Jim Chalmers claims government has ‘the balance right’ on welfare, despite warnings
The Treasurer has insisted the government has ‘broadly got the balance right’ on welfare payments, despite warnings from a leading economic think tank.
Jim Chalmers has insisted the government has “broadly got the balance right” on social security, despite warnings from a leading economics think tank that rapidly growing universal-style payments were disadvantaging poor households and straining state and federal budgets.
Speaking ahead of the government’s mid-year budget update, to be released next Wednesday, the Treasurer dismissed concerns about the government’s scattergun approach to welfare, saying it already had a “well-targeted social security system”.
“Our social security system is one of the best targeted in the world and that’s been the conclusion drawn for some time now.” Dr Chalmers said on Thursday.
“Medicare, the NDIS, early childhood education, are deliberately broader, and that’s for good reason.”
Dr Chalmers’ comments follow the release of research from the independent economic think tank E61 that showed universal-style payments had jumped from 1.4 per cent of GDP in 2000 to 3.7 per cent in 2024, while means-tested support had fallen from 7.8 per cent of GDP to 5.3 per cent.
The report identified “rapid growth” of universal-style in-kind transfers due to Australia’s ageing population and the introduction of the NDIS – a scheme that critics have long claimed should implement stronger means testing.
And with Anthony Albanese indicating last month that Australians could expect Labor’s universal childcare policy to be progressed next year, the gap between universal schemes and cash benefits is expected to close further.
Dr Chalmers attributed the shift to lower unemployment and the superannuation system, which he argued was doing “more and more of the heavy lifting in the retirement income system”.
“(There’s) a lower cost for unemployment benefits, because we got unemployment down,” he said. “The second related reason is the superannuation system is doing more and more of the heavy lifting in the retirement income system. So that’s another important reason why that number is changing over time.”
The E61 report also identified tight eligibility requirements and the indexation of payments to CPI inflation as drivers of cash transfers making up a decreasing share of GDP.
“Policymakers face a trade-off between universality – or the degree of targeting where it exists – and the rising fiscal cost of in-kind transfers,” the report read.
“The broader context is one of a fiscal position under strain and with growing inequity.”
Dr Chalmers downplayed the other side of the ledger, saying the government had taken steps to ensure the sustainability of the NDIS, despite its significant contribution to the blowout in universal payments.
“We’ve acknowledged for a couple of years now that is putting substantial pressure on the budget. That’s why we’ve been taking steps to deliver for people in the scheme but also to make sure the scheme’s sustainable,” he said.
“Some of the pressure is coming off payments even as we’ve increased them. Now I’ve introduced a permanent increase, for example, to Jobseeker, in addition to the indexation.
“So we’ve increased these payments but as a share of the economy it’s come down.”
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