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Australia's Welfare Wars

The Players, the Politics and the Ideologies

University of New South Wales Press Ltd

THE DEVELOPMENT OF THE WELFARE STATE

History, politics and ideology

Australia possesses one of the most selective income support systems in the Western industrialised world. Financial assistance is provided on a flat-rate basis, funded from general taxation revenue rather than contributions from workers. In contrast to many European states, Australia has not introduced social insurance schemes whereby those who experience unemployment or sickness are protected by income replacement packages; rather, its welfare programs are mostly means tested, targeted to people who are poor, and low in monetary value (Whiteford 2010a). This chapter explains how this unique system developed and identifies both its strengths and its limitations. The first section examines the beginnings of the Australian welfare state, from the early state-based schemes in the pre-Federation period to the emergence of what Frank Castles calls the 'wage earners' welfare state'. The next explores the introduction of the basic features of the welfare state from 1941 to 1949 before moving on to the relative inaction of the Liberal Party from 1949 to 1972; the social democratic initiatives of the Whitlam government, from 1972 to 1975; the Fraser government's contribution, from 1975 to 1983; the Hawke–Keating years, from 1983 to 1996; the major initiatives of the Howard Coalition government, from 1996 to 2007; the ALP government from 2007 to 2013; and the Coalition government from 2013 to 2016. The chapter then describes how the last three decades have been strongly influenced by the joint ideological constructs of neoliberalism and globalisation and, finally, examines some of the major current developments in Australian welfare spending and the effectiveness of the Australian system in reducing poverty.

BEGINNINGS

Early historians regularly depicted Australia as a 'workingman's paradise' in which disparities of wealth were far less prevalent than in the old world (Whiteford 1998). Yet, pre-Federation Australia was hardly immune to the effects of severe poverty. Research by Jill Roe suggests that 10 per cent of the Australian population lived in permanent poverty during the 19th and early 20th centuries, while a similar proportion resided in temporary poverty. Particularly vulnerable groups included struggling farmers, unemployed labourers, older people and deserted and widowed mothers. There is evidence of frequent disease epidemics and high mortality rates in the innercity slums (Garton 1990). The Australian states responded to these social needs with a combination of private charity and government poor relief. Private benevolence was minimal, in order to discourage idleness, and directed only to those judged to be deserving. However, the 1890s recession and associated social and political tensions placed growing pressure on governments to intervene. There was increasing acceptance of the notion that poverty reflected social and economic conditions rather than individual behaviour (Garton 1990; O'Connor, Wilson & Setterlund 1999). Governments reacted in two principal ways. Firstly, they established measures to protect the rights and conditions of workers, including women and juveniles. Secondly, they introduced direct payments for groups of people who were not working and were poor, such as older and infirm people, in preference to charity. These developments earned Australia international renown as the alleged 'social laboratory' of the world (Butlin, Barnard & Pincus 1982; Garton 1990).

Following the establishment of the Commonwealth Federation, in 1901, the objective of decent wage levels for the working man was institutionalised via a creative class compromise between urban manufacturing interests, represented by Alfred Deakin's liberal protectionists, and the emergent labour movement. The three components of this alliance were compulsory arbitration, protection and White Australia. Arbitration was enshrined in Justice HB Higgins's 1907 Harvester Judgment, which defined 'a fair and reasonable wage' for adult males supporting a wife and children as 7 shillings a day. Protection enabled the manufacturer to pay 'fair and reasonable wages without impairing the maintenance and extension of his industry, or its capacity to supply the local market'. The White Australia policy was justified as a defence of white workers against cheap non-white labour.

Thus, in Australia, a unique welfare state model was developed which concerned itself primarily with the protection of wage levels (at least for white male breadwinners) rather than with the provision of supplementary welfare benefits. Castles (1985, 102–103) calls this model a 'wage earners' welfare state' and contrasts it with both the residual model of welfare (because Australia has a minimum living wage) and the institutional model of welfare (because full inclusion in the system depends on one's status as a wage earner rather than as a citizen). Some commentators have criticised Castles's analysis for allegedly diverting attention from the failure of the Australian system to actually provide support for those unable to engage in paid work (Bessant et al. 2006).

In addition to wages, the Commonwealth government introduced age pensions in 1908 and disability pensions in 1910. However, payments were provided only to applicants judged to be of 'good character'. Asians, Aboriginal Australians other than 'half-castes', alcoholics, past prisoners and recent immigrants were not eligible. The Commonwealth also established a maternity allowance in order to promote a higher birth rate but once again excluded Aboriginal Australians and most Asians and Pacific Islanders. Both the pensions and the maternity allowance were funded from general revenue rather than through contributory insurance schemes, as tended to be the case in Europe. This method of financing the system through progressive taxation was viewed as uniquely redistributive (Garton 1990; Bryson 2001; Murphy 2011, 2013).

Nevertheless, both the wages model and the benefits system had significant flaws. The living wage granted by the Harvester Judgment provided an income closer to a subsistence level than one of reasonable comfort. It also failed to address the needs of large families, as the system was based on an assumption of three children and made no formal provision for women workers. Nor was any recognition given to women's role in unpaid caring work. Overall, the model assumed that men would act as breadwinners and women as dependants (Garton 1990; Bryson 2000).

No further income security payments were introduced by the Commonwealth government until the 1940s. Able-bodied men were expected by the state to support themselves within the labour market. Working men themselves preferred work to welfare, which was regarded as demeaning (Macintyre 1986, 2015). Some states introduced limited new schemes. For example, the Queensland government provided relief to assist seasonal labourers during periods of temporary unemployment, and the New South Wales government introduced widow pensions and Child Endowment. However, in general, unemployed workers and their families were forced to rely on relief from charities.

Attempts to legislate for expanded benefits were consistently frustrated by dissension between conservatives, who favoured the introduction of contributory insurance schemes similar to those in the United Kingdom and Germany, and the labour movement, which demanded the retention of the existing non-contributory system of funding (Watts 1987; Roskam 2001). Stephen Garton (1990, 123) calls Australia's social policy record during the 1920s and 1930s 'dismal' compared to that of other Western countries.

GROWTH, 1941–49

The basic legislative and program components of the Australian welfare state were introduced between 1941 and 1945, which has been referred to as 'the heroic age in the history of the national welfare state' (Beilharz, Considine & Watts 1992, 82). A significant contributor to this development was the Joint Parliamentary Committee on Social Security, set up initially by Robert Menzies's United Australia Party government, in 1941. The committee's first interim report, tabled in September 1941, reported that 'a considerable proportion of Australia's citizens are poorly housed, ill-clothed or ill-nourished – living in conditions which reflect no credit on a country such as ours'. The report recommended that social services would contribute to the war effort 'by improving the morale and willingness to work of the employees, who will feel that a regime which is prepared, even at this time of emergency, to improve their conditions is worth working and fighting for' (quoted in Shaver 1987, 415). The aim of the social security reforms, therefore, was to rectify the inadequacies of the earlier 'wage earners' welfare state'. Among the measures introduced during this period were Child Endowment (in the last days of the Menzies government and extended to Aboriginal Australians on condition that they were able to show evidence of progress towards assimilation); funeral benefits for deceased pensioners; a new form of maternity allowance; widow pensions; unemployment, sickness and pharmaceutical benefits; and hospital and tuberculosis benefits. By the end of the Second World War, the Commonwealth had assumed responsibility for all major income security benefits and healthcare (Kewley 1969; J Murphy 2011).

ALP prime minister Ben Chifley argued that it was the 'duty and responsibility of the community, and particularly those more fortunately placed, to see that our less fortunate fellow citizens are protected from those shafts of fate which leave them helpless and without hope'. The labour movement would fight to ensure a future 'free from want, insecurity and misery' (quoted in Beilharz 1994, 63).

Most commentators regard the introduction of Labor's welfare state as an expression of compassion and benevolence that marked a sharp break from the earlier periods of conservative inaction (Dickey 1980; Garton 1990). However, some left-wing critics argue that the welfare legislation also reflected pressing political and fiscal considerations. According to this viewpoint, there was substantial continuity in policy thinking between the conservative governments of the 1930s and the Labor period. Much of this continuity reflected the influence of a powerful group of economists, political scientists and public servants – Herbert Cole Coombs, Lyndhurst Giblin, Douglas Copland, Richard Downing and so on – involved in the key policymaking processes. These policy advisors viewed welfare initiatives not solely as the requirements of compassionate idealism but also as pragmatic means of dealing with the demands of wartime economic, manpower and taxation policies. Thus, it is argued that Labor used its welfare measures to redefine financial obligations and to secure more revenue for the Commonwealth government by imposing heavy taxation on low- income earners. In short, despite its traditional opposition to contributory funding, Labor was asking workers to pay at least in part for their own welfare benefits (Watts 1987, 1999; Beilharz, Considine & Watts 1992). A further criticism relates to the precedence that the ALP gave to economic development and full employment over welfare measures: the party's primary objective was to achieve full employment, which was seen as the real key to economic and social security. In the 1945 white paper on full employment, for example, the essential mechanism of human welfare was defined as an efficient, fully functioning wage-labour market. Social welfare was to play a subordinate role, being seen principally as a safety net that would play a compensating part in times of economic downturn (Watts 1987).

However, a counterview holds that this critique reflects too narrow an identification of social policy with welfare payments per se and ignores the broader, Keynesian, interventionist policies and objectives of the Chifley government. Social concerns were to be addressed directly, via economic planning and full employment, rather than through a narrower focus on social welfare (Smyth 1995; Fenna 1998). According to Paul Smyth (1995, 53), 'The relatively minor importance attached to the establishment of welfare services is a sign, not that plans for post-war reconstruction were insignificant, but that other policy instruments were considered more powerful means of attaining social objectives'. It was only later that the focus of social policy debate became narrowed to the relatively marginal issue of social services.

CONSERVATIVE YEARS, 1949–72

Following the welfare state initiatives of John Curtin's and Ben Chifley's governments, the ensuing 23 years of conservative administration were marked by considerably less innovation. Few substantial advances were made in the area of social legislation. Liberal Party policy emphasised the subsidisation of existing private resources and providers rather than the creation of new resources or the extension of Commonwealth responsibility. Social policy was characterised by cautious regulatory administration of incremental change which generally favoured the middle classes. Overall, social expenditure declined as a percentage of gross domestic product (GDP) during this period (Castles 1985; G Gray 1995). The only major social policy initiatives during the Liberal–Country Coalition years were the extension of Child Endowment to the first child (in 1950), free pharmaceutical and medical benefits for pensioners on full pension and their dependants (1951) and a national health act based on the subsidising of private insurance expenses (1953). The Coalition also progressively liberalised the means test for pensioners and made grants to a number of voluntary bodies in the social welfare field, including ACOSS (Kewley 1969; Menzies 1970).

The dominant philosophy of Liberal Party social policy was a commitment to individualism, incentive and self-reliance. While the Liberals rejected a return to the unrestricted laissez-faire economics of the 1930s, they continued to prefer provision by the family and private charities over reliance on state bureaucracies. They also continued in principle to favour funding by insurance schemes rather than by general taxation, although they accepted that alternative financing methods could not be implemented within the existing political agenda (Roskam 2001).

The Liberals rejected the concept of an expanded welfare state, believing that it would undermine the combination of individual endeavour and thrift which they saw to be the basis of 'true' social security. At the same time, the Liberals endorsed the concept of a safety net to keep people in need from destitution. The net, however, was placed at a sufficiently low level to ensure that individuals maintained an incentive to care for themselves (Shamsullah 1990). The prime minister John Gorton, for example, suggested that pension rates should ensure 'at least a modest standard of living so that pensioners do not need blankets to be provided for them in winter, so that at least they have enough to eat and a roof over their head' (cited in Tulloch 1979, 43), while the Social Services minister William Wentworth (1969, 3) stated that people who were poor or sick and older people were entitled to be kept in 'frugal comfort'.

Spending on welfare programs remained extremely low by international standards. Welfare expenditure was 7 per cent of GDP, compared with the OECD average of 15 per cent (see table 1). In addition, pension rates, which had been 25 per cent of average weekly earnings in 1946, had fallen to 20 per cent by 1970 (Encel 1991). Critics of Coalition policy argue that for many Australians income security payments were 'not so much a defence against poverty, but their first real encounter with it' (Elliott & Graycar 1979, 91–92).

During the two postwar decades, Australia was known as the 'lucky country', a term popularised by writer Donald Horne (1964, 239) that described the remarkably egalitarian nature of Australian life. As in the United Kingdom, it was generally accepted that, due to the initiatives of the welfare state and the increasing affluence of society, the problem of poverty was well on the way to eradication. Even left- wing radicals and ALP activists appeared to believe that the welfare state had reduced the gross inequalities of income and wealth associated with capitalism, though, to be sure, they did express some concerns that the welfare state was incomplete and that further redistribution of income and wealth should be attained via more progressive taxation and improved social services (Davies & Serle 1954; Mendelsohn 1954).

Yet, the mid to late 1960s saw the 'rediscovery' of poverty and the acknowledgment that the prosperity engineered by the economic growth and full employment of the Liberal years had passed many Australians by. Two young academics associated with the radical journal Outlook, James Jupp and Helen Hughes, provoked some early discussion. Hughes (1960) noted that about one-third of the half a million age and disability pensioners and widows were estimated by social workers to be 'living below subsistence'. Jupp (1959) referred to 'a submerged tenth' of the population – pensioners, slum dwellers, unemployed migrants, deserted wives, shack dwellers, Aboriginal Australians and 'no hopers' – who were not enjoying the general national prosperity. Jupp suggested as solutions the provision of civil rights to Aboriginal Australians, slum clearance and low-cost accommodation for migrants, pensioners and Aboriginal Australians.

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Excerpted from Australia's Welfare Wars by Philip Mendes. Copyright © 2017 Philip Mendes. Excerpted by permission of University of New South Wales Press Ltd.
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