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From Schwartz Media, I’m Kara-Jensen Mackinnon, filling in for Ruby Jones.

This is 7am.

Labor has been shy to propose any major changes to the unemployment system, and during the election, they even ruled out raising the rate of unemployment benefits.

But now we have new insight into what Labor is saying behind closed doors and it appears they are far from happy about what they’ve discovered in the unemployment sector.

Today, senior reporter for The Saturday Paper, Rick Morton, on mutual obligations and the first signs that the system might change.

It’s Tuesday, October 11.

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KARA:

Rick, If you're unemployed in Australia, in order to receive any benefits, you have to complete a whole stack of tasks under what is called the mutual obligation system. So to start, could you just walk us through this process and what it actually means for a person who's unemployed?

RICK:

Yeah. So, mutual obligations are at the heart of the employment services system and the welfare system, really, in this country. And basically what it means is that they make you jump through hoops if you're receiving income support payments to, quote unquote, ‘earn those payments’. The idea being that you've got a responsibility to look for work and the government has a responsibility to look after you in theory, by actually giving you those unemployment benefits.

The problem is that the system that's evolved around those mutual obligations is really complicated, and it is itself a multi-billion dollar privatised network of companies, not-for-profits, charities who exist almost solely to do the work of bringing people through those obligations. So, you can get your points. You can do your mutual obligations essentially any way that you are able to. So, you can enrol in a training course. You can do work for the dole, you can do an internship through the government, you can apply for a certain amount of jobs every month. You can turn up to your appointments with your provider. You can do an employability skills training, a little course or a career transition little course, and all of this stuff adds up and et voila: mutual obligations! Sounds easy, not incredibly easy to do when you're actually unemployed and you've got no money or very little money because it takes for many of these things, you've got to either have a car or you've got to have enough money to get public transport.

If you live in a rural and remote area, there aren't that many options if you've got children. And of course, with lots of single parents on jobseeker, you know, it makes it hard to meet your points total. And we've got this new thing now where you've got to get 100 points every month, and so you've got to find little bits and pieces of that puzzle to bring your points total up to a hundred every month. And then it sits, goes back to zero basically, and you have to do it all over again.

KARA:

Okay. So at the end of this whole process, if a person manages to jump through all these complicated hoops and complete all these tasks, they get a job, right?

RICK:

No, not really. And this has been the bane of this system and governments for a long time in that it doesn't actually result in secure long term work, certainly not in proper work.

So casual jobs count towards what we call outcome payments under the old system, even under this system, you know, if you get a casual job placement at the end of four weeks, or 28 weeks, a month or six months, then the government will pay a bonus to the job service provider that has allegedly helped you get that job. Now, more often than not, we've seen evidence that people would have got those jobs anyway and that it wasn't because of any particular help from the job service provider. Nevertheless, the government pays that money as a bonus or an outcome payment, but there is a lot of security in that system, and people who tend to get these casual jobs are more often than not or as often as not unemployed again within a certain period down the track. So they come back into the unemployment system and then lo and behold, they're eligible one more time for another placement, another insecure job, another bonus payment for the provider. And so the system continues.

Now, beyond that, nobody really knows what happens to those who have successfully exited the case, nobody tracks them. There is no longitudinal research now, in addition to all of these things, if you fail to respond to your, quote unquote mutual obligation, that's part of the system. If you're a jobseeker, somebody on the unemployment payments, then these providers working in concert with the government can actually suspend your income support payments. So, between January and June last year, for example, jobseekers had their payments suspended temporarily almost 1.3 million times. There were a further 745,000 instances of payment suspensions that would have happened were it not for the unemployed person being able to convince this private provider that they had a reasonable excuse for failing to meet those initial obligations. So there's a lot of tension in the system and the job service providers have a lot of power that has been delegated by the government.

KARA:

These issues will sound obviously very familiar to anyone who has been caught up in the endless labyrinth that is this mutual obligation system. I mean, I personally still get very triggered when I hear that Centrelink hold music. So how has the Labor Party actually responded to these problems of unemployment? Have they approached the election with any proposing of reform?

RICK:

No, not not a huge amount. So what was happening behind the scenes was that there has already been a review underway. The previous unemployment services system, I suppose what I call it, was called Job Active. And the Coalition had already started a review process and a trial. To come up with a new system that was meant to make things slightly better. They did that. It's called Workforce Australia and they signed all those contracts before the election and it was due to start and has started from July one this year.

Now the Labor Party knew all of that. They were watching all of that happen. They weren't happy that the contracts for these services were made before the election. But they broadly support Workforce Australia. Ideologically Labor and the Coalition have been pretty much on a unity ticket when it comes to mutual obligations and job services in this country. Going back quite a long way now and they initially planned having come into government to just let the system roll out and see how it goes.

KARA:

And so then what happened with that rollout? How did it go?

RICK:

Well, there was a lot of angst very early on and for really good reason. So the new Minister for Employment and Industrial Relations, Tony Burke, he's begun to look more deeply into the contracts for the workforce Australia, the mutual obligation system and some of the things that Labor might be said to be not so keen on right now. And it's all laid out in this speech that I managed to get a hold of that Burke gave to the Workforce Australia National Forum in Brisbane late last month.

Now Burke delivered this blunt assessment, in his words, of Workforce Australia, which is this huge network of outsourced companies and charities that administer the mutual obligations unemployment system and it cost taxpayers billions of dollars to run. And he said in this speech, I've thought long and hard about this speech, to be honest, he said. And I'd been weighing up whether to just give the standard speech that had been prepared for me. It was a very good speech, but it probably wasn't as blunt as some of what I had to say. And it set up a pretty interesting showdown, I think, between the master and between the industry.

KARA:

We'll be back in a moment.

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KARA:

Rick, we've been talking about what the new Labor Government has discovered about these mutual obligations and a key speech you've obtained delivered by Tony Burke, which he delivered to a private audience. But first, there's actually been evidence to suggest that Tony Burke hasn't been happy with these mutual obligations in this system for a while now, right?

RICK:

Well, yes, that's true. And what we're looking for as journalists is the gulf between what he says and what he does. Right. So we now know that when he was first sworn in as Minister for Employment, as all ministers do, he was given an incoming ministerial brief from his department. Now, in that brief, some of which has now been made public through freedom of information, it confirmed this really key criticism of the employment services system that advocates have been raising for a very long time, and that is that there aren't enough jobs for more than half of the caseload of unemployed people.

So of the 820,000 people in I think it was April this year in the former job active caseload before it transferred to Workforce Australia, 57 per cent were in the lowest skill category. So we're talking certificate one or secondary education no more. Just 14 per cent of all the advertised jobs nationally were suitable for this group of people. I'm not a maths expert, Kyra, but that's pretty obvious that they don't fit into 14 per cent.

The second thing that has tipped Burke's hand is that he inherited these $7.1 billion of contracts for Workforce Australia that was signed by the Coalition before the Federal election. And this is the second biggest contractual undertaking by the Commonwealth outside of defence spending. And Tony Burke's been pretty clear that he didn't like those contracts, he wouldn't have signed them. But now we're getting a little bit more explanation from him about the room. He thinks he has to move within those contracts without breaking them to change things that are starting to concerning him.

KARA:

And so what exactly did Tony Burke outline in this speech? What are some of his main concerns going forward?

RICK:

So his biggest point in this entire speech, I think, was that he was very adamant that there could not be waste in the system because we're talking about a lot of taxpayer money going into the system for what in particular few people can really say is certainly not very good at producing results for the unemployed.

So much of Burke’s speech was spent kind of admonishing providers for these absurd pieces of process that had been reported in the media. He said, We must never fall into the argument of saying, ‘oh, look, yes, sometimes things go wrong, but most of the time we get it right’. He said, with public funds, you don't get away with that argument. And he went on to say, you know, and while some of you are running charities, many not for profit, many for profit commercial businesses, it doesn't matter in every instance, it still comes back to taxpayers money.

So he also seems concerned that the current system isn't getting enough people into long term secure work. And this is very interesting, I think. He's worried that many people are simply going into casual employment and then ending up back in the unemployment system, which is certainly not an idle worry. It's been happening for a very long time. And he said to these providers at this forum, I know all the different forms of implementing and casual will always be the easiest to be able to place people, always. But there is a world of difference. After six months, if someone has a part time or full time job compared to whether they have a casual job.

KARA:

And I mean, these criticisms, they're not really new. There's been people advocating in this space for years now who've been trying to point out these issues. And yet the government seems to have committed for some reason, by and large, to maintaining the system as it is. So do you think Tony Burke can actually make any changes at all? Are his hands kind of tied?

RICK:

I think Tony Burke believes that his hands are more tied than they actually are. But certainly in this speech, we get a little bit more of a fulsome explanation from him about the fact that he believes now that he has got some flexibility within these contracts. You know, he still reiterates the point that he's not a contract breaker. He's not getting into government to break the contract that was signed, for better or worse, legitimately by the former government.

But he has gone back and looked through these contracts because he got a legal threat from one of the job service providers that basically said, don't mess around with the system too much because we've got skin in this game and we sign contracts and we will hold you accountable to those contracts. So that actually caused him, according to Tony Burke, to go back and look at these contracts with a fine tooth comb. In fact, he said there is still a fair bit of flexibility there. I'm bound by the contracts. I don't break contracts, but I do know that where there's a level of flexibility on one side, there's a level of flexibility on both sides. And I want us to do this cooperatively. In fact, he was very clear that he said, I don't want this descending into anything silly.

Now, one of the reasons we're starting to get this shift in tone and language is because Tony Burke asked the Labor MP Julian Hill to chair this new House of Representatives Select Committee on Workforce Australia Employment Services. This new committee is already being set up, it'll look at the whole system and it will report within a year of how this current system is rolling out. What are the problems? What's going on?

And it will make recommendations about where we can make long term changes to the contracts, but also where we can make immediate changes now without breaking those contracts. Now, of course, a lot of the criticism has been that the problems have always been the same, which is that we've outsourced something that really exists just to punish unemployed people. And why do we need this inquiry to tell us the same thing again, especially when we have to wait a year of people having to jump through those hoops in the meantime?

KARA:

Okay. So why then do you think it is so politically challenging for Labor to make large scale reform in this space?

RICK:

The answer in which I can see where they're coming from is that there are no votes in it. The uncomfortable truth of this whole thing is that there's not enough political capital in people being treated badly.

Having said that, I feel like that's starting to change. People are starting to become a little bit more aware of the fact that any one of us could end up in the system. And you designed the system as if you yourself had to use it. The problem that we've got in Australia is that we've had decades of bipartisan kind of ideological rhetoric that demands jobseekers prove that they are working in some way and somehow for their income support benefits. This is the mutual obligation system, right?

That's all it is. It's just we don't trust you. So, we'll give you the money. But you've got to give us a little bit in return. And of course, now we've got this overwhelming evidence that the system punishes the unemployed without improving their chances of finding employment. In fact, in many cases, it makes it worse. So in the Labor Party, the question now becomes how do they navigate this system? Perhaps what they're going to do is tinker around the edges in the meantime. And you know, if I'm being generous, perhaps hope that this inquiry will give them the report base that they need to make some more substantive changes. I will believe it when I see it.

KARA:

Rick, thank you so much for your time.

RICK:

Thanks, Kara. Appreciate it.

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KARA:

Also in the news today, it has been revealed that 28 defense projects were running overtime by an accumulated total of 97 years under the former coalition government and that this has created costs of $6.5 billion over the approved budgets for the projects.

Deputy Prime Minister, Richard Marles, said that when it comes to defense procurement, the former government was, quote, “one of the worst in Australia’s history.”

And dozens of rivers across New South Wales are flooding, and more heavy rainfall is expected mid-week. The premier of New South Wales, Dominic Perrottet, has urged people not to drive through flood waters.

I’m Kara-Jensen Mackinnon, this is 7am. See you tomorrow.

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