Appendix F: Historical trends in transfer payments
Before 1907, social security in Australia consisted of charitable relief provided by benevolent societies, sometimes with financial help from authorities.
In 1907, the Harvester Judgment established the concept of an arbitrated 'living wage'—a non-market wage paid to a 'breadwinner' wage earner for the support of themselves and dependents. This effectively introduced a model where welfare outcomes were pursued by way of wage-related benefits rather than transfer payments in cash and/or kind or tax assistance.
From 1 July 1909, an Australian Government Old-Age Pension replaced similar schemes operating in various states. This was followed by an 'invalid' pension scheme in 1910. These payment programs focussed assistance on those with no income and no capacity to work.
The first form of family assistance, a non-means tested maternity allowance, began in 1912.
The principles of these schemes set the Australian social security scene for 100 years: funded from general government revenue; based on circumstance 'categories', not past earnings; and means tested to direct assistance to those regarded as most in need.
The 1940s—the beginning of the modern social security system
The impact of the Second World War saw the expansion in scope of the social security system at the national level. The Australian Government also progressively took over and expanded state transfer payments. The period included the introduction of:
- Child endowment (1941), a family allowance paid at a fixed rate with no means test.
- Widows' pensions (1942) to provide support to those who could not reasonably be expected to work due to either the care of a child or their age.
- Allowances for the children of pensioners (1943) and allowees (1945).
- Unemployment and Sickness Benefits (1945), which formed part of the Government's commitment to achieving 'full employment'.
- Special Benefit (1945), to provide for people who had no other entitlement and were unable to provide for themselves. It was and is tightly means tested.
These changes formed a basic social security architecture the essential elements of which are discernible in the current income support payment structures.
The 1950s and 1960s—the modern social security architecture was consolidated
The Australian social security system continued to consolidate its position. The major changes included additional assistance for single pensioners paying rent (1958), Supplementary Assistance (1958); a higher rate of pension for singles to reflect the diseconomies of living alone (1963); Guardian Allowance for widow pensioners (1963) and other single pensioners with children (1965); and a major liberalisation of the means test on pensions (1969).
1973–1983—initial responses to an expanding 'safety net'
The slow down in economic growth in the 1970s saw unemployment and underemployment increased substantially, reflected in increased numbers of recipients of unemployment, sickness and other payments and longer with average duration of receipt.
The 1970s also saw the introduction of measures to abolish the means test for Age Pensioners aged over 70 (subsequently reversed); the commitment to increase the single pension to 25 per cent of male average weekly earnings; a common rate structure for pensions and allowances; and automatic indexation of adult income support rates to increases in the CPI. In 1972, the Australian Government provided its first funding for child care services. Child endowment and tax rebates for children were replaced by a 'universal' Family Allowance in 1976.
1983–mid 1990s—towards a more 'active' system of social protection
The Social Security Review was established in 1986, recognising that economic, social and demographic change had created the need for a review of the social security system to establish a long term perspective on the priorities and directions for change. The system's focus was broadened from a predominant focus on poverty alleviation, to a system that also encouraged and rewarded self-provision (through work and saving) that was better integrated with other social services and economic, labour market and tax policies.
The main changes from the Review aimed to improve payments for low income families with children; and encourage and facilitate economic and social participation of payment recipients—particularly people with disability, single parents, widows, partners of incomes support recipients and the long term unemployed through improved labour market assistance. The 'family payment benchmarks' were introduced (1987), met (1989) and later increased (1992 and 1996) as part of the Australian Government's pledge that by 1990 no child need live in poverty. The benchmarks represented the assistance a couple, without private income, required to raise a child and achieve a similar living standard as a couple without children.
The period 1987 to 1995 saw changes recognising the changing role of women in the labour force and the increased availability of part-time work. This included gradually increasing the Age Pension age for women (1995); the beginning of the phasing out of dependency based payments for women (Widow B (1987) and Wife Pensions (1995)); and individual entitlement to income support for partners of income support recipients (1995). The 1995 changes included the introduction of non-activity tested allowances for partnered parents with a child aged under 16 and older widows and partners of income support recipients with a labour market disadvantage. Other claimants were generally required to claim an activity tested allowance payment. Also occurring in 1995 was the liberalisation of the allowance income test. The 100 per cent taper was replaced by a 70 per cent taper to improve the reward for part-time work and allowance couples were subject to an income test designed to improve work incentives for second earners in a couple.
Other changes included: an increase in the coverage and level of Rent Assistance (1988-1993); the progressive introduction of 'deeming' income on financial investments (1988-1991); the introduction of an 'Earnings Credit' for pensioners (1987) and allowees (1994) to improve the rewards for part-time work; the implementation of the Child Support Scheme (1988 and 1989); and the introduction of child care fee relief (1984) and expansion (1990 and 1994).
Mid 1990s to today—increased assistance for pensioners and families and continued activation
From 1997, the benchmarking of the single pension to 25 per cent of male total average earnings was included in legislation. The 'pension supplement' introduced as part of the GST compensation measures in July 2000 increased the rate beyond
25 per cent of the MTAWE.
By the late 1990s, the Australian Government was concerned about the number of working age people receiving income support, particularly the growing number of pensioners not 'activated' into either looking for, taking up, or preparing for work. This led to the establishment of a Reference Group to consider and report on Welfare Reform. The Government's initial response to their report was the 'Australians Working Together' (2001) package that included a 'Working Credit', the closing of Mature Age and Partner Allowances to new entrants, and new or improved supports and services for parents, people with disability, mature aged workers and the long-term unemployed.
In 2005, building on the Australians Working Together changes, the Welfare to Work changes were announced. These saw the 'activation', through the imposition of obligations to work part-time or look for part-time work, of parents with older children and new entrants with disability with a partial capacity for work. New entrants to these groups are now paid Newstart Allowance rather than a pension. Single parents 'saved' on pension were to be activated by part-time activity requirements. 'Saved' people with disability on a pension with the capacity to work 15 to 29 hours a week were not. The allowance income test was also liberalised (70 per cent taper lowered to 60 per cent) to improve part-time work incentives.
In relation to family assistance, FTB (2000) increased the assistance for families with children. An ad hoc increase to FTB Part A maximum rates and a higher base rate provided additional assistance for the direct costs of children. FTB Part B increased assistance for single income families including single parents. The FTB supplements (2003–04 and 2005), more generous means testing (2000–06) and Maternity Payment (2004, renamed Baby Bonus in 2007) led to significant increases in family assistance outlays. After a period of tightening, assistance for child care was improved after 2000. In 2005 the Government accepted the main recommendations of the Ministerial Taskforce on Child Support. The recommendations have been progressively implemented and better align child support with community attitudes. A new child support formula was implemented from July 2008.
Retirement incomes policy has retained a strong focus. 'Extended deeming' of financial investments was introduced (1996) and changes were made to the treatment of retirement income stream products (1998). Other changes in the period included: extended support for carers of people with disability (1996–99); a lower rate of Rent Assistance for single people 'sharing' accommodation (1997); Youth Allowance replaced a range of payments for young people (1998); the use of 'one-off' lump sum bonuses for carers and seniors (2001 onwards); and the introduction of additional payment for utilities costs (2004 and 2005).