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The Forrest review and 'cashless welfare'

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The Forrest review and 'cashless welfare'

Posted 15/08/2014 by Luke Buckmaster


One of the more contentious elements in Andrew Forrest’s recent Indigenous Jobs and

Training Review was the proposal for a for ‘cashless welfare’ system, provided through what

he calls a ‘Healthy Welfare Card’. This FlagPost outlines key aspects of the proposal,

highlighting where it differs from both the current income management system and

Australia’s welfare arrangements in general.

What is proposed?

The Healthy Welfare Card would be based on the Basics Card which currently underpins the

various income management schemes across Australia. It would be:

• issued as a debit card through a financial institution

• able to be used at any Australian retailer or online facility that accepted debit cards,

except for alcohol and gambling outlets

• applied to all working age welfare recipients and

• programed to block the issue of cash and the purchase of alcohol, gambling and illicit

services, gift cards and ‘exclude activities discouraged by government, or illegal in some

places, such as pornography’.

According to the report, benefits of the card would include:

• ‘people [would] enjoy inclusion in the mainstream financial system’

• ‘individuals and families [would] get the full benefit from the welfare provided by


• ‘it would assist individual responsibility’ by eliminating spending on ‘unhealthy’ items


• ‘bank fraud control procedures … will assist to reduce fraud in Australia’s welfare


The report argues that ‘if a cashless welfare system is effectively and smoothly introduced,

it will render the cash system that preceded it an irresponsible social experiment’.

How would it be different from the Basics Card?

The main differences from the current Basics Card system are that it would:

• largely move operation of the scheme from the Government to commercial financial

service providers

• would be extended from applying to a proportion of a person’s income support (usually

50% but up to 70% in some cases) to the entirety of their payment and

• extend compulsory income management from selected groups across the country, to all

working age welfare recipients.

Mr Forrest has also since clarified that, unlike the Basics Card, it would be possible to

purchase tobacco using his proposed card.

Financial inclusion

The Healthy Welfare Card would not do much extra to ‘include’ welfare recipients in

mainstream financial services because it is already necessary to have a bank account in

order to receive a payment. However, it is possible that it could help address the problem of

embarrassment at using a dedicated welfare card reported by users of the Basics Card. It

would also expand the range of stores that could be accessed using income managed funds.

Conceivably, though, this and other suggested benefits associated with a mainstream debit

card could be achieved within the current system of income management.

Expansion to all welfare recipients

The move to include all welfare recipients (except pensioners) under the Healthy Welfare

Card is consistent with the Prime Minister’s view in his book, Battlelines, that income

management should be applied to all welfare recipients with children aged under 16.

This would mark a change in trajectory for income management policy, which has been

increasingly focused on targeting people demonstrably at risk of financial and related harm.

Previously, Cape York indigenous leader, Noel Pearson, a supporter of the idea of income

management, has stated that it should not be applied to people who are using their welfare

payments ‘responsibly’.

It is also worth noting that evidence for the success of income management has been

mixed. While some people report that it has improved their lives, there is little evidence that

it is leading to widespread changes in behaviour.

Cashless welfare

A cashless welfare system would make it much harder to purchase items other than those

deemed beneficial. It would also be a significant change from current arrangements in

Australia and most other comparable countries except the United States (where food stamps

and related programs have been prominent feature of welfare arrangements for many


The Forrest review presents South Africa as an example of a country in which a cashless

approach has been introduced with success. However, it should be noted that in the South

African context, the term cashless refers to the fact that recipients of social security benefits

are no longer paid in physical cash, a legacy from the Apartheid years when most black

South Africans did not have a bank account (see this report for further background).

Recently, South Africa has introduced payments using electronic cards but recipients may

access cash and no money is withheld by the Government as it is under income

management in Australia.

Moving to cashless income support would be a significant change, given cash payments

have been a cornerstone of the Australian system for much of the last 100 years. This, in

part, has been a reaction to resentment by the unemployed at having received benefits in-kind during the Great Depression. Since then cash benefits have been thought to better

reflect an approach consistent with freedom and self-determination.