Since the announcement of the Federal Budget much has been made of the proposed changes to welfare. What may come as a surprise is that half of Australian households contribute nothing in taxes once their welfare benefits are deducted from the tax they pay. Clearly, relying on only half our domestic workforce is limiting Australia’s economic potential; but what is to be done?

Even after years of theselve cutting benefits the Opposition is decrying the budget attack on welfare. But statistics show Australia’s welfare system is already one of the most efficient in the world. A study by Australian National University found that fully 20% of the nation’s poorest receive 40% of all available welfare. The wealthiest households receive a mere 3% of the pot. This works out to a ratio of 12 – 1. In America the ratio is 1.5 – 1.

The biggest challenge to welfare comes from our aging population. While the unemployed drain the economy of $7 billion a year, disability pensions siphon off double more than double that at $15 billion a year. But the aged pensions dwarfs them all, costing the economy a whopping $36 billion a year – and it’s growing.

Welfare shake-ups need to b handled carefully. Photo: www.theaustralian.com.au

Welfare shake-ups need to be handled carefully. Photo: www.theaustralian.com.au

Furthermore pension figures differ wildly: $800/fortnight for aged pensions, versus $500/fortnight jobless allowance.

And this is why the government has sought to link the aged pension with cost of living rather than the measure of wages. For the former will progress at a much slower rate than the latter.

But what worries welfare experts the most is mental health. This is the fastest growing group of welfare recipients in the Australian economy today. And it’s an area of welfare that doesn’t receive particularly well targeted funding.

Striking a balance between protecting the truly vulnerable while taxing the able fairly will always be difficult. It’s something Australia is doing remarkably well, but something we need to watch very carefully.

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