2023 Budget and beyond: will anyone be left behind?

If the 2023 Commonwealth Budget was judged by whether it puts us on a path to ‘solving’ disadvantage, how would it fare?

• SVA Quarterly
• Impact investing , Measurement and evaluation , Systems change

Does the 2023 Budget head Australia towards a fairer and more inclusive community for all? To borrow the words of the Prime Minister, how much closer are we to an Australia where no one is left behind, and no one is held back?

Budgets are about choices. You can do nearly anything, but you can’t do everything.

The Commonwealth Budget represents… a gigantic lever in any attempt to solve entrenched problems.

Some people doubt whether we can ever make significant progress in reducing disadvantage. To borrow from a former Prime Minister – the poor will always be with us.¹ But as researchers and practitioners, social policy makers and advocates will tell you, there is extensive evidence today of what will improve lives, it’s a question of choices. There are also wide-ranging efforts to find the next generation of solutions. We didn’t have a vaccine to prevent cervical cancer, until we did.

The Commonwealth Budget represents the allocation of $682 billion – a gigantic lever in any attempt to solve entrenched problems.

Many of the big-ticket items in the budget also have an impact on whether people are more or less likely to be experiencing disadvantage and can’t be ignored. Inflation has a greater impact on people on low incomes. They have less discretionary spending and so less flexibility to alter their buying patterns when prices rise on essentials like food, electricity or rent. Measures to reduce energy bills or the cost of medicines will have a wide impact. Levels of unemployment are clearly a factor but so too is climate change – which the evidence suggests has a bigger impact on people who are already vulnerable – the experience of people who are homeless is one of the most stark examples. Bushfires and floods also impact the most vulnerable the greatest – it’s hard to bounce back on a limited income and you’re less likely to be able to afford insurance or have a rainy-day fund. Managing those big issues is essential but insufficient.

How much progress have we made? We examine some of the key measures (but by no means all) and how they fit into a larger context of seeking to reduce disadvantage. What we find is that there are some important steps, including those that SVA has advocated for, that could help improve longer-term outcomes.

Pleasingly, there is a multi-pronged approach in this budget…

The following topic areas are the ones we’ve explored (links will take you directly to these sections):

• A spotlight on disadvantage
• Measuring what matters
• Impact investing
• Community-led responses to disadvantage
• Early years
• Income support
• Housing
• Charity sector
• First Nations
• School education
• Employment and skills.

Pleasingly, there is a multi-pronged approach in this budget – a combination of measures that span income support payments, funding for services, and a renewed focus on data and evaluation to speed up the cycle of improvement. But it’s just a start. There are some big decisions yet to come on early childhood policy, housing and employment as well as a review of the National Disability Insurance Scheme (NDIS).

A spotlight on disadvantage

National governments have the capacity to fix problems through laws and regulations, delivery of services and allocations of resources. However it’s both obvious and overlooked that one of the most important decisions governments make is the choice about what they do and don’t talk about. They have enormous power to set the agenda.

In the interviews over the months leading up to and in his budget speech the Treasurer, Jim Chalmers has repeatedly put a spotlight on the importance of improving the lives of people in Australia experiencing disadvantage. Arguing the case that this is something that should be a priority creates discussion and debate about how to reach this goal; elevating the issue and encouraging actors across the community to consider their role in tackling the challenge. It also sends a signal to all the lobbyists, businesses and organisations wanting to work with the Government that they need to think about how their preferred policy or boondoggle is going to impact disadvantage.

This is a good sign – the question will be how long it can be maintained when cycle of political debate operates at break-neck speed and the electorate’s attention moves on, as well as whether sufficient progress can be demonstrated to the electorate to encourage more action? That’s no small task.

Measuring what matters

It’s a truism that what gets measured gets done. Budgets are frequently measured in terms of deficit and surplus and a projected surplus of $4.2 billion in the 2023 financial year attracted a lot of attention after 15 years of deficits. Growth in Gross Domestic Product (GDP) is another very common measure – is our economy growing at the rate that we’d like? It’s a measure of whether on average we’re getting wealthier.

It’s an open secret amongst many economists that while GDP is a very useful measure for some purposes and comparisons, it’s not a particularly useful way of measuring improvements in wellbeing and it can also mask what happens to different groups within a community even if at the aggregate it looks like things are going well.

SVA is an organisation that is intensely focussed on social impact… so this is an area we will be watching.

One thing that has been de-coupled from this year’s fiscal budget is the so called ‘wellbeing budget’. The government has promised to develop a set of measures, starting with a model developed by the OECD, to track the wellbeing of people in Australia. It is intended to help assess whether the investments made by the Government are actually resulting in improvements in people’s lives, not just improvements in the bottom line. A similar process has been followed in New Zealand for several years. This work is ongoing² and will be an important tool in tracking Australia’s progress towards a country where no one is left behind.

SVA is an organisation that is intensely focussed on social impact, how you create it, how you measure it and the pathways to create impact at scale and so this is an area we will be watching. Creating and implementing a measurement framework is one way to set up an accountability mechanism for government spending and can also help the government plan over longer time horizons (including political cycles) by monitoring progress and trends.

At the micro-level – it was very pleasing to see $10m allocated to improve evaluation capability in Treasury, and a $16.4m increase in funding for the Australian Bureau of Statistics, both championed by the Minister for Charities, Andrew Leigh. If we want better outcomes for people experiencing disadvantage, we also have to make sure that whichever program we’re spending money on is effective and evidence-based and that if something else proves to be more effective, that it can replace a less effective approach. These are good investments with long term benefits.

An area that governments will have to look at more seriously in the future is how they fund evaluations of the whole range of services and programs they currently fund, particularly through charities. One of the clearest pieces of feedback we received, and was captured in our Paying What it Takes and Partners in Recovery reports examining the financial health of charities is that they are often not properly funded to conduct rigorous evaluations. Charities employ around 1 in 10 workers and deliver many of the services that both prevent people experiencing disadvantage and support them to get back on their feet. They also get around half of their income from governments³ and so if we want to see big reductions in disadvantage we have to properly fund the evaluations of these services.

Impact investing

SVA has been at the forefront of building the Australian impact investing market over the past 20 years. We were also deeply involved in working with the Social Impact Investing (SII) Taskforce which was created by the previous government and reinvigorated by this one.

Impact investing in our world is investing for social and financial return. It is still very much a niche in Australian policy making and within the finance sector but there were some important new measures in this budget.

Impact investing adds another tool to the toolkit for how we seek to improve outcomes for people.

Why care about impact investing if your primary purpose is to reduce disadvantage and create a more inclusive Australia, particularly if government is by far the largest funder of social services?

There are some things that governments can do much more effectively than the private sector (Medicare comes to mind) and there also some things which businesses are very good at (taking more entrepreneurial risks, for example). Impact investing adds another tool to the toolkit for how we seek to improve outcomes for people.

There are some opportunities to channel private capital to help solve problems (such as funding affordable housing) and for sharing risk between government and the private sector.

Ensuring that there are the right policy settings, regulation and incentives so that private investment is helping not harming our chances of improving outcomes for people who are experiencing disadvantage is also a crucial role for government.  There is a reason that government incentives for clean energy are helping consumers and the private sector to transform our energy markets. Ignoring the role of the private market seems like a recipe for ignoring both the opportunities and threats that come with it.

As my colleagues Rebecca Thomas has outlined in ‘Impact investing gets nod of approval in Federal Budget’ and Elyse Sainty explained in my interview with her there are reasons to be optimistic about the social impact that can be generated through the new $100m Outcomes Fund, as well as the additional $11.6m to help social enterprises grow and scale. Social enterprises have been shown to be more effective than other businesses in achieving measurable results not least in supporting people into quality jobs who would otherwise be excluded from the labour market.

Nonetheless, the budget was silent on at least three of the SII Taskforce’s recommendations including a fund that could invest in early-stage social enterprises that includes both philanthropy and private capital. We have yet to see the Government’s position on creating a wholesale fund and an office of social impact investing in the Treasury to help pull together data about outcomes across government departments and bring forward new investment opportunities.

Better use of government data to understand how effective investments are in achieving outcomes is one of the greatest opportunities in a digital world that didn’t exist even a couple of decades ago. However, as the Robodebt scandal has laid bare, there is a great deal of care needed to ensure that government data isn’t weaponised to make people’s lives worse in the name of saving money.

We should also not forget that there are large impact investing opportunities in housing, that we’ll cover more in Housing below.

Community-led responses to disadvantage

We were excited to see the $64 million investment over six years in Stronger Places Stronger People with the extension of funding providing certainty for existing place-based partnerships and a welcome increase in funding.

While there has been discussion and debate about place-based and local community development for decades, there is stronger evidence emerging to suggest that improving people’s wellbeing needs to take account of, and be adapted to, the community in which a person lives. An individual’s experience is shaped by concentric rings building from their immediate relationships, to extended to family and friends, local community to the systems that are operated by far off governments and businesses.

There is more work to build up the evidence base for how to translate place-based successes into other communities, but this new investment is in line with recommendations we have made to government through Restacking the Odds, a joint initiative with Murdoch Children’s Research Institute and Bain & Company. Restacking the Odds aims to drive more equitable outcomes in the early years by ensuring that children and families receive a combination of evidence-based, high-quality services in their local community.

It is also encouraging to see the investment in frameworks and data to improve the way we tackle disadvantage in community, along with the partnership with philanthropists through the Investment Dialogue, to help drive innovations and improvements in services over time.

Early years

There may be no silver bullet to ‘solving disadvantage’ but the evidence that has been generated over the last few decades on early childhood development is unequivocal – improving the outcomes for children in their first years of life gives one of the greatest chances of breaking cycles of inter-generational disadvantage, changes life-courses and has one of the greatest impacts of any investment we can make.

… there is an historic opportunity over the next few years to create a much more inclusive Australia by overhauling our early childhood policies.

If we take a step back from the individual budget initiatives and look at the policy landscape, there is an historic opportunity over the next few years to create a much more inclusive Australia by overhauling our early childhood policies.

There is a great deal of work underway both inside and outside of the Commonwealth Government to develop new early years policy including the development of the Early Years Strategy, and reviews of early childhood education and care by the Productivity Commission and the Australian Competition and Consumer Commission. These are all ongoing processes and we should be looking for the results of them in next year’s budget and beyond.

The Government’s policy ambition and commitment to the Early Years Strategy needs to match the challenge at hand – fixing a broken and patchy early childhood system that doesn’t work for children and families and leaves too many falling through the cracks.

If there is one thing that government has to get right to reduce disadvantage in Australia and create the opportunities that the Prime Minister talks about, it is guaranteeing that children and families get the right combination of services and supports to thrive delivered in a way that works for them (not just service providers).

In this budget, there were important changes to Parenting Payments (see below) but we were disappointed not to see a change to the activity test – which requires parents to be working a certain number of hours to access government subsidies for early learning. SVA has supported calls by Thrive by Five and others for changes to the activity test which we know is a barrier to improving participation for children who would get great benefit from early childhood education and care. Nonetheless, we’re encouraged by moves to streamline the process for Additional Child Care Subsidy.

Also encouraging was the much needed $72.4 million investment in professional learning and upskilling educators with funding to services and educators. A valued and professional workforce is crucial for a quality early childhood education and leads to better outcomes for children.

Income support

Income support payments have been too low for too long and have been allowed to erode over time. The structure of our labour market assumes a level of unemployment and underemployment.  It is a matter of choice as to what level of income we are prepared to accept for those who are currently unemployed. Currently we have chosen that people should live in poverty.

Disturbingly, there has also been a long-term trend of people with disability being pushed off the (slightly higher) Disability Support Pension onto JobSeeker despite limited capacity to work. We are also choosing that they should live in poverty.

One of the most effective ways to improve outcomes for children and single parents is to improve their financial situation.

Smart changes to these payments and eligibility can create enormous impact on wellbeing for those experiencing deep disadvantage. Looking to the evidence, there are now many studies globally that indicate that simply improving a person’s disposable income is a very effective way to improve their wellbeing. It’s also a very efficient and effective way to achieve those improvements because empowering the individual to make decisions on how they spend that money usually results in quite good choices – people buy food and pay bills.⁴
We welcome the small raise of the social safety net; the changes announced in the budget are a step in the right direction but there is more to do.

Analysis commissioned by SVA and the Brotherhood of St Laurence has shown that single parents, who are overwhelmingly women, experience high levels of financial stress. One of the most effective ways to improve outcomes for children and single parents is to improve their financial situation. The change to allow parents to be eligible for parenting payments until their youngest child turns 14, worth $1.9 billion over five years, is a good decision, although the rate of parenting payment remains inadequate.

Raising the rate of JobSeeker and other working age and student payment by $40 a fortnight is welcome, but still insufficient to lift people out of poverty. When taken together with measures that decrease the costs of medications and doctors’ visits, reduce energy bills and increase rent assistance, this will help the most vulnerable groups, but in a high inflation environment, it may not be enough for many.

A more significant increase that gives people the confidence to start businesses, begin new careers, retrain and find good jobs will be needed.The creation of the Economic Inclusion Advisory Committee which issued its first report just prior to the budget and will report each year is also an important initiative. It was brought about by the negotiations of Senator David Pocock, and will also provide a potent reminder of what’s at stake when the Government makes decisions in the future. 

Housing

The cost of housing, across the spectrum from social and affordable, rental and homeownership is increasing the likelihood of people experiencing disadvantage and driving up inequality. There can be no doubt that without reform to housing policy we will not see significant reductions in disadvantage in Australia.

There were some positive steps in this budget but this is a problem that has been stewing for decades and will take years to resolve.

… CRA also flows through to community housing providers… and improves the economics of their supply pipelines…

We were pleased to see the first real increase in Commonwealth Rent Assistance (CRA) in 30 years, worth $2.7 billion over five years. It is an important step to deal with the skyrocketing costs of housing, and something that SVA and others have been working to secure. However, to make sure all Australians have a good home we believe rent assistance should be doubled to $141 a week.

It’s not often remarked but increasing CRA also flows through to community housing providers (not-for-profits that provide social and affordable housing) and improves the economics of their supply pipelines – so it also has an important secondary impact on helping to boost supply of the housing most likely to be taken-up by people on low incomes.

There is a lot more work to do not just through rent assistance but also to build more social and affordable homes for people who need them.

There are large opportunities for impact investing in social and affordable housing. It was pleasing to see the growing role for the National Housing Finance and Investment Corporation (NHFIC), including increasing its mandate by $2 billion to $7.5 billion to help finance new homes. SVA advocated strongly for NHFIC’s creation and made multiple contributions to policy inquiries on its design, and it is great to see it go from strength to strength.

We welcome new measures worth $25.7 million over five years to encourage further investment in build-to-rent housing projects and will be keen to see the details of how this might unlock more scaled investment in homes that are affordable and appropriate for the people who need them.

As with early childhood, there are also major policy reviews and negotiations underway which present opportunities – including the review of the National Affordable Housing and Homelessness Agreement (NAHHA) with the state governments, through which the Commonwealth transfers money to the states for social housing and homeless services. While this will not solve broad housing policy issues including on tax and planning, the Commonwealth Government’s stance on the NAHHA will be a significant indicator of its commitment to tackling the housing challenges for those most in need of more affordable homes.

Charity sector

Over the course of the Covid-19 pandemic, SVA has continued to highlight the unique financial and operational challenges faced by charities. Charities are a large part of our social and economic fabric, as we’ve said employing more than 1 in 10 workers in Australia.

By definition, charities also have to adhere to their ‘charitable purpose’. They are far more likely than a commercial business to be working to prevent people experiencing disadvantage and help those who are. They operate our early learning services, aged care, health, housing, mental health, religious, sporting and animal welfare services. They are also drivers of community connectedness and resilience in times of crisis.

Yet they barely rate a mention when we talk about the health of different sectors of the economy or the impacts of a budget. As a result, policies designed to help ‘businesses’ are often designed in ways that don’t help charities at all even if charities are operating in the same markets.

In this Budget, the Government has shown signs of recognising the need to tailor policy to Australia’s charities and non-profits, which has been the core recommendation of our advocacy project Partners in Recovery.

We would like to see the Government make the same commitment in other low-wage sectors…

The commitments from the Government to fully fund the Fair Work Commission’s increase in wages for workers in aged care, worth $515 million over five years, and to update indexation arrangements for government-funded services delivered by community sector organisations, are steps in the right direction. It is an important recognition of the value of caring work to our economy and community. Charities make up a significant percentage of the care economy, often providing services to the most vulnerable, and face similar rising costs to the rest of the community in a high inflation environment. They can’t afford to carry these costs without government support.

We would like to see the Government make the same commitment in other low-wage sectors where charities are significant providers, especially in other areas of the care economy. We know from our analysis of charities’ financial sustainability that charities are often underfunded to deliver the outcomes that we all expect and they are mostly funded by government contracts. As we highlighted earlier, ensuring that the full costs of things like evaluations but also technology are budgeted for is crucial to getting better outcomes and saving money in the long-run.

In this Budget, Government has recognised that small business needs support with challenges ranging from improving energy efficiency to managing cyber security. Charities face similar challenges, but not all of the business support initiatives are accessible to them – for example, depreciation concessions are of little value to charities. We hope that in implementing these supports, Government will ensure that charities can access them equitably.

First Nations

First Nations people have made and continue to make an enormous contribution to Australia. However, thanks to a history of colonisation, dispossession and violence, First Nations peoples are also significantly over-represented amongst those experiencing all kinds of disadvantage.

SVA firmly believes that services for First Nations people should be provided by and led by First Nations people as part of a commitment to self-determination and improving outcomes in community.

We were pleased to see the Government committing to fund local First Nations organisations to continue to deliver and expand their important work, including capacity building for Aboriginal Community Controlled Organisations as well as services and programs.

We also accept the generous invitation of the Uluru Statement and support a constitutionally enshrined First Nations Voice to Parliament. The Uluru statement was the culmination of one of the most inclusive and deeply consultative processes undertaken in our nation’s history. We respect the views of the many people who came to this conclusion even if disagreements are to be expected.

Having a voice in debates that affect you is a prerequisite for an inclusive society. As we look at the longest arc of our history, we are only likely to have a truly reconciled country if our First Nations people have their voice heard in all aspects of policy affecting First Nations peoples

School education

Schools and school funding were not the focus in this year’s budget while the Government embarks on the review of previous National Schools Reform Agreement (NSRA).

Like early learning, school and tertiary education are ways in which people can improve their social mobility, reduce the chances of repeating cycles of disadvantage and help inoculate people against future life shocks by building their economic resilience (people with higher levels of education tend to have higher incomes and better access to more kinds of jobs).

Although it’s appropriate to take the time to assess the progress of the previous NSRA, Australia’s school system continues to have a gulf between the outcomes for children from families with wealthier backgrounds and those from low-income families.

There have been lots of public statements from the Minister for Education Jason Claire about his desire to bridge this gap and as with a number of other areas of social policy, subsequent budgets will need to tackle these issues if we are to create an education system that delivers both excellence and equity.

Employment and skills

Whether people have a safe, high-quality, well paid job or are part of a family where others do, has an enormous influence on people’s chances of thriving.

We’ve talked about the challenges of living on income support, but for those seeking to enter the workforce or take on more work there are also structural problems that are cause for concern.

The existing commitment to invest $3.7 billion for a five-year national skills agreement is important at a time when young people are more likely to be in low-quality, insecure jobs than previous generations. The low unemployment rate hides the broken career ladder for young job seekers. You probably need to be over 45 to remember a time when traineeships were a common feature of many workplaces including the public sector. Investing in apprenticeships is good – where these pathways still exist – but we need to rebuild this career ladder as both employers and young people will benefit.

Government procurement can also create demand – and the $8.6 million Australian Skills Guarantee commitment to 1 in 10 jobs on major Australian Government-funded projects going to apprentices, trainees and paid cadets will help, but it cannot be limited to construction and IT.  We look forward to the Commonwealth building on this approach by including additional areas of Commonwealth spending, and including additional equity target groups, such as the long-term unemployed.

The replacement of ParentsNext with a voluntary scheme is a welcome move away from compliance-focused employment programs to approaches that place the needs of people at the centre. We look forward to further announcements from Government as the Parliamentary inquiry into Workforce Australia employment services, and the Full Employment White Paper, continue.

Are we on a better path to creating more opportunities for people to thrive?

What can we read from the Budget about the direction the Government is taking on disadvantage in Australia?

If we try to filter out the noise, the fireworks designed to catch our attention and the smoke intended to obscure, perhaps the most important message from the Government is about the times frames over which it’s seeking to achieve its goals.

… a shift towards thinking longer term about policy change to reduce disadvantage in Australia is a very welcome move.

The Prime Minister has made no secret of his intent to secure multiple terms of government and roll out a longer term policy agenda. It’s quite clear that a number of the areas of social policy that are currently up for review will form part of an agenda taken into a second term of government or at minimum a platform for re-election.

Irrespective of your political leanings, a shift towards thinking longer term about policy change to reduce disadvantage in Australia is a very welcome move. Too often initiatives come and go or get funded then cut to fit political cycles. There are early markers in this budget of the direction the Government wants to pursue across early years policy, income support, place-based initiatives and skills and training.

There are also shifts in the approach to tackling these issues – including a welcome investment in evaluation capacity and measurement. However, these will be little more than down payments if the big policy reviews that are currently underway don’t result in significant future investments and policy shifts. Above all, maintaining a focus on reducing disadvantage over multiple years and cycles will be tough but necessary.

Will this be the turning point that many of us have been waiting to see?

Authors: Patrick Flynn & Cassie McGannon