Level of social assistance

IBISWorld forecasts the level of social assistance to increase by 0.14 percentage points in 2025-26, to reach 6.11% of GDP. A modest hike in the unemployment rate will increase the number of people receiving the JobSeeker Payment, boosting government expenditure on unemployment-related social assistance, while energy rebates and other social assistance measures will continue to rise. At the same time, an increase in the population aged 70 and older will lead to higher government payments, as older age groups tend to rely more on social assistance.

There are two main drivers affecting the level of social assistance. The first is economic conditions. Ongoing weakness in the broader economy generally leads to rising unemployment and falling household incomes, prompting more people to seek government financial support. This directly increases social assistance through greater JobSeeker benefit payments. Additionally, other benefits that are means-tested, like the Carer payment and the Parenting payment, are typically taken up by more people, increasing total payments for those benefits. The increases in social assistance payments during economic downturns are usually accompanied by a decline in government revenue, as declining incomes, consumption and profits affect tax revenues. Although the government is forced into a budget deficit, this is considered an automatic economic stabiliser, as welfare provides income to consumers, which in turn boosts consumption and improves economic growth. In most circumstances, governments make minimal attempts to limit social assistance during these times to contain budget deficits and often increase payments to stimulate demand further.

The second driver is changes to government policy. Political parties often compete for votes by offering higher levels of social assistance or by removing social assistance, arguing that the levels are too high. This driver may have some correlation with the economic cycle, but is more heavily affected by political cycles.

The level of social assistance was extraordinarily high in 2020-21, the start of the period. This was fuelled by high government expenditure on social assistance over the two years through 2020-21, due to the Australian bushfires and the COVID-19 pandemic, which led to the introduction of the JobKeeper Payment and JobSeeker Payment schemes. At the same time, real GDP growth slowed over the two years through 2020-21, due to the pandemic, as many businesses were forced to reduce employee numbers while lockdown restrictions were in place and demand dwindled. As a result, the level of social assistance was at its highest in 2020-21 since 2008-09.

The removal of the JobKeeper Payment during 2020-21 and falling JobSeeker payments due to record-low unemployment rates contributed to a plunge in total social assistance spending during 2021-22 and 2022-23. Over the same period, GDP rose as the economy emerged from the pandemic and high commodity prices boosted export values, leading to a drastic decline in the level of social assistance from 7.76 percentage points in 2020-21 to 5.64 points in 2022-23.

The level of social assistance has begun to climb again since 2023-24 due to rises in the unemployment rate, hikes in the JobSeeker Payment amount and increases to rent assistance payments during 2023-24. In addition, during 2024-25, the higher JobSeeker rate of payment applied to single recipients with a partial work capacity of up to 14 hours a week, while a range of other social assistance payments also rose, including a 10.0% increase in Commonwealth Rent Assistance, a rise in carer and other family assistance payments and energy rebates for Australian households, which will extend into 2025-26. Social assistance spending has also risen since 2022-23 due to climbing NDIS payments and increased investment in aged care since the 2021 Royal Commission into Aged Care Quality and Safety. Overall, IBISWorld forecasts the level of social assistance to decrease at an average annual rate of 0.33 percentage points over the five years through 2025-26.