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The fairness test
Labor thinks it's on a winner - devoting Monday's question time to portraying the budget as unfair and asserting that Tony Abbott is responsible.
Working age Australians have become far less reliant on welfare payments since the turn of the century – undermining Abbott government claims of a crisis of welfare dependency in Australia.
The finding comes from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, an authoritative Melbourne Institute of Applied Economic and Social Research report that has tracked more than 12,000 people since 2001.
The latest HILDA report, for 2011, shows rising inequality in Australia as well as flat or even falling living standards for middle-class Australians in the years after the global financial crisis.
But it also shows a marked trend away from working age Australians – and even pensioners – being as reliant on welfare.
Last month’s federal budget included a number of measures to restrict welfare, including preventing unemployed people under 30 getting access to payments for up to six months.
Treasurer Joe Hockey, in a speech last week, described Australia’s welfare system as ‘‘unsustainable’’ and said claims the budget was unfair were misguided “old-style socialism”.
He said the government was spending, on average, more than $6000 on welfare for every Australian.
“The average working Australian, be they a cleaner, a plumber or a teacher, is working over one month full-time each year just to pay for the welfare of another Australian,’’ he said.
Yet the HILDA research shows that in 2001 23 per cent of people aged 18 to 64 had received welfare payments each week and a decade later that had fallen sharply to 18.5 per cent.
There has also been a big drop in the percentage of working age households where more than 90 per cent of their income came from welfare. In 2001 that accounted for 7.1 per cent of households while a decade later it was just 4.8 per cent.
The proportion of retired people who relied on benefits as their main source of income also declined across the decade from 65.8 per cent to 63.5 per cent.
The report's author, Associate Professor Roger Wilkins, said Australia was experiencing its lowest level of welfare reliance in decades, possibly since the 1980s.
‘‘I’m absolutely bewildered by Hockey’s obsession on welfare reliance in Australia,’’ he said. ‘‘It’s lower than it's been in a couple of decades, possibly longer.’’
Professor Wilkins said the long-term trend away from welfare reliance was largely the result of Australia’s long boom, although a succession of welfare reforms that have tightened eligibility to payments had also contributed.
‘‘The long and short of it is we’ve had 20 years of growth uninterrupted by a recession. This is a fact I don’t think is appreciated widely enough,’’ he said. ‘‘It is the longest boom recorded in any developed country ever.’’
The long boom had also helped the number of Australians in absolute poverty halve in the decade with low, middle and high-income groups all recording strong real income growth. Despite that, inequality is rising in Australia with men in highly paid full-time jobs recording the strongest wages growth.
Professor Wilkins said besides 2009 – when government stimulus payments lessened inequality – the trend since the mid-2000s has been for inequality to edge higher. While we are far more equal than US or many developing countries, among rich countries we have reasonably high levels of inequality.
‘‘We’re probably not as equal a country as many people think,’’ he said.
The Rudd government’s stimulus payments of 2009 also masked the effect of the global financial crisis with living standards rising sharply that year as interest rates fell and incomes rose.
But disposable income for the median household fell in both 2010 and 2011 on one measure. That contrasts with the years before the financial crisis when there had been strong growth in real household income. ‘‘It’s a pretty good hint for why the Rudd and Gillard governments had such a difficult time ... median household incomes were going backwards,’’ he said. ‘‘I think that is a delayed GFC effect.’’
As the federal government moved to rein in its large deficit there were no more income tax cuts while thresholds for some payments, such as family tax payments, were frozen. ‘‘That’s why people were feeling a bit aggrieved,’’ Professor Wilkins said.