Introduction

In its May 2015 Budget, the Commonwealth Government announced an intention to implement the Australian Priority Investment Approach to welfare in Australia. The development of this approach was one of the recommendations of the review of Australia’s welfare system, A New System for Better Employment and Social Outcomes (the McClure Report), along with the broader recommendation for reform, to simplify the system and reward work. Given strong evidence that work is beneficial to individual wellbeing, a major objective of the Australian Priority Investment Approach is to inform policy settings and interventions that effectively help individuals with capacity to work, to do so.

The Department of Social Services (the Department) has set up an Investment Approach Taskforce to implement the Australian Priority Investment Approach to social welfare with the aim of reducing welfare dependence, and improving the lifetime wellbeing of people and families in Australia.

PricewaterhouseCoopers (PwC), in conjunction with Data Analysis Australia (DAA) has been engaged to undertake the actuarial analysis supporting the Australian Priority Investment Approach. This will involve four annual actuarial valuations of the Commonwealth’s social security and income support system, the first of which is known as the ‘baseline valuation’, and estimates the total lifetime costs for the Australian population as at 30 June 2015. This report documents the baseline valuation.

PwC’s engagement commenced on 14 September 2015, and a draft report outlining the valuation method was prepared in October, discussed with the Department during November and revised in late November to incorporate feedback. The project is being overseen by the Investment Approach Inter-Departmental Committee (IDC), and the members of this Committee along with members of the Department’s own Internal Reference Group came together with PwC at a design session on 23 November to discuss the actuarial model that will support the Australian Priority Investment Approach, how it will work and what is important to stakeholders.

A draft baseline valuation report was then prepared and delivered in mid-December, which built on the draft method report and on the discussion at the design session. Its purpose was to start documenting the assumptions being developed, to explore early insights coming out of the analysis, and to bring to life the format for communicating results and outputs from the model. The draft baseline valuation report documented results from the foundation model which applied assumptions by age, gender and class. The next phase of the project involved refining the model to incorporate risk factors, and this final baseline report documents the final baseline model incorporating these risk factors, and takes into account feedback on the format, structure, content and terminology contained in the draft report.