Introduction

The Australian economy has experienced over 13 consecutive years of strong economic growth, following extensive deregulation of its financial, product and labour markets. Throughout this period, the Commonwealth government has tightened its targeting of income transfers and relied increasingly on competitive tendering between government and non-government agencies to deliver its social programmes, leading the world in many of its reform initiatives. The fact that the Australian welfare system has traditionally relied on an extensive array of non-government agencies has made the task of privatising welfare more manageable than some other countries have found. However, the counterpart to this is that many of Australia’s welfare structures and institutions are more fragile than elsewhere, and questions are being raised about their ability to withstand current pressures. As the middle class is required to pay for services while being income-tested out of social transfers, support for the welfare state is declining, placing pressure on government to implement further programme cuts and/or user charges that reinforce the problem.

Australia's pro-market reform strategy emerged under the Hawke– Keating Labour governments of the 1980s, when the initial changes were introduced as part of an Accord between the government and the trades unions that delivered wage restraint in exchange for employment generation and a boost in the social wage. Since its election to office in 1996, the Howard government has combined an even more radical free market approach with a conservative social agenda built on notions of personal responsibility and mutual obligation. Market deregulation has been accompanied by increased real wages, but high productivity growth has meant that growth in output has not translated into employment, and unemployment remains stuck above 5%. Welfare receipt among the working-age population increased from around 11% in 1965 to over 19% in 1997 (Whiteford, 2000). Although welfare receipt has declined since then to below 16% by 2002, government policy remains focused on getting those on welfare into work.

Against this background, this chapter examines the circumstances of households that contain disabled members in the context of proposed reforms to the main income support programme for disabled people, the Disability Support Pension (DSP).