Title Community Affairs Legislation Committee
Database Senate Committees
Date 09-03-2021
Source Senate
Parl No. 46
Committee Name Community Affairs Legislation Committee
Page 21
Questioner CHAIR
Siewert, Sen Rachel
McCarthy, Sen Malarndirri
Responder Mr Flavel
System Id committees/commsen/17429b8a-cfd4-421d-bc81-b26a94d15777/0005

Community Affairs Legislation Committee - 09/03/2021

FLAVEL, Mr Matt, Deputy Secretary, Social Security, Department of Social Services

McLARTY, Ms Mary, Acting Group Manager, Participation and Family Payments, Social Security, Department of Social Services

PATON, Ms Kath, Branch Manager, Participation and Supplementary Payments, Social Security, Department of Social Services


CHAIR: I now welcome representatives from the Department of Social Services. Thank you for appearing before the committee today. I remind witnesses that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. I also note that the media are back in the room, so I want to make sure everyone's aware that they've requested permission to film and take photographs. If a witness objects to being filmed or photographed, the committee will consider this request. The media are reminded that they're not able to take images of senators' or witnesses' documents or of the audience. Media activity may not occur during suspensions or after adjournment of the proceedings. Do you wish to make an opening statement, or are we going to go straight to questions?

Mr Flavel : We are happy just to go to questions. Thank you, Chair.

CHAIR: I will go straight to Senator Siewert to start the questioning, then.

Senator SIEWERT: Thank you and good morning—sorry, it's now afternoon over there. Sorry. First off, what information and evidence was used to make the decision to increase the rate by $25 a week?

Mr Flavel : As you'd expect with a major decision like this, there's a range of analyses and information which goes into providing advice to government in order to facilitate this decision.

Senator SIEWERT: Could you articulate that, please?

Mr Flavel : Looking at past history of payments, the state of the labour market, forecasts of the way the economy is improving and all those sorts of things would go into the mix.

Senator SIEWERT: You just said the state of the labour market. How do you take that into account, particularly when—on the best evidence—it looks like nine people for every one job? What is the baseline for your decision-making in terms of the state of the labour market [inaudible]?

Mr Flavel : As we've seen over the past 10 to 12 months, while there was a significant impact on the labour market back in April and May 2020, we have actually seen improvements in the labour market since that time. Over the period from May until, I think, January this year we've seen employment go up by something like 800,000. And in more recent times, some of the more contemporary indicators around things like job vacancies have also shown improvement.

Senator SIEWERT: With all due respect, you didn't answer my question. If there are nine people applying for every one job still, what do you consider is the baseline for the labour market looking better?

Mr Flavel : I think I just answered that. I've given you some indications. The RBA's most recent quarterly statement talked about the fairly strong growth in both the economy and employment outcomes. I think that used the language of having improved better than the RBA forecast. And some of those other indicators—internet vacancies and ANZ job ads—have all strengthened recently. So there's not one particular piece of evidence; there's a general set of observations about the way the economy is improving and the way in which the jobs market is also playing out.

Senator SIEWERT: So is the 'nine people for one job' ad considered satisfactory?

Mr Flavel : I don't think I have anything to add to what I've already said about the key statistics around the state of the labour market.

Senator SIEWERT: Alright, I'll move on. When he made this announcement, the Prime Minister referenced the benchmark of 41 per cent of national minimum wage to set the new rate. You didn't mention that in your answer to my first question. Can you tell me why that setting was used, and did you provide advice on that?

Mr Flavel : I would go back and check the transcript. I'm not sure that the Prime Minister mentioned the word 'benchmark'. He referred to the fact that—

Senator SIEWERT: He referred to it—

Mr Flavel : as has been observed, the base rate of unemployment benefits had fallen somewhat as a proportion of the minimum wage over the past 20 years. Essentially, the $50 per fortnight put that back as a point of reference to where it was back in the early 2000s period.

Senator SIEWERT: Did you consult any economists or other people with expertise in this area to see whether that was a relevant percentage, given that the situation has changed vastly in the last 20-odd years?

Mr Flavel : All I would say is that when these decisions are taken by the Prime Minister and senior ministers they take into account the best advice across a range of government agencies. Insofar as general economic advice goes, that's obviously a matter for the Treasury, and the Treasurer would be the best placed person to answer those questions.

Senator SIEWERT: Did you provide any advice specifically in the department on the minimum wage and taking it to 41.2 per cent?

Mr Flavel : I'm not at liberty to talk about what advice we may or may not have given to our minister.

Senator SIEWERT: Did you seek any advice on the effectiveness of that particular percentage?

Mr Flavel : I'm not sure, sorry, what you're referring to when you say that incentive—

Senator SIEWERT: Did the department, in providing advice—I've noted that you refused to answer that question. Did the department seek any advice on linking the permanent rate back to 41.2 per cent? Did you seek any [inaudible]? I'm not asking what advice you gave the government; I'm asking whether you sought advice on that particular issue.

Mr Flavel : I think I've said it before, but I'll say it again: we took into account a range of different factors in providing advice to government on this matter.

Senator SIEWERT: I don't see why you can't answer that question specifically. Did you seek any advice on the percentage of the national minimum wage when you were formulating your advice?

Mr Flavel : I don't think it's a case of seeking advice. It's a matter of fact that the national minimum wage is known, as is the level of unemployment benefits. Looking at how the proportion of unemployment benefits as a proportion of the minimum wage has evolved through time is something that can be analysed by a whole range of stakeholders both inside government and outside government.

Senator SIEWERT: Did you seek advice as to whether it was appropriate to continue to use that percentage of minimum wage and what impact it would have on people's payments?

Mr Flavel : Sorry, you're breaking up a bit. I just missed the very last bit of the question, sorry.

Senator SIEWERT: Did you seek advice on continuing to use that as the benchmark—41.2 per cent of the minimum wage—given the circumstances are vastly different now, or did you consider an alternative approach?

Mr Flavel : I would like to go back and check the transcript, because you are using the language of benchmark and I think that in my language it's more a reference to the fact that the proposed increase would mean that the level of unemployment benefits as a proportion of the minimum wage is essentially where it was around 20 years ago. I think that was the context in which the Prime Minister and the minister referred to it when they—

Senator SIEWERT: Fair enough. It doesn't change the context of my question: did you seek advice on whether that was still an appropriate reference point for payment for unemployment benefits?

Mr Flavel : I'm happy to take on notice the question of whether we sought advice on it.

Senator SIEWERT: Thank you. Did you provide any advice to government or seek any advice on the point at which the payment becomes a disincentive to work?

Mr Flavel : I can only refer to what I said earlier. There are a range of factors. In terms of the specific question around incentives or disincentives, I would make the observation that in announcing the policy the government noted the fact that, with the more generous income-free areas, it was very much designed to increase the level of the safety net while at the same time ensuring that there are incentives for people to return to work, and the fact that those income-free areas for a single rate of JobSeeker are at $150 a fortnight, and—I think one of the previous witnesses mentioned this—it does allow people to actually get back into work while retaining some form of payment.

Senator SIEWERT: The context in which that evidence was given previously was that it was particularly around security of work and the fact that, at the moment, there's a lot more insecure work that provides security. Can you take on notice whether you took advice and what advice you received about that, and whether you looked at international evidence that shows that much higher rates of payment in other countries are not proving to be a disincentive to work?

Mr Flavel : I'm happy to take it on notice. I will, as you might expect me to do, provide a general cautionary note about some of those international comparisons, given the very different ways in which a whole range of social assistance is provided.

Senator SIEWERT: Thank you. You touched on the issues around the income-free area. My understanding of the legislation is that that the new rate of $150 per fortnight isn't being indexed; is that correct?

Mr Flavel : That's correct.

Senator SIEWERT: I just wanted to check I was correct in my understanding. Have you done any modelling on the difference that the fact that you're not providing indexation makes over time, and why aren't you providing indexation?

Mr Flavel : I think the setting of the income-free area at $150 a fortnight is, when all's said and done, something that's actually easy to understand for people who are moving into work. Rather than having figures that are chopping and changing, that $150 remains constant. Base rates of payment, of course, would continue to be indexed through time, and so therefore things like the ultimate level of the income cut-out—that is, the level at which people can no longer receive payment if they're getting other income—would also move with indexation.

Senator SIEWERT: But not at the same rate.

Mr Flavel : Well, they're adjusted by—

Senator SIEWERT: It's still a disadvantage. It's still reducing the payment in the longer term.

Mr Flavel : I think there's a question of by how much, but I'm certainly happy to take on notice what modelling we might have done around that particular point.

Senator SIEWERT: [Inaudible].

Mr Flavel : Sorry, Senator. That was mostly lost in—

Senator SIEWERT: Sorry. Are you seeking advice or—

Mr Flavel : Sorry, Senator. The entirety of your question was lost due to the connection. I apologise.

Senator SIEWERT: Okay. I beg your pardon. There's an appalling connection here. You didn't answer the question about whether you did any modelling of that.

Mr Flavel : Sorry, Senator. I did say I would take on notice the question of any modelling undertaken.

Senator SIEWERT: Okay. Thank you. I've got one last question. I know mutual obligations are the responsibility of another department, but did you have discussions with the Department of Education, Skills and Employment on the changes to mutual obligations?

Mr Flavel : We would consult with a range of different departments and agencies in the course of our business, so it's likely that we would have spoken to what's now known as DESE in relation to mutual obligations, as we would have talked to Services Australia about the implementation and readiness for implementing the measures, and as we would have talked to other stakeholders—I've mentioned Treasury before—in relation to the economic outlook.

Senator SIEWERT: So were you aware of the jobseeker line, of going back to 20 applications and also of the checking and auditing of people's job applications?

Mr Flavel : Senator, if you're asking me if I was aware of them before they were announced, that's something I would need to take on notice to check.

Senator SIEWERT: Could you also take on notice whether you provided advice on those particular measures and the impact they would have on jobseekers?

Mr Flavel : I'm happy to do that.

CHAIR: Sorry, Senator Siewert. We just need to move to Senator McCarthy, because we need to be winding up at 1 pm. So I will move to you, Senator McCarthy, for your questions.

Senator McCARTHY: Thank you Chair. This morning we've been hearing evidence from different witnesses about the mutual obligations, so I'll just keep going on that and on the hotline to report people who do not accept a job offer. Most of the witnesses that we've asked those questions to have real concerns about that. Particularly in relation to remote and regional Australia, where jobs are so scarce, how do you see this situation in terms of the response around people having to dob in someone when the job situation is so lacking?

Mr Flavel : My understanding—and again it's actually another department—is that it's in the circumstances where somebody is offered a job and refuses it. There's an ability for the employer to make contact back with the department in relation to that. So it's only in those circumstances where somebody has decided that they don't want to take a job after it was offered. There are existing penalties under the mutual obligations framework, both for general adherence to job plans but already in terms of people not wanting to take on jobs. So, in many ways, this is really just a strengthening of the existing arrangements that apply around mutual obligations.

Senator McCARTHY: We've also heard evidence this morning that the lessening of mutual obligations—in particular, during the COVID situation—has actually made life a whole lot better for Australians across the board. What's your response to that?

Mr Flavel : I think the government was pretty clear that mutual obligations requirements were altered in light of the state of the labour market, but, as I've said before, there has been strengthening in the way that the employment market is coming out and that, in keeping with that, some of those mutual obligations requirements are being reintroduced at a moderate pace—things like the number of job searches per month, for instance.

Senator McCARTHY: How many job applications will there be for each vacancy when the 20 applications per month return?

Mr Flavel : I'm not sure. I'd have to take that question on notice.

Senator McCARTHY: If you could, thank you. I've got quite a few questions and I'm conscious of the time, so I'll just go through these questions and let's see how we go. How many people does the department expect to be receiving unemployment payments—JobSeeker, youth allowance or other—in each year of the forward estimates? And has it changed at all since the budget? I've got the forward estimates of 2020-21, 2021-22, 2022-23 and 2023-24.

Mr Flavel : Within the budget itself, there is a number for unemployment benefit recipients in each of the budget and forward years.

Senator McCARTHY: I'll come back to that. How many people will come onto unemployment payments when JobKeeper ends on 31 March?

Mr Flavel : There's not a particular number for that, but, if it's helpful, I think that the evidence that the Treasury Secretary gave to the COVID committee on 11 February is relevant, where I think he referred to that transition point as being more akin to a kind of a pause in the labour market rather than a major shift, and, given the responsibility for that program in that portfolio, I don't think I can add any more to the observations that Dr Kennedy has put on the record to another committee.

Senator McCARTHY: Alright. Chair, could we have that noted, please, in terms of the secretariat, for that response?

CHAIR: Certainly.

Senator McCARTHY: How many people will see an increase in the rate of their unemployment payment going from a part rate to a full rate when JobKeeper ends on 31 March?

Mr Flavel : Some of that is more detailed information, so I'd need to take that on notice.

Senator McCARTHY: How many people will lose access to unemployment payments when the higher partner income test ends in March?

Mr Flavel : Again, I will have to take that on notice, and the reason for that is that sometimes there can be interactions between the various waivers and other arrangements that the government has put in place to temporarily support people on payment, so to separate it out is a little bit tricky. So it's best that we take that one on notice as well.

Senator McCARTHY: How many people will have their payment reduced or cut off when the income free area reduces from $300 a fortnight to $150 a fortnight in March?

Mr Flavel : Again, for the reasons I've just mentioned, about some of those interactions, I think it's best that I take those more detailed questions around numbers on notice.

Senator McCARTHY: How many people have received payment suspensions or other penalties since the return of mutual obligations and how many of these are in the CDP?

Mr Flavel : I'll take that on notice.

Senator McCARTHY: Thank you very much.

CHAIR: Thank you, Senator McCarthy and Senator Siewert. We have had a few questions taken on notice. I am conscious of that and conscious that there is a very tight turnaround time frame, so I would ask the members of the department to try and adhere to the close of business tomorrow, Wednesday 10 March, for the provision of answers to questions on notice, as the committee is reporting to the Senate on Friday of this week. I'd also like to thank you all for making yourselves available today to provide evidence. It being nearly 1 pm, that concludes today's hearing. On behalf of the committee, I would like to thank all those who've made submissions to the inquiry and made themselves available today. I'd also like to thank broadcasting, Hansard and secretariat staff for their assistance today, noting the time frame to prepare. The committee stands adjourned.

Committee adjourned at 12 : 59