Regulatory oversight and the delivery of mainstream income support

 

Through tatter'd clothes small vices do appear;

Robes and furr'd gowns hide all. Plate sin with gold,

And the strong lance of justice hurtless breaks;

Arm it in rags, a pigmy's straw does pierce it.

King Lear, Act four, Scene six.

In September the Guardian reported (link here) that some 300,000 Centrelink payment recipients had their payments unlawfully cancelled because of a glitch in the IT system that runs the mutual obligations scheme embedded within the social security system. The Guardian article stated:

The analysis from Economic Justice Australia shows about 310,000 people had their Centrelink payments unlawfully cancelled between 2020 and 2024 because they were not given enough time to reconnect to a job provider after missing a compulsory activity as part of their mutual obligations.

Jobseekers are required to meet mutual obligation requirements – such as attending meetings with an employment provider and applying for jobs – to continue to receive their payments. After jobseekers receive five demerits in the mutual obligation system, they enter what is called the “penalty zone”, where they risk having their payment completely cancelled.

The Guardian article linked to a previous report where the Commonwealth Ombudsman had found 964 persons had their payments illegally cancelled. The Employment and Workplace Relations Department (DEWR) later found additional unlawful cancellations and the mutual obligation system was placed on hold.

A second Report from the Commonwealth Ombudsman has just been issued titled Fairness in the Targeted Compliance Framework: when decisions are made beyond your control (link here) which follows up on the Ombudsman’s previous report. The Mandarin provides a short summary of the report too (link here). Both these reports deal with mainstream income support and do not apply to remote regions where the Community Development Program (CDP) administered by NIAA and DEWR operates (link here and link here). Importantly however, the same IT systems that underpin mainstream program administration are utilised for CDP.

I don’t propose to attempt to unpick the administrative detail that underpins the delivery of income support but instead point to two important elements revealed by the Ombudsman’s valuable analysis.

First, Indigenous citizens are over-represented in the unlawful cancellations. Bear in mind, these are citizens residing in urban and regional Australia, not remote communities. The Reports states (page 11; footnote removed):

Of the 985 unlawful cancellation decisions affecting 964 job seekers between 8 April 2022 and 4 July 2024 (affected job seekers), First Nations People were disproportionately represented:

·         16%:  Average number of First Nations People who accessed Workforce Australia Services between 1 October 2022 – 30 June 2024

·         46%:  First Nations People who were identified to have had their payment unlawfully cancelled between 1 April 2022 – 4 July 2024

Further, 24% of affected job seekers had one or more of the following vulnerability indicators attributed to them: • psychiatric problem or mental illness • illness or injury requiring frequent treatment • significant lack of literacy and language skills • drug or alcohol dependency which impedes compliance • recent traumatic relationship breakdown • homelessness (beyond the control of the job seeker) • cognitive or neurological impairment and • significant caring responsibilities.

I have quoted the related vulnerability indicators as Indigenous citizens are undoubtedly over-represented in many of these categories. They point to the deep systemic issues in play that point to the importance of considering issues beyond Indigenous status in seeking the causes of the underlying drivers of disadvantage.

Bearing in mind the finding by Economic Justice Australia that the total numbers of unlawful cancellations was over 300,000 between 2002 and 2024, the number of Indigenous citizens adversely affected is likely considerable, perhaps in excess of 45,000 over the relevant period.

Second, the Ombudsman’s most recent report makes a finding related to the apparent underinvestment in compliance oversight of the providers by DEWR (see pages 44-47). I have extracted four paragraphs from the report which I suggest are worth considering (emphasis added):

As discussed in Finding 5, DEWR and Services Australia are overturning provider decisions at a high rate. When incorrect decisions are being made by providers at such high percentages, we cannot be assured that DEWR’s prevention and education strategies are sufficient or should not be complemented with a more rigorous approach to deterrence and sanctions. Given the program has been active for more than 3 years, we would have expected more compliance activities against providers.

Our concerns of the lack of transparency for provider performance were heightened when we observed that there appeared to be nominal compliance actions taken against providers. A lack of provider performance transparency combined with nominal compliance actions against providers, in an environment where a high rate of provider decisions are overturned, could point to an oversight design where providers are not being held accountable for poor performance.

In comparison, job seekers are very frequently subject to potentially catastrophic penalties for perceived failures to comply with mutual obligation requirements. In 2023-24, providers issued 1,373,295 income support suspensions to 734,220 job seekers; of these, 6,895 job seekers were subject to financial penalties.

Providers are paid significant amounts by the Australian government to deliver services to job seekers. In 2024-25 DEWR spent approximately $1.256B on Workforce Australia, 74% of DEWR’s spending on employment services.

Conclusion

My own takeout from the release of this report is threefold:

First, the implementation of outsourced program delivery arrangements requires high quality and independent regulatory oversight if the public interest is going to be served. What is almost always absent in our whole of government thinking about the delivery of basic services is the quality of regulatory oversight. I do not doubt that there are downsides to excessive regulation in some policy spaces, but to the extent that the incessant and longstanding campaign against regulation is broad bush and not nuanced, it should be seen for what it often is: ideological special pleading.

Second, there is a case for our core accountability institutions to shift more attention to focussing on the issue of whether governments are under-investing in regulatory oversight across the board (rather than in focussing on whether particular programs or (worse still) program clients are involved in fraud, inefficiency or maladministration. My sense is that at least in areas where the recipients of government services are comparatively voiceless, that this regulatory underinvestment is endemic and indeed a key element in driving or exacerbating systemic (and seemingly intractable) disadvantage as appears to be the case in the income support /social security system.

Third, in terms of Indigenous policy, the mainstream policy realm matters. While the extent of disadvantage and need is arguably more intense in remote regions, the issues facing non-remote indigenous citizens are quantitatively and qualitatively significant and structurally embedded. The National Agreement on Closing the Gap includes as one of four Priority Reforms a reform focussed on the transformation of mainstream institutions (link here). However, the underpinning detail is all about the processes used by agencies to deliver mainstream programs and says nothing about the importance of high-quality mainstream regulation in ensuring Indigenous citizens access mainstream programs equitably. This may appear to be a very fine distinction, but I would argue that it is a crucial distinction that deserves more thought by the Joint Council on Closing the Gap.

10 December 2025

Correction: an astute and conscientious reader has alerted me to the fact that in the third paragraph above, I incorrectly state that the Community Development Program (CDP) administered by NIAA and DEWR operates across remote Australia. Of course, the reason that is incorrect is that the Albanese Government has from the current financial year replaced the CDP with two new programs: the Remote Jobs and Economic Development (RJED) program and the Remote Australia Employment Service (RAES).

The RAES is very similar to the CDP, although much less punitive. There is currently a moratorium in place on the mutual obligations elements of the RAES, however these are scheduled to come back into operation on 6 February 2026. In a recent seminar I attended, I heard someone refer to the RAES as ‘CDP lite’ which may have contributed to my oversight when drafting this post.

The RJED program is I think a valuable initiative although I would have structured it differently, and most problematically, I consider it to be a woefully small response to the problem of structural unemployment in remote Australia. As I have mentioned previously, the Prime Minister claimed CDP was a ‘failed program’ (link here), but given that there were over 40,000 participants in CDP, a reform involving funding 3000 jobs to be implemented incrementally over three years is hardly going to be the transformative reform the Government claims to be implementing, and nor does it meet the commitments made by the Government in 2022 in the lead up to its establishment (link here).

Apologies to readers of this post for my error.

12 December 2025

Reconsidering the architecture for closing the gap

 

                                                 Go, tread the path that thou shalt ne’er return.

                                                 Richard III, Act One, scene one.

 

Following the publication of the Productivity Commission’s draft report for its Closing the Gap review (link here), I published a critique arguing for a more wholistic approach to the review. Having already made a submission, I was initially reluctant to make a further submission, but eventually decided I should make the effort to put my views formally to the review.

 

Last week, I submitted a second submission (link here) focussing primarily on the high level problems with the architecture for Closing the Gap, and argued that the Commission should take the opportunity to look beyond the Priority Reforms to the policy architecture generally and the targets in particular. I also attached an appendix outlining one alternative approach to designing the policy architecture for Closing the Gap. My purpose was not to advocate for that specific design, but merely to demonstrate that alternative design approaches are feasible which would address the flaws and gaps in the current policy architecture (which I pointed to in the body of my submission).

 

As it is reasonably short, I include the appendix below, and encourage readers to read the full submission.

 

Appendix A: Outline of one possible alternative framework for closing the gap

 

[This potential framework is included merely to demonstrate that alternative approaches to devising a framework for Closing the Gap are possible.]

 

The first step would be for the Productivity Commission to be requested to make an independently refereed estimate of the potential cost of closing the gap over (say) a fifty year period. This estimate should be indicative, revised every five or ten years, and designed to inform the Australian community of the scale of the challenge involved. Such an estimate should be contextualised with an analysis of the broad causes of existing disadvantage to undercut any suggestion that these are self-inflicted costs or that First Nations citizens are somehow responsible for their disadvantaged status. Such an estimate might be complemented by a revival of the Productivity Commission’s previous Indigenous expenditure reports, albeit better framed to take into account positive and negative expenditures, to differentiate between citizenship entitlements and discretionary investments, and perhaps even broadened to include tax expenditures as well as appropriated expenditures.

 

Core principles of the framework would be that the targets should be high level and address systemic issues, and implicitly acknowledge that deep disadvantage has multiple causes and symptoms.

 

The primary purpose of the targets would be to provide a generalised indication to governments whether or not disadvantage exists and continues. To this end, a limited number of targets would be set based on the availability of reliable data, and their power to communicate a readily understood narrative to the Australian population. To this end, they would generally involve comparisons between Indigenous and non-Indigenous citizens, and may benefit from being aggregated to amalgamate differing data points within each cohort into a single index (e.g. to amalgamate outcomes for education outcomes at different schooling years into a single index). There should be no expectation that Governments should allocate funding to these particular targets.

 

Examples of potential targets include:

•          Comparative lifespans.

•          Comparative educational outcomes.

•          An indicator of comparative geographic disadvantage across urban, regional and remote regions (incorporating physical infrastructure elements such as housing and essential services; and perhaps other core services such as health and education).

•          An indicator of comparative health disadvantage.

•          An indicator of comparative justice system disadvantage.

 

Beneath the high level targets there would be a limited series of high level ten year sectoral priorities linked to the allocation of additional funding locked in to legislated appropriations.  These core priorities would be supplemented by additional priorities locked in to the forward estimates. The priorities and their associated funding would be underpinned by a published policy or program rationale that includes indicators of current comparative socioeconomic status, a program logic and rationale, and links back to the overarching aim of the Closing the Gap agenda, namely, removing comparative disadvantage and inequity. However, there would also be scope for these priorities to encompass initiatives directed to strengthening culture, including for example language programs, support for the various forms of artistic expression, and support for maintaining links to land and country. Stronger cultures strengthen the capabilities that are a core part of citizenship and contribute indirectly (but importantly) to addressing disadvantage. In other words, such a model builds in a tangible mechanism for governments to acknowledge and fund alternative life choices by First Nations citizens.

 

In relation to the ten year sectoral priorities, there would be benefit in requiring these to be agreed Commonwealth /state funding programs which are designed to be additional to current funding initiatives and programs and can be monitored and assessed as a unified strategy.

 

There should be regular independent evaluations of each the sectoral and additional priority programs, with the evaluation reports tabled publicly in Parliament.

 

Additionally, there should be a series of Priority Reforms (such as currently in place) focussed on driving institutional and systemic reforms designed to support and underpin the Closing the Gap policy architecture. These should be framed in qualitative and not quantitative terms, and should be assessed by regular reviews (such as the current review process).

 

Finally, the Commonwealth should take the lead in this national project as the ‘first among equals’, rather than the current model where is sees itself merely as one of nine jurisdictions with responsibility for closing the gap. This would mean that it should take a direct leadership role in ensuring high level consistency in the closing the gap activities of states and territories, and in engaging with the Coalition of Peaks. The Commonwealth should take responsibility for amalgamating performance monitoring and reporting related to the closing the gap architecture across all jurisdictions. It should also provide robust feedback (perhaps through establishing a statutory office) to the states and territories on the quality of their program reports and implementation plans. This would be consistent with the implicit purpose of the 1967 referendum which gave the Commonwealth powers to legislate in relation to Indigenous citizens.