Australian Credit Cards > Credit Card News > Australian Welfare Payments go Plastic

Email this article: Australian Welfare Payments go Plastic  Email 
 Link to story 

Australian Welfare Payments go Plastic

By Leni Mex

Some Australian welfare recipients will soon use something that looks a lot like a credit card to pay for essential items. But it's not a credit they're getting but their biweekly welfare payments that have daily or weekly spending controls built in. australia-card

The new BasicsCard program will be managed by the Department of Human Services.

In this form of "compulsory income management," the most at-risk welfare recipients will be put onto BasicsCard program, in order to receive funds. The card has drawn controversy as recipients can only pay for necessary items like rent, bills, food, and education. In the past, Aussie welfare recipients could spend their welfare checks on just about anything.

This system was first trialed by the Howard government in the Northern Territory in 2007 and is currently employed in Western Australia (metropolitan Perth and the Kimberley region) Logan, Rockhampton, and Cape York (Queensland), Bankstown (NSW), Playford (SA), and Greater Shepparton (Victoria).

Encouraged by feedback from these test areas, the government is forging ahead with plans to roll the scheme out over much of the country, at a cost of approximately $1 billion.

Nevertheless, detractors of the initiative have raised concerns over the cost of the scheme.

"We would not see this as an ‘innovation,'" said Fiona Guthrie, executive director of Financial Counseling Australia. "It is extremely costly -- $4,500 per person in the Northern Territory rollout."

And concerned about the way that the BasicsCard is often referred to as a credit card, Guthrie said that it may work like a cash card, but that's where the similarity ends.

What is compulsory income management?
According to a 2012 parliamentary report, income management -- also known as "welfare quarantining" -- siphons off between 50 and 70 per cent of welfare funds into a special account that can only be spent on certain goods and services.

Among those goods the report specifies as off-limits with the card include: alcoholic beverages, tobacco products, pornographic material, home brew concentrates and home brew kits, and gambling services.

Welfare payments arrive every two weeks with a spending cap of $1,500 per day. Those who complete a government approved money management course and have a 13-week record of compliance with the course, may be eligible to a $500 contribution towards household goods.

Other aspects of the scheme include:

  • Directing welfare payments to the priority needs of recipients, their partner, children and any other dependents.
  • Help affected welfare payment recipients to budget so that they can meet their priority needs.
  • Reduce the likelihood that welfare payment recipients will be subject to harassment and abuse in relation to their welfare payments.
  • Encourage socially responsible behaviour, particularly in the care and education of children.

Does compulsory income management work?
According to the report, the rest of the payments will be paid as usual, and the remainder of the welfare money can be spent as the recipient wishes.

The income management initiative is designed to curb the number welfare abuses, to "foster individual responsibility and to provide a platform for people to move up and out of welfare dependence."

Welfare recipients specifically targeted by the income management program in the Northern Territory are those deemed by the Government to be disengaged youth, long-term welfare recipients, and vulnerable welfare payment recipients.

But Guthrie is not only concerned about the concerned by racial narrative played out in the initiative-of the 17,000 people subject to income management in the Northern Territories, 90% are indigenous-she is also concerned about the government's lack of any conclusive data that shows how successful the initiative really is.

"Voluntary income management - where an individual or community decides themselves...this budgeting and payment mechanism helps them [and] is fine," said Guthrie.

"But compulsory income management is a completely different story," Guthrie continued. "Many people feel stigmatised, as if they are second-class citizens. They might want to travel somewhere but the new location doesn't have the stores where they can use it. It is extremely costly. It treats everyone the same, when this isn't the case. Government staff is really making really big decisions about people's lives."

The June 5 parliamentary report states that any evidence provided for or against income management is inconclusive.

"At best, the evidence has only partially clarified particular aspects of a complex situation," the report states. And it admits that, "much of the controversy stems from the fact that there are substantial difficulties associated with evaluating the effectiveness of income management."

See related:  Considering a payday loan? Weigh the risks; Got bad credit? 4 ways to boost your score

Published: October 11, 2012

Comments or Questions, Library of Stories

Email this article: Australian Welfare Payments go Plastic  Email 
 Link to story 

Three most recent Bad Credit / Credit Repair stories:

  • 8 ways to improve your credit record – Thanks to the new comprehensive credit reporting system, which includes your good behaviour instead of just the bad, securing a good credit deal is easier these days. But improving your credit score is still no easy feat ...
  • 5 warning signs of bad financial advice – When you're having money troubles, one of the first suggestions you'll get is to seek professional help. But how can you know if your financial expert is giving you good advice or not? ...
  • Use caution when hiring credit repair service – Experts and consumer advocates question whether credit repair services -- some of which charge upward of $1,000 to fix your credit -- are worth the cost, or if you should do it yourself ...