Bailing Out With a Broken Bucket

What Australia needs is a review that tackles the complexity of the income support system including how it interacts with the tax system, our approach to supporting disabled people back into the workforce and assistance for long-term unemployed people, says Mission Australia chief executive Toby Hall.

When Wayne Swan delivers his budget next month it's likely more than $130 billion will be earmarked for welfare spending.

How did we get here? How is it that around one-third of total government expenditure each year is on welfare? There is no doubt that a fair Australia must have an adequate safety net that provides unemployed, sick, disabled and vulnerable people with the support they need.

Yet the current system is clearly not working. Whether they be income supports to rich, middle-class or low-income Australians they are all part of our "jerry-built" welfare system that is unfair, complex and in dire need of reinvention.

People on $150,000 a year do not need welfare. A recent report shows some $158 billion is taxed then returned to Australians in the shape of welfare support. Even for those in genuine need, the system is failing.

Too many people have been allowed to disengage from the labour market. On the flipside there are too many people who are genuinely looking for work but denied the resources and training to get them job-ready.

It is a badly kept secret that Australia's jobless figures mask the true problems of unemployment and underemployment. This is never truer than when you look at the explosion of people on the Disability Support Pension (DSP).

There are now 825,000 people on the disability pension, a growth of 280 per cent over three decades. There is certainly no evidence there has been a similar increase in disability across the nation.

There is no doubt most people who are on the disability pension are genuinely disabled and require our support. But over the years we have allowed thousands of people without serious disabilities to move from the dole to receiving the DSP where they are not engaged in looking for work.

This is despite the fact they might have a capacity for employment and their issues could be overcome with intensive help. For example, close to 30 per cent of people are on the DSP for psychological/psychiatric conditions. But recent studies show up to 85 per cent of people experiencing serious mental health issues can return to work or study with the right help.

If a person's barriers to work can be overcome with our help, what's stopping us from trying?

To its credit, the Gillard government has cut the flow of people on to the disability pension. Since December, 2011, the number of people on DSP has fallen by 6000. But the horse has bolted. What we need is a review that tackles the complexity of the income support system including how it interacts with the tax system. We need a review that reinvents the nation's approach to supporting disabled people back into the workforce. We need a balanced approach to assisting long-term unemployed people and doesn't fall into the trap of "all stick and no carrot".

It's been 13 years since the last major review of our welfare system. One of its central findings remains undone. The McClure Report recommended a single payment complemented by a participation supplement and a "add-on" payments according to individual or family circumstances such as a need for childcare to attend work or for someone challenged by public transport.

Such a system would be fairer for individuals and less complex for the government to manage. It would also better deal with Australia's intractable problem with poverty. Data released by the Australian Council of Social Services shows well over two million Australians – almost 600,000 of them children – are living in poverty. The main cause, unsurprisingly, is joblessness.

It is why Mission Australia has joined business, union and community groups in calling for an immediate $50 a week increase to the Newstart allowance. Yet this is only a short-term fix. Major reform is long overdue.

Delivering root and branch reform to our welfare system won't be easy or cheap – two reasons why our politicians prefer to tinker around the edges.

Ducking the problem and short-term fixes only postpone the inevitable, guaranteeing that when the correction comes it will be even harder. And who benefits under the status quo? Not the job seeker. Cutting people off from work who have the capacity to work sets them up for a life of misery.

This article was first published in The Daily Telegraph. It is republished here with permission.