The degree to which our government provides support programs for our lower income demographics is a main point of contention across the political aisle.
However, we should all be able to agree that we can’t spend more than we can afford.
Doing so has a detrimental effect on Australia’s prosperity, which then further reduces our ability to fund these programs going forward.
In other words, we need to ensure welfare is sustainable, in balance with the productive economy.
Welfare expenditure was already trending higher when COVID hit it. That understandably caused a sharp upward jump, but has then stayed at an elevated level rather than returning to trend:
The uptake and expense of NDIS in particular is quite out of hand at this point.
We have so incentivised people to identify themselves or their kids as disabled, that now more than 1 in 10 boys aged 5-7 are on NDIS support.
You can see below that NDIS is projected to overtake all other categories of government spending:
Thankfully this doesn’t seem to be a contentious issue, with politicians of all stripes agreeing that this needs to be promptly reined back in.
There are parallels here with Italy’s disastrous post-COVID building program, which ballooned out of control as people realised they could take advantage of its well-meaning support.
We should of course help our truly needy citizens via welfare.
However, it can prevent marginally needy people from ever becoming prosperous, a negative incentive against success. Beyond a certain point it holds people back, the presence of welfare can be an obstacle for people to push past and gain their own agency and self-sufficiency.
When welfare is removed after someone gets back on their feet, the now level playing field can feel tipped against them, undermining motivation.
So again the key here is balance: welfare for those who truly need it, who don’t have the means to support themselves, but hold short of displacing their own means of achievement and prosperity.