Australia Aims to Simplify Welfare System to Reduce Outlay

Australia is proposing changes to help reduce its welfare outlay, estimated at A$145.8 billion ($137 billion) for the year to June 2015, according to an interim review of the payment system.

The review proposes a structure of four basic benefits, compared with the current 20 payments and 50 supplements, Social Services Minister Kevin Andrews said in a statement yesterday. It also suggests limiting disability support to those permanently impaired and unable to work.

With more than a fifth of Australia’s 23 million people on some degree of income support from the state, the government commissioned a review of the welfare system in December. Treasurer Joe Hockey, who announced welfare spending cuts in the May budget, on June 11 called the system unsustainable in its current form. From Australia to the U.S., developed nations are grappling with aging populations, rising welfare costs and budget deficits.

“Australia’s current welfare system is incredibly unwieldy,” Andrews said in yesterday’s statement. With an aging population, we “need a system that is sustainable in the years ahead and one that encourages most people who are capable of working to work.”

About 45 percent of Australians with health problems or disability live in poverty, more than double the average among nations in the Organization for Economic Co-operation and Development, according to a 2010 report. Loose monetary policy has encouraged hiring, with unemployment holding at 5.8 percent the past three months, after reaching 6 percent at the start of the year.

Spending Cuts

Australia is cutting spending on foreign aid, welfare and public services, and imposing a tax on its highest earners to set a path to surplus. Treasury forecast a A$29.8 billion deficit for the 12 months through June 2015, down from A$49.9 billion this fiscal year, with shortfalls narrowing in the following three years.

The opposition Labor party has already come out against the disability pension proposal.

“Labor supports measures to help people on the disability support pension back into work where it’s possible and appropriate,” shadow treasurer Chris Bowen said on ABC TV yesterday. “ What we don’t support is cutting people’s benefits on disability support in some brutal and blunt effort.”

The interim review was released yesterday and is open for public comment till Aug. 8. The final report will be completed later this year, Andrews said.

To contact the reporter on this story: Narayanan Somasundaram in Sydney at nsomasundara@bloomberg.net

To contact the editors responsible for this story: Stanley James at sjames8@bloomberg.net Garry Smith, Jim McDonald

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