By avoiding means testing, the government is giving handouts to the rich |
Australia’s highly targeted tax and transfer system is being eroded by a shift toward universal benefits – redirecting support away from those who need it most.
Australia is a global success story. The structural reforms in the 1980s and ‘90s of liberalising trade, floating the dollar and reducing government involvement in the economy ignited an unprecedented period of growth. What followed was almost 30 years of uninterrupted economic growth and a substantial increase in living standards.
Crucially, this happened without a massive spike in inequality. A 2024 report from the Productivity Commission affirmed that our tax and transfer system played a significant role in redistributing income.
And while the size of government ballooned in Europe, with government expenditure soaring to around 50 per cent of GDP (gross domestic product) in the EU, it has remained comparatively lean in Australia, staying around 24 per cent.
Yet, unlike the US, Australia did not gut its social safety net. We deliver top-tier health outcomes, provide robust support to low-income earners and maintain a high-quality public education system.
How did we pull off this exceptional outcome? It’s largely because of something the current government seems to want to do less and less: means testing. We can see this in action with policies such as student debt cuts and electric vehicle tax concessions.
The shift towards universal policies may seem fair, but it’s creating a system that gives to the wealthy at the expense of the poor.
The idea is simple: support should be directed to those who lack the financial capacity to pay, while those with sufficient means should contribute for themselves.
Our tax and transfer system is one of the most targeted in the world. Research by academic Peter Whiteford highlights that Australia’s social security system is more targeted to the........