Level of social assistance

IBISWorld forecasts the level of social assistance to increase by 0.31 percentage points in 2024-25, to reach 6.11% of GDP. A forecast hike in the unemployment rate will increase the number of people receiving the JobSeeker Payment. In addition, the higher JobSeeker rate of payment is set to extend to single recipients with the partial capacity to work up to 14 hours a week. A range of other social assistance payments are set to climb. This includes a 10.0% increase in Commonwealth Rent Assistance, as well as a rise in carer and other family assistance payments. At the same time, an expansion of the population aged 70 and older will lead to a hike in government payments as older age brackets tend to rely more on social assistance.

There are two main drivers affecting the level of social assistance. The first is economic conditions. Ongoing weakness in the wider economy generally contributes to rising unemployment and falling household incomes, pushing more people to seek financial support from the government. This directly increases social assistance through greater JobSeeker benefit payments. Additionally, other benefits that are means tested, such as the Carer payment and the Parenting payment, are typically taken up by more people, increasing total payments for those benefits. The increases in social assistance payments during economic downturns are usually accompanied by a fall in government revenue as declining incomes, consumption and profits affect tax revenues. Although the government is forced into a budget deficit, this is considered to be an automatic economic stabiliser as welfare provides income to consumers which in turn boosts consumption and improves economic growth. In most circumstances, governments make no attempt to limit social assistance during these times to contain budget deficits and often increase payments to stimulate demand further.

The second driver is changes to government policy. Political parties often compete for votes by offering increased levels of social assistance, or by removing social assistance in the view that assistance levels are too high. This driver may have some correlation with the economic cycle, but is more heavily affected by political cycles.

The level of social assistance increased strongly at the start of the period. Government expenditure on social assistance rose significantly over the two years through 2020-21, due to the Australian bushfires and the COVID-19 pandemic. The Federal Government allocated $2 billion in funding to businesses and households affected by the bushfires, some of which was in the form of social assistance. Furthermore, an additional $100 million in income support for bushfire victims has been provided by the Federal Government. The COVID-19 pandemic has also affected the level of social support over the period. Real GDP growth slowed over the two years through 2020-21, due to the pandemic. Many businesses were forced to reduce employee numbers while lockdown restrictions were in place and demand dwindled. In response, the Federal Government introduced several fiscal stimulus packages, which increased financial assistance payments. These include the JobKeeper Payment scheme and the JobSeeker Payment scheme. The JobKeeper Payment offered support to businesses to help retain employees, while the JobSeeker Payment provided relief for people who were unemployed. This income support significantly increased government expenditure on social assistance benefits over the two years through 2020-21. However, the removal of the JobKeeper Payment during 2020-21 and falling JobSeeker payments due to record-low unemployment rates have contributed to a plunge in the level of social assistance over two years through 2022-23. The level of social assistance has begun to climb again in recent years in response to a rise in the unemployment rate and hikes in the JobSeeker Payment amount during 2023-24. Overall, IBISWorld forecasts the level of social assistance to decrease at an average annual rate of 0.25 percentage points over the five years through 2024-25.