(Image: AAP/Tracey Nearmy)

It’s an article of faith in politics that the Liberals are the party of welfare cuts — and one not discouraged by Liberals, who portray themselves as the best fiscal disciplinarians (despite their record as Australia’s biggest taxers and biggest spenders), the most devoted enemies of “waste” and the most committed advocates of the principle that the best form of welfare is a job.

It’s also linked to the belief on the left that welfare cuts are central to neoliberalism. A writer at Overland accused the Liberals of a “campaign to undermine welfare through continual cuts to unemployment spending” intended “to perpetuate the policies of neoliberalism.”

Australia had become a “post-welfare state”, argues one of the key academic texts on welfare in Australia. Other academics blamed both sides of politics for being the “gravediggers” of the welfare state. An ANU academic claimed “it is well documented that Australia’s Aboriginal and Torres Strait Islander peoples have experienced some of the harshest effects of neoliberal intensification and its continuous pursuit of state welfare retraction and stigmatisation.”

Another group of academics claimed in 2016 “‘neoliberalism’ … is used here to refer to an ideological reaction to the welfare state inspired by Frederick Hayek [sic], popularised by Milton Friedman and manifested in public choice theory. The reaction against the welfare state and increased reliance on market mechanisms has tended to have disproportionate impact on women.”

Indeed, “Frederick” Hayek — AKA Friedrich — had some thoughts about welfare. In Road to Serfdom he wrote “there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody … Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision.” And Milton Friedman proposed a “negative income tax” akin to the Universal Basic Income idea touted by many on the left now. Still, those are mere details. 

It is true that “neoliberalism”, at least in the sense of promoting contestability and use of markets rather than public intervention, has reshaped welfare in Australia in areas like job services. But has neoliberalism forced cuts to welfare expenditure? And has the Liberal Party delivered them?

Two studies contradict this. A 2012 paper by Curtin University academics examining welfare spending in the two decades to 2004 found “far from succumbing to neoliberalism, the Australian welfare state became if anything even larger over this period. Neither bipartisan economic liberalisation, nor competing party welfare policies, made much difference to the welfare state when viewed through a fiscal incidence lens.”

The study found that welfare spending as a proportion of GDP did not shrink; redistribution of income did not reduce; all income quintiles received more benefit payments over the period but the poorest quintiles received more, and all quintiles paid more tax, but the wealthy paid a lot more. A 2018 paper that updated the research to 2008 confirmed those results, while acknowledging an increase in inequality in Australia.

Those papers are based on analysis of historical data. They also reflect how complex any definition of welfare can be, since it combines not just direct income support but indirect forms, via the health and education systems, and the interaction of households with the taxation system.

Moreover, even direct income support is composed of different elements — the number of people who qualify for the aged pension is, some definitional tweaking aside, primarily a reflection of demography adjusted for the income and wealth levels of recipients. The overall level of unemployment benefits, however, primarily reflects the state of the economy. For all the controversy over the level of Newstart payments — which everyone bar the major parties believes is too low — the Rudd-Gillard and Turnbull-Morrison governments have had historically low levels of unemployment.

But if the Howard government didn’t preside over cuts to welfare, surely the Abbott, Turnbull and Morrison governments — especially given the notorious 2014 budget — have? 

Next week, we’ll look at that data on welfare over the last decade.