Gina Rinehart, Australia’s richest woman, can’t go on Jobseeker. That’s pretty much universally agreed to be okay—we would rather our tax dollars didn’t go towards bolstering the income of the ultra-wealthy. More than that, an additional $866 a fortnight would make no difference to Rinehart; she makes that much money every nine seconds. Australia’s welfare system is built on the principle that payments should go to those who need it most, which means high-income households do not receive government payments.

That’s why many welfare benefits have a means test—if you exceed a certain income or wealth threshold, you become ineligible. Youth Allowance, Rent Assistance, the Age Pension and unemployment benefits are all means-tested; as they should be. We don’t want billionaires receiving money from the government to ease the cost of living, and so thresholds based on income or wealth are constructed to direct payments towards lower-income Australians.

However, some taxpayer-funded programs are not means-tested, or they’re not means-tested in an effective way. New research from Policy Institute Australia found that around $21 billion of government welfare spending is flowing to the top 20 per cent of households by either wealth or income. That figure isn't driven by JobSeeker or Youth Allowance. Instead, it reflects programs that are either weakly targeted or not targeted at all, allowing substantial benefits to flow to affluent households.

The Age Pension is one example. Although the pension is subject to both income and wealth tests, the family home is exempt from the assets test. Individuals who live in multimillion dollar houses can still receive government benefits, while those who pay rent but have money in their superannuation are left without the pension, even if they have assets which are considerably less valuable in aggregate. The exemption exists partly to avoid forcing retirees to sell their homes, but it also produces inequity between homeowners and renters and means that some very wealthy retirees remain eligible for the pension.

There are even clearer examples. In the 2024 financial year, the federal government provided all households, regardless of income, with $300 to spend on electricity bills, and then $150 a year later. High-income households do not need government welfare to manage electricity bills. This program came at an estimated cost of $5.3 billion; if the wealthiest 20 per cent of households had not received the benefit, it could have saved the government over $1 billion.

There are reasons why a government would prefer a universal handout to a means-tested program. They’re simple to administer as the costs of regulating distribution are reduced without rigorous eligibility checks. Individuals do not have to go through an application process to receive the benefit, and arbitrary means testing brackets are not required. Without a lengthy or burdensome process, it’s more likely that all those who would benefit receive welfare—a wider net means that fewer people in need will be missed. Means testing requires administration, creates compliance burdens and can discourage additional work if benefits are withdrawn too quickly. But these costs should be weighed against the billions currently flowing to households that simply don't need government assistance.

Universal payments persist because they're good politics rather than efficient policy. When every household receives a benefit, those households have a reason to defend that policy, including the wealthiest 20 per cent. Targeted welfare, by contrast, has a narrower constituency behind it. A politician proposing to means-test the next energy rebate must explain to millions of voters why they're losing $150, while a politician proposing to cut JobSeeker would only impact a smaller group of people already on the program. Once introduced, universal payments create millions of beneficiaries, making them difficult for governments to wind back.

Universality also comes at a significant fiscal cost. It doesn’t make much sense to hand everyone $150, when most people have paid more than that in tax anyway. Even if energy rebates helped households manage rising bills, directing assistance towards high-income earners came at the expense of better targeted support. The same money could have funded larger payments for low-income households or reduced pressure on the federal budget. Because public resources are limited, directing assistance towards those with the greatest need generally produces greater improvements in living standards than spreading the same money evenly across the population.

When welfare payments are spread across the entire population, they inevitably become less generous for those who genuinely depend on them. Every dollar directed towards high-income households is a dollar unavailable for Australians facing unemployment, housing stress or poverty. To address this welfare failure, the government needs to reexamine how it means-tests for programs like the Age Pension. It needs to stand against political pressure and introduce means testing for programs like energy rebates. A welfare system that pays affluent households while many Australians remain below the poverty line has lost sight of its purpose.

Welfare should be about need, not political convenience.