Stung by the near-universal verdict that his budget fails the fundamental tests of fairness and decency, Joe Hockey took to the lectern at the Sydney Institute earlier this month to wax lyrical about the need to end the so-called age of entitlement.

In his speech, Hockey complained that attacks on his budget amounted to 1970s class warfare. Apparently anyone who points out the obvious inequity of the government’s changes to pensions, family payments and Newstart is a class warrior. In that case, groups and individuals as diverse as Labor, the Business Council of Australia, Acoss and former Liberal leader John Hewson have donned their khakis to battle on behalf of the working class.

To justify his claim that his budget is fair, the treasurer has made some bare assertions, including that the "welfare system is unsustainable in its current form and it is not well targeted to those who really need our assistance”. This is the basis for the Coalition's cuts and attrition.

He goes on to argue that “payments are too broadly available to too many people. As a result, less is available for those most in need”.



Hockey doesn’t appear to appreciate the irony of declaring an end to the age of entitlement for low- and middle-income earners while introducing the biggest entitlement scheme for high-income earners in our history – a non-means tested scheme which sees cheques of up to $50,000 written to women, regardless of income or assets, to have a baby.

Whatever the treasurer's assertions, our welfare system is well targeted. Australia has the most means tested social welfare system in the world. This is a good thing. It means that we can achieve good, targeted poverty reduction at a lower cost than most other countries, while keeping a low tax environment and a high level of economic freedom. In fact, we spend less on welfare than all countries in the OECD with the exception of Iceland.

Hockey seemed surprised that we spend more on welfare than on education, health or defence. I’m not sure why; it has long been the case in Australia. As Greg Jericho points out, even the United States, with its parsimonious welfare system and huge defence infrastructure, spends more on social welfare than it does on defence capabilities. The logical conclusion seems to be that our social welfare system should be reduced to a level that would facilitate greater inequity in our society than is currently the case in the US.



Australia’s welfare system can be regarded as among the most efficient in the world. This is largely due to efforts by successive Labor governments to make sure that taxpayers’ money is spent in the most effective way possible to alleviate poverty. Labor means tested the age-pension under Bob Hawke, against howls of opposition from Andrew Peacock’s Liberal party, who defended the right of millionaires to draw on the taxpayer in their retirement.

The Howard government made Australia’s finances dangerously unsustainable by winding back means testing and failing to introduce it in new programs like the private health insurance rebate, the baby bonus and first homeowner grants. The Rudd and Gillard governments needed to move to make the budget more sustainable by reigning in these payments. The Liberal party, which protested against means testing then, complains about an unsustainable budget now.

Making matters worse, the treasury’s last inter-generational report tells a very different story to Hockey's spin. In 2010, all social welfare payments to individuals were the equivalent of 6.9% of our economy. The cost of our welfare system is expected to remain stable at that level out to 2050.

Why does welfare spending remain stable over time, despite the population getting older? The answer is simple: because Labor governments introduced myriad reforms, including means testing the age pension and universal superannuation. Superannuation could play even more of a role in reducing the cost of the age pension, but the Abbott-Hockey Coalition government stands stubbornly committed to reversing reforms which make it easier for low income earners to save for their retirement.

There is nothing wrong with a debate over Australia’s welfare system. We have a strong and sustainable safety net, but Labor believes it is time to take stock and ensure that our system, which has served Australians for a generation, can serve Australians for another one. This is why Jenny Macklin is conducting a thorough and comprehensive series of consultations about how we renew our social policies to meet the needs of people in our modern economy.

But this debate, like any other, should be built on facts. The treasurer must do more than reply with dodgy assertions and the lazy demonisation of recipients of government payments as “leaners”. He can rely on his stale philosophy about an “age of entitlement” if he chooses, but if wants to be taken seriously he will need to provide a better analysis of the challenges to our support for the vulnerable than he has up to now.