Ahh yes, a timeless debate. To stimulate the COVID-impacted economy, ScoMo flexes the big bucks in the form of multiple stimulus packages. Inspired by the state of our current economy, to what extent will these transfer payments strengthen Australia’s social security? What’s stopping us from getting more?
FOR:
1.4% economic growth ain’t it chief. Keynes witnessed the impact of The Great Depression and believed its “impact could have been cushioned if the government provided stimulus packages rather than depending on the business cycle.” To fix the current state of the economy, the man himself recommends injecting funds into the economy. Increasing the proportion of government expenditure, in turn will see a much needed rise in aggregate demand. Going hand-in-hand with increased consumption, growth in the short term will be back on track at the 3-4% target band. Through the multiplier effect each proportion of every new dollar is spent and re-spent within the economy. The circulation of funds will pop off an individual to a firm, which is then passed on to another individual and so on and so forth. Especially in the current covid-state of the economy, surely you’d appreciate another $750 payment from centrelink to shout the boys some kfc wicked wings.
The government aims to achieve an equitable distribution of income through their progressive tax system, whereby income tax revenue is redistributed amongst the unemployed, pensioners and those with disabilities. By increasing welfare payments, the government is able to reduce the disparity between high and low income earners. The benefits of achieving an equitable distribution of income includes:
- Less incidences of poverty.
- A reduction in levels of disease/sickness would be seen, as individuals have access to healthcare and medical treatments. Hence resulting in an overall higher life expectancy of Australians.
- A reduction in crime rates, due to individuals not seeking desperate measures such as; robbery and illegal trading.
- Less social class divisions would be achieved, as the income division lessens. This results in reduced rates of family breakdown and rates of stress/suicide. Overall improving the standard of living.
Following on from the point above, a more equitable distribution of income results in Australians being able to improve their standard of living, whilst gaining maximum utility through their purchases. Specifically, low income earners are able to boost their lifestyle though satisfying their autonomous needs, such as food, shelter clothing etc. This extends onwards, for example, increasing funding towards National Disability Insurance Scheme (NDIS) can see an improvement in their lifestyles through providing better quality doctors, equipment and treatments. Hence integrating them more seamlessly into society and removing societal pressures.
AGAINST:
Increasing welfare payments may leave Australians uncomfortably comfortable with relying on governmental support, diminishing productivity levels and earning potential. We must stay acutely sensitive to the state of “welfare inertia”, where raising welfare payments may necessarily create a disincentive to both work and invest. With the OECD reporting that Australia’s productivity levels are one of the lowest relative to total hours worked, providing the incentive to remain apathetic will only bolster this. Instead, we should focus on enhancing earning potential by introducing more in-work benefits and encourage self-sufficiency.
Instead of doling out hasty welfare expansions, Australia should focus on strengthening the enduring sustainability of a volatile federal budget. Amidst our current pandemic, the last Treasury figures revealed a writhing $69.9 billion budget deficit, which is predicted to rise to $200 billion next year. With social security and welfare representing 36% of our nation’s fiscal expenditure, further increases in welfare payments may paradoxically dilute our economic growth and investment incentives by hiking up taxes and stripping government resources. Instead we should turn our gaze to bolstering our balance sheet, especially during our post-pandemic recovery in the next 5 years.
Ultimately, Australia should instead look to nourish a long-term plan for welfare improvement by committing to social investment from the ground roots up. If you think of increasing welfare payments as constantly refilling emptied jugs, strengthening our level of social investment will be providing a permanent water source for perennial use. Australia must look to direct financial injections into areas such as education, health and upskilling in order to create a more encompassing form of welfare. Social policy scholar Paul Smyth suggests that a stronger investment in children and earlier formal learning can repair the conflict between economic diversity and efficiency that increasing welfare payments is unable to achieve.
References/ further readings
- https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0809/09rp31#_Toc229967801
- https://www.theage.com.au/national/the-end-of-the-age-of-entitlement-20120419-1x8vj.html
- https://theconversation.com/who-really-benefits-from-australias-tax-and-social-security-system-48808
- https://www.oecd.org/els/emp/36780865.pdf
- https://www.smh.com.au/politics/federal/budget-surplus-replaced-by-largest-budget-deficit-on-record-20200626-p556fe.html