Australia’s welfare system puts disadvantaged at risk, inquiry told

Australia's mutual obligation system for welfare risks "subjecting disadvantaged participants to unreasonably onerous and punitive conditions", the commonwealth ombudsman has warned.

The ombudsman made the submission to a Senate inquiry, which has already recommended a major overhaul of the controversial ParentsNext program, and revealed that Aboriginal and Torres Strait Islander participants were fined at almost double their rate of participation.

Indigenous participants "incurred a higher rate (33%) of payment suspensions than their proportion of the ParentsNext caseload (18%)", according to the employment department's submission.

ParentsNext is a $110m a year pre-employment program which requires some people on parenting payments with children as young as nine months to attend compulsory activities such as career guidance, vocational education, playgroups or storytime, or risk payment suspension.

The Senate select committee inquiry is examining ParentsNext as well as the entire Workforce Australia employment services model, which imposes obligations on welfare recipients who risk payment suspension for non-compliance.

After the election of the Albanese government in May 2022, the employment services minister, Tony Burke, said it was too late to unwind Coalition-era contracts for Workforce Australia but promised to make the points-based mutual obligation system more "logical".

In its submission, the commonwealth ombudsman warned it was "concerned the incentive structure for providers and their discretion concerning participants' job plans may not always produce fair outcomes for participants".

"For example, participants may be subject to significant penalties such as payment suspensions for relatively minor instances of non-compliance."

The submission to the Senate inquiry comes after revelations in the robodebt royal commission from senior members of the agency that the commonwealth ombudsman did not do enough to shut down the program, despite doubts about its legality.

The employment department's submission noted in 2021-22 that 25,920 people, or 22% of the participants of ParentsNext, had their payment suspended.

"Since 2018, out of more than 220,000 parents who have participated in the program, 17 individuals have incurred a financial penalty. Six of these were in 2021-22."

The department said that younger men were more likely to fail to meet requirements without a valid reason, but "Aboriginal and Torres Strait Islander participants are more likely to face compliance action even controlling for these factors".

The department is reviewing "whether bias is a factor in decision making", it said.

The department defended the penalty regime by noting it accepted a "range of valid reasons for non-attendance" and the system allowed a review "before financial penalties are applied".

Earlier iterations of the program "had more flexible compliance arrangements, relied on income support suspension and did not apply penalties, and were not subject to the same level of criticism", it said.

In separate submissions the Australian Council of Social Services and Jobs Australia, the largest network of not-for-profit job services providers, called for mutual obligation to be overhauled to ensure activities are beneficial, and the "punitive dynamic is removed from the employment service relationship".

In February the Senate select committee's interim report recommended that the ParentsNext welfare program be abolished and replaced by a new service that dials down mutual obligations and offers cash incentives for parents.

"I think we want to make sure that we're not penalising women unfairly, but also that we are providing the right support for them when they're parenting young children," Gallagher told Radio National.

The inquiry continues, with a final reporting date of no later than 29 September.