Australian Priority Investment Approach to Welfare

Our social security system ensures the most vulnerable Australians will always have help. The Australian Priority Investment Approach to Welfare is about using evidence to ensure vulnerable Australians have a better future.

About the approach

Through the Priority Investment Approach and by intervening early, we can give people with capacity the support they need to take part economically and socially through work.

The Priority Investment Approach uses actuarial analysis to estimate Australia’s future lifetime social security costs. This allows us to look into the future and see where we are headed.

The approach also breaks down the cost of future payments to various groups within the population. This helps to understand what groups are most at risk of disadvantage and where to focus investment and support.

Valuation reports

The valuation reports provide insight into how Australians are likely to use the social security system in the future. This informs evidence-based policies and programs to help us deliver the best results.

The 2015 Baseline Valuation Report created a foundation. Later reports build on this foundation:  

Insights from the valuations have informed the Try, Test and Learn Fund. Read more about Transition Funding for Successful Try Test and Learn Projects.

History of the approach

The review of Australia’s social support system, known as the McClure review, recommended that Australia adopt an investment approach. This would help ensure funds are invested in those groups of people with the largest future lifetime costs and the capacity to move to self-reliance.

Frequently asked questions

Question Answer
Why has Australia adopted an investment approach?

An investment approach to welfare was a key recommendation of the McClure review. Specifically, the review recommended that actuarial analysis should be used to identify groups at high risk of long-term dependence on income support. This analysis would provide an evidence base for investments to improve people’s life chances and get people who can work, into work.

By intervening early we can give those with capacity a better opportunity to find work.

Employment has significant health and social benefits. Having a job also helps individuals build financial independence, and reduces social security costs.

What is actuarial analysis?

As recommended by the McClure review, the Priority Investment Approach is underpinned by annual actuarial valuations.

The valuations estimate the future lifetime cost of social security payments to the Australian population and groups within it. This method is similar to the way that insurance companies estimate their future costs.

These valuations and accompanying analysis help us tailor investments to address barriers to employment for people who would be able to work with extra assistance. This includes building their capacity to work in the future even if they can’t work now.

What is a future lifetime cost?

There are 3 different types of future lifetime cost estimates in the Priority Investment Approach valuations:

  1. 1. The total future lifetime cost is an estimate of the overall amount that the Government is expected to spend on social security over the lives of the Australian resident population at the valuation date.
  1. 2. A future lifetime cost for a group of people, such as those on Carer Payment, is an estimate of the amount that the Government will spend on all social security payments for the people who were in that group at the valuation date, over the rest of their lives.
  1. 3. A future lifetime cost for a social security payment category, such as the studying payments category, is an estimate of the amount that the Government will spend on payments in that category over the lives of the Australian population at the valuation date.
What will the Government do with the findings of the actuarial valuations?

The findings will help build a better understanding of specific groups and their transition pathways into and through the social security system.

This enables the development of tailored responses which improve people’s life chances and help build the skills and experience they require to find work.

Will the Government cut support for people who are not able to work to reduce their future lifetime costs?

Our social security system is there to support those who are most in need. It should also encourage people to build the skills, knowledge and experience required to find work. In doing so, this reduces the risks of intergenerational dependence on income support.

We are using the Priority Investment Approach to identify groups at risk of long-term dependence on income support who have the capacity to work and would benefit from additional help. For these people, the right policy supports at the right time could increase their prospects of getting and keeping a job.

Who performs the actuarial valuations?

PricewaterhouseCoopers was contracted to undertake the first 4 annual valuation reports from 2015 to 2018.

From 2019, the department has been working with the office of the Australian Government Actuary to continue producing annual valuations.

Why perform regular actuarial valuations?

Each annual valuation will enable more sophisticated analysis and more detailed understandings of the pathways into and through the social security system.

This will allow for further identification of opportunities to provide vulnerable Australians tailored support at critical points in their life.

What are the data sources for the actuarial valuations?

Underpinning the Priority Investment Approach actuarial valuations is the social security administrative data from Services Australia. This data is supplemented by other data sources such as Australian Bureau of Statistics population data, and data from the Household, Income and Labour Dynamics in Australia Survey.

Will the data used in the actuarial valuations be released?

To help foster innovative ideas for the Try, Test and Learn Fund, insights from the analysis were shared with service providers.

Priority Investment Approach analysis and insights are used for policy and program development by government departments.

The Priority Investment Approach dataset will not be made publicly available. A range of social security data is available through

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