Mr McARTHUR (10:29 AM) —I am delighted to contribute to this debate in support of the government’s important welfare to work reforms embodied in the Employment and Workplace Relations Legislation Amendment (Welfare to Work and Other Measures) Bill 2005. Australia’s welfare system is rapidly approaching breaking point. The welfare leviathan is growing so large that the hard-working taxpayer will not be able to cope with the burden. The welfare to work legislation seeks to address a fundamental problem facing the nation: the unsustainability of our national welfare system.

Over the past 40 years the welfare state has grown immensely, and it is fast approaching an unsustainable position. In June 2005, 705,000 working age Australians were on the disability support pension; 630,000 working age Australians were on parenting payments, about 450,000 of whom are single parents; and 500,000 working age Australians were on unemployment benefit—the Newstart allowance. This level of increase in payments is not sustainable. In 2004-05, spending on the disability support pension exceeded $10 billion. The total welfare budget for 2005-06 is $60 billion—I emphasise that figure: $60 billion. Peter Saunders the Social Research Director at the Centre for Independent Studies, has researched the problems of welfare in Australia. I commend his book published in 2004 entitled Australia’s welfare habit: and how to kick it, in which he noted:

I note that, since the publication of this book last year, the position seems to have become even worse. Official statistics show that today there are only four people in employment to support every one person of working age who is on welfare. The level of welfare dependence has reached the ludicrous position where one in five working age Australians is now reliant on income support funded by the taxpayer. That is almost unbelievable. In today’s current strong economic conditions who would ever have believed that one in five people you see in the street, one in five working age Australians, are on welfare. In total, 2.6 million people out of 13.7 million people aged between 16 and 64 years are welfare dependant.

This high rate of welfare dependency is despite the relatively low unemployment rate of 5.2 per cent, as at September 2005. Imagine how much worse it would be if we had the high unemployment rates of the 1990s under the Hawke-Keating governments. Over the last four years there has been a remarkable change in the profile of people who are dependant on welfare, with a dramatic increase in the number of people reliant on the disability support pension and on the single parenting payment. In 1980, a small 2.3 per cent of people of working age were on the disability pension. By March 2005 that proportion had doubled to over five per cent, or 705,000 people. The proportion of working age adults who are described as being incapable of work has increased by 117 per cent over the last 25 years. Half of the people going onto disability support each year are recruited from the unemployment rolls, an indictment in itself.

The disability support pension is an attractive option for unemployed people who do not want to find a job. DSP recipients are exempt from any mutual obligation requirements, and we have seen people transfer from unemployment to disability support following the introduction of the government’s mutual obligation requirements. In the seven years to June 2004, the number of people on the DSP grew by 26 per cent. There are now more working age Australians on DSP than on the Newstart allowance unemployment benefit. The DSP is growing much more rapidly in Australia than in other OECD countries. People who are on DSP can remain on the pension for life, irrespective of their ability to work. The most common problems reported by DSP claimants are musculoskeletal—that is, bad backs; and psychological/psychiatric problems—that is, feeling stressed and other problems.

Almost a quarter of a million working age Australians claim disability support because of musculoskeletal and connective tissue medical problems—again, commonly called ‘bad backs’. The bad back is a difficult problem for policymakers to address as the complaint is hard to analyse and to prove or disprove. The medical profession and the chiropractors who deal with this problem on a day-to-day basis have no easy answer or definitive view on the cure. Being a farmer I have had a close association with a crook back for the last 40 years. Personally, I have tried to ensure that my back remains flexible so that I can carry on normal activities. Many of the so-called bad back cases have no trouble going to the beach, playing games with their children and doing a few odd jobs for cash. There seems to be an underground bad back work force out there who receive both the disability pension and cash payments for a number of light-duties type jobs.

It is not unreasonable to ask people who have the capacity to work to do so, even if it is not their normal job. In the 21st century there are alternatives to manual jobs. The computer age is here, and it does not require any great stress on the musculoskeletal system, to use the technical term.

There are over 175,000 working age Australians who are claiming psychological/psychiatric problems, including ‘feeling stressed’. In total, these two categories make up about 60 per cent of people on the disability allowance: 34 per cent in the bad back category and 24 per cent in the psychological/psychiatric category.

I want to move now to the single parenting area of this bill. There are approximately 630,000 people on parenting payments, of whom about 71 per cent are sole parents. The parenting payment single allowance has grown by over 100,000 persons, or 33 per cent, over the last seven years. On the other hand, the parenting payment partnered allowance has fallen by over 60,000 persons. The budget for parenting payment pensions alone has exceeded $6 billion for 2004-05.

I commend to the House the submission by the Department of Employment and Workplace Relations to the Senate inquiry into this legislation. It is a high-quality submission. From that submission I note that Australia performs poorly internationally in relation to the number of single parents in employment. Unpublished OECD data shows that, among 23 OECD countries, Australia has the lowest employment rate for sole parents with dependent children. This is a bad outcome for sole parents and their children.

With interest I noted that the government’s submission picked up on the situation in Denmark. I recently had the pleasure of travelling to Denmark and Sweden as part of a parliamentary delegation and can report that Denmark and Sweden are facing a real crisis in managing their welfare systems. I understand that the GST in both these countries is in the range of 25 per cent and that the upper levels of income tax are in the range of 60 per cent. However, there is an endemic culture in the Scandinavian countries that welfare is good and that somebody should pay for it. In the longer term this is a recipe for financial disaster and social dislocation. In Denmark, single parents are entitled to only one year of benefits before they are required to look for work. In Switzerland, Austria, Germany, France, Italy and Norway, single parents on benefits are required to look for work when their youngest child turns three. So much for comparisons with this proposition before the parliament!

These are policies in other countries which face a significant sustainability problem with the maintenance of the welfare state. In these countries, steps have been taken to encourage single parents back into employment quickly to reduce the burden on hardworking taxpayers. In Australia, more than half of the people who receive the parenting payment do not earn any private income, and there are 700,000 children growing up in homes where neither parent is in employment. There is a risk in such families that a culture of not working could be created and handed down from one generation to the next. As a nation, a key equity challenge for governments must be to break the chain of intergenerational poverty and job opportunities.

The government is taking steps to address these problems—to address the unsustainability of the welfare system and to encourage working age persons out of welfare and back into active employment. I am pleased to support the government’s reforms in this bill to encourage people who are in receipt of disability support pensions and parenting payments to re-enter the work force. A key principle that underpins these reforms is that Australians who have the capacity to work should do so rather than rely on hardworking Australian taxpayers to pay their bills. The reforms seek to address the unsustainability of our welfare system and encourage greater self-reliance and deliver self-fulfilment.

In the Depression in the 1930s when there was negligible welfare and very serious human problems with affording the bare necessities of life, Australians were very reluctant to take welfare. There was a wonderful self-reliant attitude that they would get through somehow and not rely on Big Brother government for a hand-out. In Australia we are fast losing this self-reliance and independent spirit as creeping socialism and welfarism corrodes the very essence of Australia’s characteristic battler culture. If you are in a job and you feel good about yourself, you feel good about your family, you feel good about Australia and you know you are making a contribution to your own children’s future wellbeing. No amount of welfare will be a substitute for this fundamental human value and philosophical approach to life.

The reforms recognise that a key symptom of poverty for Australians is the absence of paid employment and that, by assisting welfare-dependent Australians to re-enter the work force, we in the Howard government are taking important steps to improve the living standards of our citizens and to lift as many people as possible out of poverty and free from disadvantage.

In terms of the need to address the unsustainability of our welfare system, I just make a few observations about why the government must act. First, it is important to recognise that an equitable welfare system cannot fund itself. For Australia to be able to afford a viable welfare system there needs to be sufficient people in paid employment raising income to afford taxes to pay for the safety net needs of those who cannot provide for themselves. People who can look after themselves should be encouraged to do so. If the welfare system costs the taxpayer too much then we run the risk of not being able to afford suitable welfare for those who legitimately need it. Peter Saunders addressed this problem in his publication ‘Australia’s Welfare Habit’:

Those remarks come from Peter Saunders who is certainly a well-qualified person to make comment on this matter. To address this problem, the government have acted to encourage new entrants to the parenting support system and the disability support system into employment where they have the capacity to work. The notion is not new either internationally or within Australia. Within Australia we have seen a similar approach. We are proposing that those on a disability pension and those injured workers who are under state WorkCover schemes are encouraged back into the work force. In fact, in Victoria there is a requirement for employers to implement procedures for the transition of injured workers back into employment, including changed duties where the injured worker is no longer capable of doing previous work tasks. Australia is not the only country that has to address this problem. The United States, amongst others, have faced such difficulties, and I quote former Democrat President Bill Clinton:

That, again, is a quote from Peter Saunders’s ‘Australia’s Welfare Habit’. That is the view of the Labor side of politics in the USA and I commend that point of view to those sitting opposite.

 What is the Labor Party’s approach in Australia? They will argue that the government should not take steps to address the long-term unsustainabilty of the welfare state, but instead the government should allow the problem to get worse by forcing Australian taxpayers to pay more for the increasing number of people who have the capacity to work but instead move out of employment onto welfare. Peter Saunders has again addressed this problem and recognised that, in the welfare debate, ‘nothing succeeds like failure’. He says:

Some on the Labor side of Australian politics recognise the reality that the current welfare system is not working. It is not helping those people most disadvantaged who rely on governments to deliver the best policies to assist them. I would like to quote former Labor Leader, Mark Latham, who, in his 2001 paper ‘Making welfare work’—published in his book The Enabling State, coedited by respected Labor commentator and author Peter Botsman—said:

In the face of the Labor Party’s opposition, the government is implementing brave reforms. We have introduced important industrial relations reforms to strengthen the economy and increase job opportunities. We have abolished nuisance tariffs on non-competing imports—

Mr Tanner —You put them on.

Mr McARTHUR —a bold move, which even the member for Melbourne would agree with. We have established a Future Fund to meet the government’s future superannuation liabilities—again, a very bold move by the Treasurer to put away money for a rainy day to meet those ever-increasing liabilities of publicly funded employees. I hope that future Labor governments—when they eventually come to power—might support that move very strongly. The Howard government is introducing these welfare reforms to make the welfare system sustainable.

It is not easy to introduce these reforms but it is necessary. Again, I note that Peter Saunders has addressed the political problem in Australia leading to the failure of past governments to address the problem of a growing welfare state. He said:

I would agree with that and I am sure that the rhetoric coming from the other side would support that view. However, we need to understand that somebody needs to pay for the welfare in the longer run and in the longer run it needs to be sustainable.

The Howard government is taking the bold step to address the problem of an unsustainable welfare system. Through our reforms we will be improving opportunities for the 700,000 Australians on disability pensions by encouraging them to enter the workplace—as is the case in America and will be the case in Europe as their welfare systems topple over like the Berlin Wall. It is clearly on the public record that the welfare systems of France, Germany and other European nations are unsustainable even in the shorter term as the working age population, the high rates of taxation and the excess benefits paid to the welfare system make it unsustainable. Other nations have found the way forward to assist parents with children to combine family responsibilities with work. Australia should follow their example. I strongly commend the bill to the House for its philosophic content, its long-term consequences and its importance for future generations of Australians.