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Fact sheet

Fact Check: Josh Frydenberg says welfare dependency was at a 30-year low heading into the pandemic. Is that correct?

Income support Welfare recipients Budget Government expenditure Unemployment Australia

The Coalition Government has reassured Australians that the nation is well placed to emerge strongly from the coronavirus crisis in large part because of its handling of the economy in the years leading up to the pandemic.  

Treasurer Josh Frydenberg recently pointed to the Government's success in cutting the unemployment rate before the pandemic, claiming this had produced the lowest welfare dependency for three decades.

"And let's not forget that going into this crisis, we saw welfare dependency at a 30-year low because we'd got that unemployment rate down," Mr Frydenberg told ABC's Insiders program.

Is it correct that welfare dependency was at its lowest level in 30 years before the coronavirus crisis sent the economy into reverse? And can this be attributed to lower unemployment? RMIT ABC Fact Check investigates.

Yes, the data shows welfare dependency is at a low, but there is more to the story than Mr Frydenberg's claim suggests.

Fact Check relied on two measures of "welfare dependency" when assessing Mr Frydenberg's claim: the proportion of the working-age population being paid a major welfare benefit and the proportion of households getting at least half of their income in the form of government benefits.

In the case of the former, about 14 per cent of working-age Australians were receiving a major welfare benefit in June 2019 — the lowest rate since the early 1990s.

And, in the case of the latter, 22.5 per cent of households relied on government benefits for half or more of their income in 2017-18 — the lowest since at least 1994-95, when the current statistical series was started.

Although falling slightly short of the time-frame referred to by Mr Frydenberg, both measures lend weight to the claim that welfare dependency had reached the lowest level for 30 years before the pandemic struck in early 2020.

Before the pandemic began, welfare-dependency was at a record low. But that's not necessarily all due to lower unemployment.(AAP: Dan Peled)

However, experts consulted by Fact Check noted that lower levels of unemployment had not been the only reason for this shift.

Government policy changes have also played an important role. These have included the introduction of tougher eligibility rules and obligations for payments such as unemployment benefits and the Disability Support Pension; the abolition of some payments; and, declining payment rates relative to wages for some types of income support.

Moreover, in the years leading up to 2020, there was a significant increase in the number of working-age people in Australia not entitled to social security.

This growing cohort includes international students, working holiday visa holders and skilled migrants and an unknown number of New Zealanders whose social security rights were reduced from the early 2000s.

It also includes recently arrived permanent residents, who now face a four-year wait before they can receive government benefits.

Although difficult to quantify precisely, this increase has had the effect of lowering welfare dependency relative to the labour market.

The verdict: Yes but more to it

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