Play the odds, save $200bn on welfare: study

Australian government have been urged to adopt New Zealand’s investment approach to welfare.

At least 5 per cent of the net value of the federal government’s welfare bill could reportedly be cut if governments adopted New Zealand’s ‘investment ­approach’ to welfare.

The government could shave more than $200 billion from the trillions in welfare it plans to spend on the current generation over their entire lifetimes if it harnessed its detailed data sets to target spending on those most likely to require more support in the future.

Hugh Miller, an actuary at Taylor Fry, said at least 5 per cent of the net present value of the federal government’s welfare bill — which rose 3.6 per cent to $4.7 trillion over the year to June 2017 — could be cut if governments adopted New Zealand’s “investment ­approach” to welfare.

“Combined government spen­ding (by governments in Australia) across welfare, housing, healthcare, justice and child protection can easily amount to $500,000 to $1,000,000 per person over a lifetime,” the Actuaries Institute report, written by Dr Miller, concluded.

New Zealand’s welfare bill, in net present value terms, had fallen 14 per cent as a result of reforms developed under treasurer Bill English, which focused government welfare spending on categories of New Zealanders who were statistically most likely to require ongoing government support.

“It’s the idea you can spend more now in the hope you can ­reduce spending in the future by figuring out the estimated lifetime cost of individuals in different circumstances,” Dr Miller said.

“We can probably predict which jobseekers will find employment quickly, which prisoners will re-offend, or who will end up homeless,” the study said, calling on the government to use improved technology to collect data on outcomes as well as inputs.

The “outcomes based” payments already used to fund job seeker services, where providers are paid only if job seekers maintain a job for between 12 and 26 weeks, could fruitfully be applied in other sectors with better analysis of more data, the report said.

“When people exit the prison say, how they integrate into society matters: if they don’t go into establish housing for instance, then their chances of reoffending are quite high,” the report said.

The NSW government has used social impact bonds — which pay investors more when they achieve measureable results that save the government money — to reduce the cost of children in care or at risk.

“Private investors get paid more if more children are successfully restored to their natural parents, and that increased return is offset by lower costs to NSW,” Dr Miller said.