Introduction
Good evening everyone, it is a great privilege to be here tonight to deliver the inaugural Rev. Dr. Gordon Moyes Lecture.
Thank you very much to Wesley Mission and Dr Keith Garner for the invitation as well as to Beverly and the Moyes family.
This is a forum which honours the memory and contribution of a great man of faith, of compassion and of community by gathering together to speak to his abiding interests in public life.
Gordon's life was dedicated to service – he was a good and faithful servant.
He served God and his community and in doing so provided what all leaders must, an example to follow.
As a Christian Minister, a social worker and reformer and a politician he ventured into all of life's difficult topics.
He was also someone who knew, in the spirit of Wilberforce, that the voice of faith, in particular the Christian faith, should not be driven and intimidated from the public sphere. He knew that the separation of church and state was first and foremost to protect the church and the integrity of faith from the direction and influence of the State.
He was also a man who had great heart for our city.
The practical demonstration of his faith through charity commenced from an early age, amongst the homeless and downtrodden of Melbourne.
It continued the rest of his life, most famously through his 27 years as the Superintendent of Wesley Mission, bringing hope to those whom had not previously known it – and what a gift hope is.
Of course Gordon's passionate advocacy continued through his nine years' service as a member of the NSW Legislative Council.
He was a man of deep, heartfelt convictions.
Our former prime minister, John Howard, described Gordon as the "epitome of Christian leadership"[1].
Gordon was also a man who prized results; he understood business and always came to the table with a healthy serve of common sense.
He could be as hard-headed as he was kind-hearted. Wesley Mission benefitted greatly - along with many thousands of vulnerable Australians across our country, and especially here in Sydney.
In coming here tonight I also acknowledge the continued wonderful work of the Wesley Mission and your long history – 200 years in fact – of caring for the most vulnerable.
Reforming welfare
Gordon understood the challenges our welfare system faces.
Our social safety net is, understandably, a source of pride for Australians. It reflects the strength of our society: our belief in the fair go and our determination to help those in genuine need.
But few would deny that it could be better targeted and that it needs to be more economically sustainable. Only this way can it be a safety net that Australians can truly rely upon. You need no more recent example than Greece to illustrate this point – a safety net that was killed with kindness and good intentions.
A strong and balanced Budget supported by a strong and growing economy is crucial to this task.
Since the Coalition was elected we have successfully set about the task of getting the Budget under control to ensure that the resources that we have to support the most vulnerable are as well targeted as they can be. In undertaking this task we have sought to place need above entitlement.
But the challenge is vast.
Right now, the Government spends one-third of its budget on social services - or $154 billion.
It takes around eight out of ten income taxpayers to go to work every day to pay this bill.
This will increase by $73 billion in the next decade, largely as a result of growing demands from the aged care, disability, carer and childcare systems.
Meanwhile, since 2004–05 we've seen expenditures double for job seeker allowances and age and disability pensions.
And this is while we seek to implement Australia's next great social reform, the NDIS.
While the Government is fully committed to this, the reality is that from
2019–20, the 0.5 per cent increase in the Medicare levy will cover less than half of the Commonwealth's contribution.
By 2023–24, about $32 billion will need to come from consolidated revenue.
The NDIS should be the first dollar we spend out of our social services budget. It is a programme that invests in people's ability. It is about assisting people to be as independent as they can be – to help every Australian, regardless of their level of ability – to realise their potential.
Of course we will meet our commitment to the NDIS, but it will mean that we must ensure that our welfare system more broadly is targeted and fit for purpose.
20 payments and 54 supplements make our welfare safety net a complex and unwieldy system.
Most disappointingly the complexity and coverage of the welfare system can serve as a disincentive to being in work.
The best form of welfare is a job.
In 2012, in 19 per cent of Australian families no one had a job – that means that more than 530,000 Australian children were growing up in a family where no-one had a job. The intergenerational implications of this statistic are chilling.
Almost 40 per cent of children who grow up in a jobless family will be welfare dependent by the age of 22. We must do better than this.
That said there are fewer working age Australians receiving income support payments this year than in 2008, immediately prior to the GFC at 16.3 per cent. You have to go back to 1990 for a lower proportion.
At the same time our workforce participation ratio is increasing – while our employment to population ratios for Australians of working age has risen to 72 per cent, reversing the decline of recent years and the peak of 73.2 per cent, also in 2008.
Youth unemployment is now at 12.2 per cent, down from the peak of 14.5 per cent in November 2014 and down from the 12.6 per cent at the last election for the first time.
More than 360,000 jobs have been created since the last election, with around 315,000 in the past year alone – once again the strongest employment growth in seven and half years and more than ten times the monthly jobs growth than was occurring in 2013.
A job provides dignity, purpose and self-worth. It delivers economic opportunities and helps to break the cycle of poverty. It provides choice and the ability for Australians to exercise some control over their lives.
Everyone who can work, should work. Because welfare cannot do what a job can do.
Ronald Reagan used to say that the Government can do a lot of things to destroy families but can't do anything to replace them. The same is true about a job. Welfare cannot replace a job – it can only mitigate the loss.
The welfare system can catch you when you fall, but it must do more to help people bounce back.
We can do this by working with the sector - many of you here now - and by thinking innovatively, welcoming choice, and building in sustainability.
This is what I would like to talk about tonight: reforming our welfare system, as well as the role superannuation can play in this pursuit.
It is an area of continuing interest for me as Treasurer, and as the former Social Services Minister, because welfare reform and strong economic growth go hand in hand.
A better welfare system frees up people to enter and participate in the economy; more people working means stronger economic growth.
You've all no doubt heard the word fairness being used particularly regularly over the past few years in the context of political debate on the Budget and welfare spending.
Many, particularly our opponents, are quick to invoke the word to justify their views that the Australian people should have more of their income taxed and spent by government on welfare.
But fairness I believe in Australia is not so much about income redistribution – as it is about a fair go. It's not about an equal outcome but an equal opportunity.
Our welfare system is an economic stabilizer – not an economic equaliser.
It provides a targeted safety net for those who need it when they need it and for as long as they need it.
But our safety net must act to restore – not enslave. It must signpost as effectively on the way out as it currently does on the way in.
That means we need to tax in a way that minimises negative distortions in our economy – such as penalising self-sufficiency. In other words, to back people to follow their natural instincts, to get involved and participate in our economy.
We need to tax in a way that engages everyone to make a contribution, to share in our great national task – but also to let people keep as much of what they earn as possible.
Making payments, handing out government cheques can condition our population to welfare and state dependence. Better to take home what you earn than what you are given.
When Labor was last in government they increased the income tax free threshold from $6,000 to $18,200. This meant up to one million people would no longer need to fill in a tax return, they left the tax system.
Meanwhile, as at June 2015, around 5.1 million Australians received an income support payment. This is an increase of 10 per cent from 2000, when 4.69 million people received income support payments – more than 400,000 additional Australians receiving payments.
We need more people who understand that the answer to their economic circumstances is a job – not welfare. Our tax and welfare systems must support that understanding.
While the Government has already acted to reduce the number of supplements and has outlined plans for more, the complexity built into our current system mean they are laid on top of a framework of rates, eligibility, activity testing and compliance.
Under these circumstances, people in similar circumstances can have dramatically different experiences of income support.
This isn't how it should be. It needs to be easier for people to understand and access support.
There needs to be a clearer pathway.
Of course, the Government understands that some intricacy is necessary given our welfare structure is highly targeted.
But this has to be balanced against the benefits of simplicity - which will also make the benefits of work clearer.
A more streamlined system - one that has addressed anomalies and the payments architecture - would go some way towards removing administrative inefficiency and high operating costs.
Take the example of two students.
One is on Austudy and working to complete a full-time graduate diploma; the other is a Youth Allowance jobseeker completing a full-time short course.
Both are looking to improve their skills and secure employment.
Both, however, are treated differently by the income support system.
The student on Austudy - who is regarded as having fully met their mutual obligation requirements with full-time study - can access the Student Income Bank.
This allows them to accrue more than 10,000 work credits a year, meaning that if they choose to work, they can keep more of what they earn.
The student on Youth Allowance, on the other hand, has to look for and accept any paid work that doesn't conflict with their study. And if they do secure work, they can only accrue up to 1,000 work credits before their support payments are docked.
This is the type of situation we need to avoid. The system shouldn't cause students, or any other Australian receiving income support, to hesitate before accepting work.
Another example of complexity obscuring the benefits of work is High Effective Marginal Tax Rates, or EMTRs.
They can become a problem where income support recipients are subject to a number of different income tests at the same time.
The complex interaction between income tests can mean a person actually loses money by increasing their hours of work - thereby choking their opportunity for advancement.
Here's another example: a two-child family receiving Family Tax Benefits. When one of the kids leaves secondary school and, say, applies for Youth Allowance, the family becomes subject to two income tests.
This means their EMTRs increases, and the overall assistance for the family drops.
As much as possible, withdrawal rates across payments should be coherent so people transitioning between payment types are not subject to a sudden drop in income.
Through simplification, we can make it easier for families to understand the clear benefits of getting back into work, or working more.
We need to have the settings for work incentives and work expectations right.
That is the fair thing to do; the simple thing to do. And with steps such as this, we can encourage more people into work or to work more.
Investment approach
I'd now like to turn attention to some areas of reform I'm particularly optimistic about - ones that highlight what innovative thinking and greater choice can achieve for the welfare system.
Firstly, the Investment Approach. This looks at the safety net from a different angle, stressing the need for it not only to protect, but also to restore.
The approach, which has been used in New Zealand to reduce long-term welfare dependency, directs funding to where it will do the most good through innovative means.
For instance, under such an approach we would start by using actuarial analysis to assess the risk factors for long-term welfare dependency. This would allow us to pinpoint which cohorts are likely to benefit from early intervention.
Then, with this analysis in tow, the Government could invest in evidence-based programmes tailored to make the most difference to those in need.
And each year, the policies would be reviewed by actuaries, providing an opportunity to refine policies so they can do the most good.
It's a promising area - and an innovative idea. This is why in the most recent Budget the Government allocated more than $20 million to fund an Investment Approach.
We believe that if we can get this right, as they have in New Zealand, we can not only help people to become more independent, but also lessen the liabilities of the public purse.
Community and business partnerships
The second area of reform I wanted to highlight is the enormous potential of public–private partnerships, which the Government is currently exploring with its review of competition.
The reason for this is that we live in a world in which governments, from federal to local, face growing demands for more and better quality services - ones that meet individual needs.
If we can find innovative ways to deliver such services, we'll be able to better meet these challenges. And if we can introduce more choice, we can improve the quality of the services received, particularly in the welfare system.
Let me give you an example of the success such partnerships are having right here in New South Wales.
The social benefit bond initiative uses an innovative financing method whereby returns are based on achieving agreed social outcomes.
Private investors provide capital to fund social programmes and, if the social outcomes are achieved and there are savings to the Government, the Government can use these savings to pay ‘interest' on the private investment.
Not only does this improve efficiency and save money - it also has the potential to increase the reach of social programmes and provide better quality services to those who need them.
One of the two initiatives currently underway is the Newpin bond, with UnitingCare Burnside partnering with Social Ventures Australia to deliver a child protection and parent education programme.
Already it has seen better continuity of care for families, as well as greater transparency and data reporting so that more improvements can be made.
And this success in New South Wales, under Premier Mike Baird's leadership, follows similar good news stories across the globe. In Canada, social benefit bonds are being used to help single parents; in Belgium, it's giving unemployed migrants a leg-up; in Ireland, it's changing the lives of homeless people.
These are the type of new, innovative ideas that place choice and sustainability at the very heart of welfare - and this is what we must do if we are to change Australia's social landscape for the better.
Superannuation
Superannuation also plays a significant role in welfare reform.
Our retirement income system is underpinned, in large part, by the Age Pension and superannuation.
The Age Pension is the ultimate welfare safety net: it provides security for those Australians who, for various reasons, have not had the opportunity to save for their retirement.
Superannuation, on the other hand creates independence in retirement; it also means greater security and over time it will reduce the reliance on the Age Pension.
But superannuation is a pretty rigid system that could do with refining - particularly if we are serious about reforming welfare.
One of those areas is the reduced superannuation potential of people who take time out of the workforce, such as women and carers.
We know that these groups accumulate lower superannuation balances than men and non-carers and, as a result, are more likely to rely on the Age Pension.
The most recent ABS figures, for instance, reveal that the average superannuation balance for men is about $135,000 while for women it is $83,000.
The figure is hardly surprising when you consider that last financial year the labour participation rate for women was about 65 per cent – which is 13 per cent lower than for men.
And when it comes to primary carers, the latest data shows that the participation rate is 42 per cent compared with 69 per cent for non-carers.
These are remarkable figures, and the Government is examining how we can tackle such deficiencies - how we can, in effect, have a superannuation system that reflects changes in people's lives.
Several innovative ideas have already been proposed.
One is that we could potentially lift the cap on superannuation contributions for those who experience lengthy disruptions in their working life. This would give them more opportunity to top up their super, and introduce more flexibility to the system.
Of course, all ideas will be carefully reviewed and considered. But it's clear that tax incentives for superannuation must put those Australians at risk of not being independent in retirement into a stronger position.
Another important aspect of superannuation is the Government's plan to boost choice to enable greater retirement outcomes for Australians.
Through our recent response to the Financial System Inquiry, the Government is taking action to make it easier for retirees to access retirement income products that better meet their needs.
To that end, the Government will facilitate trustees of superannuation funds preselecting comprehensive income products for retirement (CIPRs) for their members.
The pre-selection of these products will help guide members as they approach retirement, and also help retirees achieve higher incomes throughout their retirement.
Meanwhile, when it comes to choice we agreed to extend choice of fund arrangements to more employees by removing the ‘deemed' choice for certain enterprise agreements and workplace determinations.
This could eventually extend choice to up to 40 per cent of the 2 million employees who are currently denied a choice of fund.
People should be able to make retirement savings decisions with their own personal circumstances in mind.
We know that not having a choice of fund can result in employees having to pay multiple fees and insurance premiums, reducing their capacity to accumulate savings. And not being able to choose a fund can lead to disengagement.
Closing remarks
A couple of years before he passed away, Gordon gave a sermon in which he quoted 1st Corinthians:
"The body is not made up of one part but of many … If one part suffers, every part suffers with it; if one part is honoured, every part rejoices with it." [2]
In that passage, Paul is talking about the church, but it could be applied to our democracy and society as well. We are connected. Whether we are acutely aware of it or not, we partake in each other's sufferings and joys.
That's why it's so important that we care for people in need, and why our welfare system must do what we need it to do, as efficiently and effectively as it can.
It must be sustainable. It must offer choice and flexibility. It must meet the needs of the people it's there to serve. Otherwise it's just a very expensive sop to our collective conscience.
That is not what the Government wants to see.
We want to change how we look at welfare so it is more innovative, embraces choice and is sustainable into the future.
Australians deserve a system that not only treats people fairly, but also builds their capability and encourages them to work.
And when the time comes for them to retire, they can enjoy independence.
That is, without doubt, what a welfare system should be in 21st century Australia.
So, let me end by thanking Wesley Mission again for inviting me here tonight, and each of you for being here.
Gordon was a man of action; unafraid of change and always seeking outcomes. We would all do well to follow his example.
Thank you.
[1] http://www.biblesociety.org.au/news/gordon-moyes-preacher-and-politician-passes-away
[2] 1 Corinthians 12:20,26