended lifting the maximum threshold of CRA by 50 per cent. Others argued for rent assistance to be ‘considered in the context of Australia’s high and increasing living costs’, while Anti-Poverty Week argued CRA should rise simply ‘so everyone has a safe place to call home’.
2.94Some submitters agree CRA is too low but do not think increasing the level of payment will address underlying issues at the nexus of the housing market, social security system, and cost of living challenges. For example, Antipoverty Centre instead recommended large-scale changes to rent assistance including eligibility for all renters and some mortgage holders, linking to market rents, and allowing pre-payments.
2.95Since the publication of the interim report, the Australian Government increased these payments through a 2023-24 Budget measure – Increased Support for Commonwealth Rent Assistance Recipients – that increased the maximum rates of CRA allowances by 15 per cent to ‘help address rental affordability challenges for CRA recipients’ at a cost of $2.7 billion over 5 years. This represented the largest increase to CRA in thirty years.
Adequacyof Disability Support Pension (DSP)
2.96According to Physical Disability Council of NSW, the DSP is the sole source of income for many people with disability and only 7.5 per cent of DSP recipients receive money from another source. Meanwhile, ACOSS and UNSW stated that 41 per cent of DSP recipients live in poverty (based on a 50 per cent of median income measure). The intersection of poverty and disability was portrayed in a submission’s case study:
As my condition has progressed, I have found myself becoming more and more disabled, and thus dependent on benefits. This has led to moving into cheaper (and less appropriate) accommodation, further entrenching my disability while also limiting access to essential treatments and health care (and community). Not only exhausting, but demoralising. I live in constant dread of rental increases, for I know not where I shall wash up next…
2.97Several submitters highlighted how DSP was set at a level too low to meet the complex needs of people with disability, which are piled on top of the already challenging circumstances faced by people on low incomes. For example, Advocacy for Inclusion submitted that DSP is ‘inadequate to manage the rising and added cost of living stemming from disability’ and should be raised to ‘enable people with disability to live independently with dignity and actively participate in their communities’. It was highlighted that this inadequacy forces people with disability to ‘make compromises on essential living costs and often between necessities’ such as rent and food.
Eligibility criteria
2.98Referring to the predecessor to JobSeeker Payment, the Australian Federation of Disability Organisations mentioned the:
… series of reforms were introduced that severely restricted eligibility for the DSP and resulted in a major reduction in the standard of living for Australians with disability, including redirecting many previously eligible recipients onto the lower paying Newstart Allowance.
2.99Exploring eligibility problems, Legal Aid NSW submitted that:
there are significant difficulties for people with serious medical conditions and limited or no capacity to work in meeting the eligibility criteria for DSP, or in being able to prove they meet the eligibility criteria for DSP. The complexity of the criteria and the assessment and review process create barriers for applicants, particularly for those from culturally and linguistically diverse backgrounds, with mental health conditions and those that experience other compounding disadvantage.
2.100Economic Justice Australia also highlighted that for ‘many [people] including those with severe psychosocial disability’ who do not meet the DSP eligibility criteria, have to rely on JobSeeker Payment or other activity-based payments where they are at high risk of payment suspensions due to inability to comply with mutual obligations.
2.101Disability Advocacy NSW raised the difficulties for people with disability living in regional, rural, and remote areas to access the DSP which ‘entraps’ them into ‘cycles of disadvantage and poverty’. This includes struggles with the application process and physical attendance due to mobility issues, which submitters argued in turn meant an inability to meet eligibility requirements.
Compliance and support
2.102Similar to the criticism of mutual obligations, MS Australia also highlighted that DSP has a strong focus on compliance rather than supporting individuals to meet their needs.
2.103Taking a broader lens of the payment’s contribution to disability policy, submitters recommended in-depth investigations into the adequacy of DSP in its ability to achieve Australia’s commitments to the United Nations Convention on the Rights of People with Disability and how it should be redesigned to guarantee lifelong access to support by removing requirements to re-establish qualification, removing cap on hours worked, and other changes.
Other income support payments
2.104Acknowledging the many other payments and supplements provided through the social security system that aim to provide a safety net for Australians, other inquiry participants focused on the importance of boosting rates and access to the Age Pension, Carer Payment and Carer Allowance, energy concessions, Parenting Payment (see Chapter 4 for discussion on parenting payments), and remote allowance (see Chapter 3).
2.105Some submitters also raised the desirability of widening access to income, housing, employment and other services and concessions to all people on temporary visas, people seeking asylum, and newly arrived migrants.
Recommendations on payment levels
2.106In addition to calls to increase support payments, some submitters outlined the payment levels they thought were needed. For example, the Brotherhood of St Laurence cited modelling that showed:
increasing overall social security spending by even 10 per cent would lower the poverty rate of households on allowance by almost half, from 88 per cent to 34 per cent, and lower financial stress by almost 16 per cent.
2.107Other submitters had slightly different views on the level of ambition or the appropriate benchmarks. For example, Antipoverty Centre suggested increasing base rates to the Henderson poverty line until a measure of poverty is adopted.
2.108ACOSS recommended a package including a substantial increase in the rate of single JobSeeker Payment and Youth Allowance to the same level as the single Age Pension ($513 per week including pension supplement), an increase to the maximum rate of CRA by 50 per cent, and to index all working-age payments twice a year in line with CPI and wages.
2.109The Children’s Policy Centre provided ANU research that modelled scenarios and the impacts of increasing a package of income support payments to varying degrees. For example, a ‘high increase’ option which increases JobSeeker Payment, Parenting Payment, Disability Support Pension, Carer payments, and Family Tax Benefit Part A, and CRA (to different degrees at a total cost of $20 billion per annum) is estimated to decrease poverty for single parents by 50 per cent. Lower cost options were also modelled that pulled many people out of poverty but to a lesser degree.
2.110The Brotherhood of St Laurence reiterated their support for the Interim EIAC recommendation that ‘payments would need to grow to about 90 per cent of the aged pension in order to be considered adequate’.
2.111The Interim EIAC recommended a ‘substantial increase in the base rates of JobSeeker Payment and related working age payments as a first priority’ and an increase to Commonwealth Rent Assistance and changes to indexation to ‘better reflect rent paid’. In their 2023–24 Budget report, they also recommended a staged framework to increase payments.
2.112Professor Whiteford from the Interim EIAC highlighted the Australian Government’s actions to increase income supports in the 1980s, and that over a 13-year period of increasing family and unemployment payments (more than the Age Pension on average) resulted in ‘reducing child poverty by more than any other OECD country’.
2.113Some organisations also considered how the increased redistribution should be funded, such as by withdrawing the Stage 3 Tax Cuts ‘where half of the benefit goes to the top four per cent of taxpayers’; or a modest package of tax increases to Capital Gains Tax, progressive superannuation tax scale, and indexation of income tax thresholds.
Interaction between income support payment levels and employment
2.114Relating to increasing income support payments, the committee’s interim report detailed evidence from submitters rebutting how an increase to payments might reduce the incentive to work.
2.115Mr Matt Flavel, Deputy Secretary of Social Security at the department provided further evidence that ‘in net terms, the income from work still leaves the person better off than if they weren’t working’ and that this ‘was a core design feature’ of the social security system.
2.116For example the JobSeeker Payment is designed with an income-free area, a tapering of payment rates as income increases, and an upfront bonus. The department highlighted how the payment was always designed to be just below the minimum wage to send the signal that people will be better off working than receiving benefits.
2.117Using this as an argument to support raising income support payment rates, Professor Whiteford from the Interim EIAC reiterated that because ‘JobSeeker is so low… we shouldn’t at all be concerned about incentives to work’ and that even a ‘low-paid job makes you much better off than if you were on JobSeeker, even with significant increases’.
Recent Budget measures
2.118The committee’s interim report recommended the Australian Government prioritise measures in the 2023–24 Budget to target rising inequality and entrenched disadvantage, including through the income support system.
2.119The 2023–24 Budget included the measure – Increase to Working Age Payments – that increased the base rate of several income support payments by $40 per fortnight costing an additional $4.9 billion over 5 years from 2022–23. This included JobSeeker Payment, Youth Allowance, Parenting Payment (partnered), ABSTUDY, Disability Support Pension (youth), and Special Benefit. This was in addition to the 15 per cent increase to CRA mentioned above.
2.120In response to these changes, Ms Jennifer Kirkaldy, General Manager of Policy and Advocacy at the Salvation Army acknowledged that ‘any increase is going to be welcome’ but that the increases following the Budget are ‘not actually going to be enough to lift people out of poverty and allow them to live with dignity’.
2.121Dr Travers McLeod, Executive Director of the Brotherhood of St Laurence considered that the combination of 2023–24 Budget measures, including lifting JobSeeker and related payments, increasing rent assistance, providing energy price relief and reducing the cost of medicines, were ‘modest’ but acknowledged they are ‘steps in the right direction to providing essential relief to those in our community doing it toughest’.
2.122Whilst Dr McLeod welcomed the shift towards ‘improving the lives of Australians facing poverty and disadvantage’ in the 2023–24 Budget, he added that these measures ‘can only be the start if Australia is serious about making poverty reduction a much greater national priority’.
2.123There was also a change to Parenting Payment Single where eligibility was expanded to increase the age of accessibility from 8 years to 14 years – a change the Centre for Children’s Policy considered ‘very significant’ and that was also welcomed by Ms Kelly Bowey, Policy Advisor at Brotherhood of St Laurence.
Committee view
2.124The committee acknowledges that the objective of Australia’s social security system is to provide a safety net for those who need it most. However, the committee heard evidence from a number of submitters throughout the inquiry who did not believe that it was meeting its objectives.
Payment levels
2.125The committee notes the evidence provided on the direct links between income support payment levels and poverty rates. The evidence submitted shows that the current rates of some income support payments for working age Australians can result in recipients having inadequate income to support their basic living costs. These findings are not new. The committee is cognisant of past reviews, which also identified the need to increase the rates of payments available to working-age unemployed income support recipients as well as the rates of supplements such the CRA.
2.126In 2020, a previous iteration of this committee also identified the need for a review of the income support system to ensure income support recipients do not live in poverty. More recently, ahead of the 2023–24 Federal Budget, the Interim Economic Inclusion Advisory Committee also recommended a substantial increase in the base rates of JobSeeker Payment and related working age payments as a first priority.
2.127The committee acknowledges the investment of $14.6 billion dollars in cost-of-living relief and improved accessibility to the parental leave scheme in the 2023–24 Budget, $9.5 billion of which was specifically targeted at boosting payments and entitlements for those on the lowest incomes.
2.128The committee also notes the calls for further increases to these payments by submitters to the inquiry.
2.129The committee is of the view that the social security system is a powerful vehicle through which the Australian Government can address poverty rates in Australia in the short-term.
2.130The committee recommends that the Australian Government take urgent action so that Australians are not living in poverty, including through considering the suitability, adequacy, and effectiveness of the income support system.
Disability Support Pension
2.131The committee acknowledges the evidence received on the difficulties for many people with disability to manage the rising costs of living and the significant struggles associated with poverty. It also heard about the tightening of the eligibility and difficulties for many to apply for the Disability Support Pension that has meant many people living with disability are relying on the JobSeeker Payment.
2.132The committee recommends that the Australian Government take action to better support applicants and recipients of the Disability Support Pension and ensure people can participate in their communities and cover their living costs.
Commonwealth Rent Assistance
2.133Throughout the inquiry, the committee received evidence that housing insecurity and unaffordability are intimately linked with poverty. People on low incomes are more likely to rent and CRA is one mechanism to provide rent relief for income support recipients renting in the private rental market.
2.134The committee acknowledges the increase to the CRA in the 2023–24 Budget as part of broader cost of living reforms. However, the committee notes the calls from submitters for further review of the CRA. The committee sees merit in undertaking such a review.
2.135The committee recommends the Australian Government consider asking the Economic Inclusion Advisory Committee to review Commonwealth Rent Assistance, to determine effectiveness and appropriateness at alleviating cost of living pressures.
‘Complex’ and ‘difficult’ system
2.136The committee heard evidence about the dissatisfaction with the overall social security system and its historically punitive approach to managing income support recipients, including that mutual obligations requirements can work against the interests of vulnerable income support recipients, causing psychological distress, and detracting from economic participation.
2.137The committee heard throughout the inquiry that there was also need for reform to the employment services system more broadly, including Workforce Australia. Inquiry participants highlighted how the current system does not sufficiently support the most disadvantaged to find work and can act as a hindrance to economic participation. The committee agrees with submitters that a more person-centred approach to employment services is needed to improve employment outcomes – one that is cognisant of the diverse needs of the most disadvantaged jobseekers.
2.138Evidence was also received on the inappropriateness of debt recovery mechanisms, including income apportionment and income averaging. The committee acknowledged these elements of the social security system have had devastating impacts for many income support recipients, as were uncovered by the Robodebt Royal Commission.
2.139The committee is of the view that low-income Australians should not be faced with a social security system that distrusts and punishes people. Instead, there should be a system that aims to support vulnerable people through financial stress, provide meaningful assistance for people seeking employment, and that works to lift people out of poverty and disadvantage.
2.140The committee recommends the Australian Government reform mutual obligations, giving consideration to the report of the Select Committee on Workforce Australia Employment Services.
2.141The committee recommends that the Department of Social Services and the Department of Employment and Workplace Relations undertake a review of all employment services programs to ensure they move to a strengths-based, person-centred approach.