How we tried to assist families in Australia, and why the attempt failed

What is the wider picture here? Many people, including many social commentators, think that in recent decades—a period of economic reform and liberalisation—the Australian welfare state has suffered major retrenchment, perhaps as collateral damage from the reform process. But in fact the Australian welfare state has not declined; in fact it has grown, up by 52 per cent since 1984.

Where has this growth taken place, if it did not go to couple families? The short answer is that it has gone mostly to the elderly. Figure Five shows that trend. At the household level, net benefits to the elderly have risen by 76 per cent. This is not a function of increased longevity. Total expenditure on net benefits for the elderly has tripled, for sole parent families it has more than quadrupled. These trends make up a large part of the growth in the welfare state.

More controversially, it seems clear now that growing support for the elderly has little to do with economic need. Today the elderly are on average almost as well off in income terms as average couples with children, and they are clearly better off in terms of their net worth. Table One shows the ABS net worth figures for 2009-10. It shows that when net worth is adjusted for household size, elderly households are markedly better off than couple families and very much better off than sole parent families.

I finish with a few more general thoughts about politics, ideology and values. I think of myself as a pro-family libertarian. My view is that government should be kept as small as possible, but equity and the common good require assistance to families with children. At first sight this ideological category seems to be not very well occupied. Is it just me? I don’t think so. It seems to me that I am describing the dominant viewpoint amongst Australian voters and politicians.

Australians have always favoured relatively small government, and by OECD standards we have a relatively small government system, allocating about 30-35 per cent of GDP to the government sector, a fraction much smaller than the OECD average of 40-45 per cent. We have always favoured a minimalist welfare state. We call it ‘targeting’, and it corresponds to our sense that in a democracy some redistribution from the well off to the less well-off is justified. We do not favour the European models, whether social democratic or Christian democratic, which involve high levels of taxation and expenditure, with relatively low levels of effective redistribution.

But to some at least, this minimalism seems inconsistent with support for families and children, except when it is targeted at the lowest income households. I don’t see it that way. There is in principle no contradiction between the two. However, in the present state of things making a case for family support does present a problem. As I have described it, we have a welfare system with no net support for couple families; 25 years of pro-family rhetoric and policy-making has merely resulted in a system of transfers from top to bottom quintile families, plus steady increases in support for sole parent families. We also have a steady trend towards welfare state expansion and increased government expenditure. In those circumstances, it would be best to decrease government, if that can be done, but if not we at least need to balance budgets and aim to get government back into surplus.

In that situation, how are couple families to be given the kind of support that Australia’s pro-family politicians and the people who voted for them thought they were aiming for, though (as I see it) they never succeeded in achieving? The only way forward, consistent with a small government philosophy, is to reduce expenditure. And the place to reduce expenditure is at the end of life. As we have seen, expenditure on the elderly has grown and continues to grow dramatically. At the very time when politicians thought they were enacting pro-family policies they were in fact enacting pro-elderly policies. As a result we now have not a pro-family welfare state but a pro-elderly welfare state. This is not a surprise. The same has happened in all welfare states, and in fact age-favouritism is less rampant in Australia than it is in perhaps any other welfare state. True though that may be, it remains the case that age-favouritism is what happened when we thought we were assisting families. Reversing that trend may be impossible, but we can and should try to arrest it. And perhaps that is the only pro-family policy that, realistically, we can now hope to accomplish.