Helping or Harming? Compulsory Income Management in Australia and New Zealand

By Louise Humpage

Imagine that during the Covid-19 lockdown you had no means to buy online goods, because your EFTPOS-like card could only be used in person at a limited number of shops, many of which were closed. 

Imagine if you had to seek permission (with sign off at two levels) just to shift money from that card to your bank account, so you could buy basic goods at the dairy.

This is what lockdown was like for Youth Payment and Young Parent Payment recipients who are subject to Money Management, a form of income quarantining that means most of your income is paid directly to your landlord and other utilities, up to $50 is offered in an In-Hand Allowance and the rest is allocated to a Payment Card which can only be used certain shops (mainly supermarkets) and not to buy alcohol, cigarettes or electronic goods. 

This policy was introduced in 2012 with the view that young people on benefits cannot be trusted to spend their benefit appropriately, so must be taught how to manage their money through compulsory budgeting courses, mentoring and – rather ironically – by removing their agency and control over most of their benefit payment.

Australia is the only other country that implements a similar type of such income quarantining (often called ‘income management’).  There it targets a wider range of benefit recipients and there is more diversity in terms of how income management is implemented, but the fundamental premise is the same: benefit recipients are poor because they do not manage their money well, so the state must take control and tell them what they can buy and cannot buy.

Prior to the lockdown, research in New Zealand and Australia indicated that income management has many detrimental effects on benefit recipients.  These include not only frustration and despair at being unable to buy the goods they need when they need them but also increased stigma and shame, as well as anxiety and stress.  In some cases, cultural needs – such as attending tangihanga – remain unmet because payment cards cannot be used to buy petrol or koha.

Ironically, many benefit recipients on income management also report increased difficulties in meeting their financial commitments due to their lack of control over when payments are made (meaning, for example, they miss loan repayments), problems with IT systems that mean cards do not work when they should and an inability to use Trade Me, local markets or second hand shops because of insufficient cash. Indeed, in New Zealand the direct debits for rent and board appear to prioritise the financial security of landlords over that of the young people receiving the benefit. 

Worse, there is evidence that income management is poorly targeted.  No assessment is made to evaluate whether money management problems exist before control is taken away. People who have previously worked, have no record of not caring appropriately for their children and are demonstrating financial responsibility are subject to the same conditions as those who might be more spendthrift.  Many of the Young Parent Payment recipients I interviewed were extremely angry that anyone should think they were not already putting their children first when making financial decisions.

Much has been made of how Covid-19 has increased the financial vulnerability of workers and employers, but benefit recipients on income management were already extremely vulnerable before the inevitable recession that will follow this global pandemic.  While many New Zealanders are newly coming to realise how little money benefit recipients must live on, due to their age most will not be subject to income management – yet.

The National Party says it wants to extend income management if it is re-elected.  Many of the newly unemployed probably think they won’t stand for that; but like other benefit recipients, they will find they have little choice in our highly conditional and punitive welfare system if they don’t want to go hungry.  

New Zealanders have demonstrated that we can “be kind” to each other over the last few weeks, so let’s make sure that politicians from all parties know that income management is no longer a tolerable policy position.

More findings from the comparative research study are documented in a new report:

Helping or Harming? Compulsory Income Management in Australia and New Zealand.