The social security system administered by the Commonwealth Government; Payments for war veterans and their dependants; A mix of compulsory and voluntary occupational superannuation; The health care system; Compensation arrangements for work injuries and deaths; Compensation arrangements for road accident injuries and deaths; Life and contingency insurance; Paid sick leave; and Other cash and in-kind welfare benefits.

1. David Stanton
Visiting Fellow
Crawford School of Public Policy
david.stanton@anu.edu.au
Social Protection in Australia
Presentation to
DFAT Social Protection Workshop
10 and 11 June 2014

2. Background to Presentation
• My background
• Structure of Presentation
– Concepts and Terms
– Social Protection in Australia
– Australia in International Context
– Some Lessons

3. Social Protection
Whiteford and Angenent (2001) consider that social protection in Australia
comprises:
• The social security system administered by the Commonwealth
Government;
• Payments for war veterans and their dependants;
• A mix of compulsory and voluntary occupational superannuation;
• The health care system;
• Compensation arrangements for work injuries and deaths;
• Compensation arrangements for road accident injuries and deaths;
• Life and contingency insurance;
• Paid sick leave; and
• Other cash and in-kind welfare benefits.

4. Social Security: Various Definitions
• US Social Security Act 1935. Coverage for risks of old age, death,
disability and unemployment. ”Welfare” different.
• William Beveridge (Nov 1942). Securing income in the event of
unemployment, sickness or accident, retirement, widowhood and other
exceptional circumstances.
• Tom Kewley (1973). Focussed on social security pensions, benefits and
allowances provided by the Commonwealth of Australia.
• ILO (1984). Protection against risks
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5. Social Protection
• My focus will be on social security, which
 Directly affects almost every Australian at some time
 Accounts for the largest component of spending by the
national government
 Outlays on social security and welfare are estimated to be
$145.8 billion in 2014-15, representing 35% of total outlays
and 8.9% of GDP.
 Is even more significant when allowance is made for
mandated superannuation and “tax expenditures”
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6. 6

7. Social protection
 Australian social security system different to most other countries.
 Europe and some other countries - most government benefits are financed
by contributions from employers and insured employees, and benefits are
often related to past earnings.
 The “social insurance approach” has a lineage going back to Chancellor
Bismark (The Iron Chancellor) who introduced social legislation to inhibit
unrest in Germany in the 1880’s.
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8. Social protection in Australia
• Most government benefits are flat-rate entitlements financed from
general government revenue, and there are no explicit social
security taxes.
• Most benefits are income-tested or asset-tested, so that entitlements
reduce as resources increase.
• Eligibility is based on residence and coverage of the population is
broad.
• Duration of payment receipt is not time limited.
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9. Social protection
• What guides policy decisions: the Seven Es
 Equity - horizontal, vertical (including adequacy, keeping a fair share of personal
income, taking account of earning capacity)
 Effectiveness – practicality, simplicity, ‘take-up’, achieving social goals (family stability,
well-being of children etc)
 Employment – work incentives, link to education, social participation.
 Efficiency - economic, administrative, ‘target’ (and maybe ‘churning’)
 Economy – costs (benefits and administration)
 Environment – the sixth E
• Expediency – the seventh E, ‘the elephant in the room’.
• See Stanton and Herscovitch (2013).
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11. Centenary of the Australian Age Pension
 On 6 July 2009, the Hon. Jenny Macklin MP, unveiled a plaque and
memorial commemorating the centenary of the first payments of the Age
Pension.
 It is located near the Department of the Treasury building in the
Parliamentary Triangle in Canberra.
 The memorial refers to three key aspects the contribution of the age
pension : Security, Dignity, and Support.
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13. History of social protection
• In the beginning
 Before 1900 –mostly charitable relief but no Poor Law.
 Denmark(1891) and New Zealand (1898)
 Age and invalid (disability) pensions came first in Australia (NSW
and Victoria in 1900 and Queensland in 1907, then the
Commonwealth in 1909 and 1910)
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14. History of social protection
 Set the pattern – funded from tax revenue, no social insurance
contributions, no link to previous earnings, means-tested
 Experience of other countries, particularly in Europe, had been studied
closely
 Maternity allowance in 1912 – also funded from tax revenue, no link to
earnings (but no means test)
 Comprehensive schemes (social insurance) proposed at
Commonwealth level in 1928 and 1938, but fell by the wayside
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15. History of social protection
• The 1940s: a defining decade
 New provisions introduced –children, widows, unemployed
 Commitment to full employment
 The Social Services Contribution (later integrated with income tax)
 Uniform income tax, the Joint Parliamentary Committee on Social
Security
 Constitutional change in 1946. Earlier successful challenge on
pharmaceutical payments.
 Governance – a new department and the consolidated Social Services
(later Social Security) Act
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16. History of social protection
• The 1950s and 1960s: consolidation and means test easing
• The 1970s and 1980s: the pace quickens
 Means testing, new benefits, family allowances, indexation,
carers, child support.
 Commissions of inquiry into national superannuation and
national compensation.
 Poverty Inquiry (Henderson) and Social Security Review (Cass)
 Health insurance (1972) and personal services
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17. History of social protection
• The 1990s: relentless change
 Budget restraint
 Many changes (disability, families, individual income testing,
pension rates, carers)
 Tax reform
 Governance: the creation of Centrelink (1997) and Family and
Community Services (1998)
• Superannuation grows (1992 changes)
• New Social Security Act
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18. History of social protection
• The new century – taxation and retirement incomes
 Superannuation liberalised
 Rises in rates of pension
 Means test on pensions liberalised, but sustainability and
affordability concerns then led to tightening
 Age pension age to rise to 67, but superannuation benefits still to
be normally payable at 60
• The Henry and Harmer reviews
• CLASS EXERCISE
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19. History of social protection
• Why did Australia’s system develop as it has?
 State precedents (particularly NSW and before that N.Z.)
 Seen as fairer to base rights on present needs rather than past
contributions
 Australia’s sense of itself as a pioneer
 Social insurance protections embedded in other ways such as
minimum wages, paid sick leave, workers’ compensation and
(more recently) superannuation. “Wage earners welfare state”.
 System seen as having the advantage of flexibility to deal with
emerging issues.
 Inertia can’t be discounted either – ‘if it ain’t broke, don’t fix it’
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20. Abbott Coalition Government (2013- )
 Re-establishment of the Ministry and Department of Social Services.
 Welfare Review established under Patrick McClure to examine working age
payments, including Newstart Allowance and the Disability Support
Pension. (McClure undertook a similar review for the Howard Government
in 1999-2000).
 Debate on the affordability and sustainability of the existing social protection
system. Joe Hockey and “end of the age of entitlement”
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21. Abbott Coalition Government (2013- )
 Commission of Audit established in October 2013 chaired by Mr Tony
Shepherd, President of the Business Council of Australia. Reported in May
2014.
 The Committee made wide ranging recommendations for
changes/efficiencies in the social security system to ensure it was “more
sustainable and better targeted”.
 The 2014-15 Budget was presented by the Treasurer, the Hon. Joe Hockey
M.P., on Tuesday 13 May 2014. The Budget picked up a number of the
recommendations of the Commission of Audit.
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22. Future of social protection in Australia
 Dealing with economic storms and short-term cost pressures
 Long-term sustainability issues/ageing of the population
 Need to raise benefit rates for unemployed people and sole
parents
 Reform of superannuation, including superannuation tax
concessions.
 Double dipping - poverty targetting and non-mandatory
annuitisation
 Examining the system as a whole. A life cycle approach.
 More integrated administration and a simpler system.
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23. Australia’s tax/benefit system and the OECD
Australia has:
the most progressive structure of benefits and as a percentage of household income, net
benefits to the poorest 20% of the population are among the highest in the OECD.
one of the most progressive systems of direct taxes in the OECD, and has low and very
progressive taxes on retirement age households.
less “middle class welfare” than any other country, lower churning than nearly all other
countries, and the highest level of transfer efficiency in reducing inequality and poverty.
many strengths – it targets the poor effectively at lower budgetary cost than many other
systems, so is more likely to be sustainable in the medium to long term.
A system that has become increasingly complex over time.
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24. Trends in social spending in Australia relative
to OECD average, 1980 to 2013 Source: Whiteford 2014
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25. Spending on Income-Tested Cash Transfers,
OECD, 2009-10 Source: Whiteford 2014
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26. 26
Net redistribution to the poor is high
Net transfers received by poorest quintile as % of household disposable income
Source: Whiteford 2014

27. The Australian Model and Other Countries: ILO and World Bank
 Traditional views of the ILO and the World Bank.
 Now recognise diversity and the importance of context. No “one size fits all” model.
World Bank “three pillar model”.
 The World Bank and “basic” or “zero” pillar (or perhaps a “foundation” for the other
pillars) to protect the poor.
 The ILO now supports a basic floor approach to ensure a least a widespread basic
level of social security for all. June 2012 Rec. 202 on National Floors on Social
Protection.
 Interest in “social pensions”. Increasing interest in Australian experience with general
revenue financed system.
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28. The Australian Model and Other Countries
 The two main system designs amongst developed nations:
 Some, like Australia, New Zealand and the UK, have long given more
weight to poverty alleviation, providing flat-rate government pensions
and benefits (or minimum income guarantees), often means-tested;
 Others, such as most European nations and the US, have long given
more weight to ‘social insurance’, providing earnings-related benefits
linked to compulsory contributions.
 Robin Hood versus Piggy Bank.
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29. The Australian Model and Other Countries: Observations
 History, culture and social values, as well as economic capacity.
 Once you start down a particular path it can have a significant influence on
the future. Issues of “path dependency”.
 Can also get to an end point by various paths. Superannuation in Australia
and social insurance objective of income replacement.
 “Off the shelf” models or “one size fits all” schemes and policies rarely
have lasting impact
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30. The Australian Model and Other Countries: Observations
 Need to examine social protection systems in context. e.g. the “age
pension” versus the overall system of retirement incomes.
 Social security reform needs to be integrated with economic reform.
 Be conscious of the implications of complexity
 Policy implementation, administrative efficiency and service delivery.
 Bring others with you, including staff, customers and citizens.
 CLASS EXERCISE
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31. The wisdom of others
 Chinese sayings:
• “Only he who has travelled the path knows where the holes are deepest”
• “Cross the stream by feeling the pebbles with your toes”
• “The mountains are high and the Emperor is far away”
• “ It doesn’t matter if the cat is white or black as long as it catches the mouse”
 Arab saying: “The camel driver has a plan but so does the camel”
 George Santayana:” Those who cannot remember the past are condemned
to repeat it”
 Winston Churchill: “History will be kind to me for I intend to write it”
 Wellington NZ. On the wall of the Te Papa Museum. Maori instruction to the
young: “Embrace the past. Prepare now to shape the future”.
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32. Source Material
• Herscovitch A. and Stanton D. 2008, ‘History of Social Security in Australia’, Family Matters, No.
80, pp. 51-60.
• Jackson L. and Bozic S. 1997, ‘The Australian Social Security Model: Revisiting the International
Debate’, Social Security Journal, Department of Social Security, Commonwealth of Australia,
September, pp 32-35.
• Andrew Podger A, Stanton D. and Whiteford P. 2014, ‘Designing Social Security Systems:
Learning from Australia and Other Countries’, Public Administration and Development
(Forthcoming)
• Stanton D. and Herscovitch A. 2013,”Social Policy and Programs: From Principles to Design”,
Asia and the Pacific Policy Studies (APPS) Working Paper Series, 01/2013, April.
http://ssrn.com/abstract=22588099
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33. Source Material (Continued)
• Whiteford P. Stanton D. and Gray M. 2001,‘Families and income security: Changing patterns of
social security and related policy issues’, Family Matters, Issue No. 60, Spring/Summer, pp. 24-
35).
• Whiteford P. 2014, Lecture to Principles of Social Policy Post Graduate Course at the Crawford
School of Public Policy, ANU, 7 March 2014.
• Whiteford P. and Angenent G. 2001, ‘The Australian System of Social protection - An Overview’,
Occasional Paper No 6, Department of Family and Community Services, Commonwealth of
Australia, Canberra.
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