However, it is important to understand that government payments to individuals who are unemployed are only a fraction of the spending on the welfare state's largest programs - health and retirement income. These programs benefit everyone, regardless of their financial situation. A productive and technologically advanced economy requires a strong welfare state that educates its citizens and keeps them healthy.
Today, we stand at a crossroads. The welfare state is expanding in several areas, including aged care and the national disability insurance scheme. As such, it is necessary to consider how we can better support our fellow Australians, particularly the most vulnerable, without substantially increasing taxes as a share of GDP.
There are three intellectual pillars to the welfare state: the universal provision of services, the redistribution of resources, and a focus on risk management. While all three pillars are important, we could benefit from placing greater emphasis on the third pillar, particularly in light of recent events such as the COVID-19 pandemic.
For decades, governments ignored warnings from experts about the need to prepare for a pandemic. The failure to sufficiently prepare for a pandemic was financially astronomical, with the federal government spending more than $340 billion in response. This serves as a reminder that governments tend to adopt a reactive approach to the many risks that society and individuals face.
Thus, it is imperative that we adopt a more proactive approach, focusing on risk management to ensure the sustainability of our welfare state. An insurance mindset can serve as a key tool in this effort.
