ADDRESS TO THE MELBOURNE INSTITUTE 2014 ECONOMIC & SOCIAL OUTLOOK CONFERENCE

Thank you very much Patricia, ladies and gentlemen, it’s a great privilege to be here at this importance conference again this year.

I would like to place my comments this afternoon in the context of work.

Work is a social good which, in turn, is a foundation and expression of human dignity. Seen this way, it is work or employment and finding it for all those who wish to participate that should always be a primary focus of national policy.

Not only does work enable us to express ourselves as human beings and fulfil our material needs; it enables us to contribute to society as a whole: to our families, our communities, and the nation.

An issue, then, is how we can ensure work for all those who are capable of it. None of us exist in isolation.

We have a duty to allow each of our fellow citizens to participate in the work of society according to their ability.

I am not alone in this view my fellow panellist, Jenny Macklin, said the following in 2012:

“Work provides independence, purpose and dignity and a sense of achievement. I believe we can do better than a lifetime spent on income support for Australians who have some capacity to work. That’s why this government has made significant reforms to the disability support pension.”

Seventy years ago, the Australian authors of the 1945 White Paper on Employment proclaimed that “full employment is a fundamental aim of the Commonwealth Government.”

It was an objective that sustained us for several decades. But the changes wrought by the transition to a modern, globally competitive economy affected this aim, returning us to levels of high unemployment in the late ’80s and early ’90s.

By the end of the Howard era, unemployment had returned to low levels, only to rise again in subsequent years.

Australia retains a progressive tax and welfare system, but we cannot ignore the tides of change.

As others will have observed, Australia faces a number of challenges, including the transition from the construction to the production phase of the resources boom, the very large Commonwealth deficits and debt, and the ageing of the population.

The latter has two significant consequences: the increase in the number and proportion of post-retirement age Australians; and the contraction in the net growth of the workforce.

Policy objectives

So what should be the objectives of our policy for welfare reform?

All people should be able to contribute, according to their ability, to the economic life of the nation.

People with disabilities, for example, both want and are generally able to contribute.

This is equally true of others locked out of employment because of age, personal circumstances, or changing industrial trends.

When the great majority of people, whatever their physical, mental, or social situation, want to contribute positively to society, the issue is both social and moral.

To miss the chance to increase the opportunities for more people to participate in the workforce would be to betray our obligation to our fellow men and women.

As I said at the Sydney Institute this week, our welfare system continues to fail many people:

“the neglected child; the listless, directionless youth; the socially isolated women with psychological injuries; and the long term jobless mature aged man..should be the faces of opportunity and support; not the faces of welfare dependency.”

The 2005 and subsequent reforms

Two major changes to the Australian welfare system were announced as part of the Howard Government’s Welfare to Work reforms in 2005 and came into effect from 1 July 2006.

First, single parents claiming Parenting Payment Single after 1 July 2006 would be able to receive this payment until their youngest child turned 8 years of age.

Coupled parents claiming the Parenting Payment Partnered after 1 July 2006 could receive the payment until their youngest child turned 6 years.

Once their child turned 8 or 6 respectively, parents would be required to claim another income support payment, most likely Newstart Allowance, if they weren’t already in work.

Prior to these changes, parents were eligible to receive Parenting Payment until their youngest child turned 16.

The Howard Government decided to grandfather, or grandmother, existing recipients of Parenting Payment, with the view that they would, in time, wash out of the system.

However, the subsequent Labor Government abolished the grandfathering arrangements from 1 January 2013, which pushed tens of thousands of previously grandfathered single parents onto Newstart Allowance if their youngest child was older than 8 years of age.

Second, the Howard Government tightened eligibility for the DSP by reducing the continuing incapacity to work test from 30 hours a week to 15.

If people with disability had the capacity to work between 15 and 29 hours a week without ongoing support in the open labour market, then they would be ineligible to claim the disability support pension.

People with a work capacity of between 15 to 29 hours seeking income support would receive an unemployment benefit, typically Newstart Allowance, with the requirement to look for part time work.

This reform was effective in slowing growth in the DSP for around a year, before the effects of the Global Financial Crisis began to be felt and DSP figures began to grow again.

Since then the DSP has been subject to a series of reforms that have tightened eligibility, such as the Program of Support requirements and the updated impairment tables.

And since 1 July this year, for the first time, some DSP recipients under the age of 35 will have participation requirements that will require them to improve their chances of moving off welfare by undertaking job preparation activities.

In addition, income management was introduced as part of the Northern Territory intervention.

The income management provisions were amended subsequently, and trials commenced in a number of places outside the Northern Territory.

Recent proposals

As you will be aware, a Reference Group, headed by the former head of Mission Australia, Patrick McClure, provided an interim report on further welfare reform to me.

The report, which is in the form of a discussion paper, was released last Sunday, and is now the subject of consultation.

As Mr McClure is speaking at this conference tomorrow, I will not detail his proposals, other than to restate that a new architecture is suggested.

Four new payment streams – working age, disability, children and the age pension – have been suggested to replace some 20 existing payments and 55 supplements and allowances.

The future

In his book When the Money Runs Out, the British banker Stephen King, writing of the urgent need to tackle the structural problems threatening our economic futures, noted this:

“We are persistently trying to consume tomorrow’s income today.”

As he points out, this is the path to ensuring all our aspirations remain unmet.

For us, this means some of our great reforms, such as the National Disability Insurance Scheme, would be in jeopardy.

We want a country in which we can always provide for the vulnerable and the needy.

We are doing this by not consigning our fellow Australians to a life on welfare.

Instead, our welfare reform has the dual aim of benefiting both society and individual Australians. That is why there is a strong emphasis on incentives to work.

Collectively, the future of Australia’s prosperity depends on our ability to increase our productivity.

Individually, a job is important for self-worth, for independence, and for quality of life.

Long term reliance on income support, on the other hand, increases the risk of poor health, low self-esteem and social isolation.

We know that if a person is on welfare for a long time then they are more likely to stay on welfare or return to it at various stages of their lives.

We also know that families in which parents rely on welfare rather than work set in train intergenerational effects that impede children’s aspirations to an education and work.

This is not in their interests, nor is it in the nation’s.

As a nation, we are must continue to develop our human capital.

Dependence on mining and agriculture will only take us so far now.

Ensuring economic prosperity in a globalised world means we will need the necessary skills to make a contribution to a constantly changing environment.

This means that every Australian who is able to work but not in a job, needs to be getting the skills to future proof their employment.

This entails a lifelong learning process to keep skills job-ready and relevant.

It is particularly important that young Australians embrace this concept.

The certainty of their future employment is increasingly dependent on having the skills needed for a technologically evolving economy.

Earn or learn must be the options for young people.

This emphasis on getting relevant job skills is at the core of the government’s thrust to increase participation in the workforce.

We need a welfare system that has adequate payments based on need to encourage people to prepare for and seek work where it is reasonable to do so.

It is why we are embracing the challenge of reform – both in the economy and in the welfare system.