The Albanese government is facing calls to suspend the use of a system designed to punish jobseekers who do not meet mutual obligation requirements after officials told a Senate estimates hearing that it cannot have “confidence” that the system is functioning lawfully.
The Department of Employment and Workplace Relations issued an apology in Senate estimates last week over failures of the system and said it had to repay more than $1.2m to 1,280 jobseekers due to an IT system error.
It comes after the federal ombudsman launched an investigation into the functioning of the compliance framework, while the full mutual obligation system undergoes three separate reviews.
Jobseekers are required to meet mutual obligation requirements – such as attending meetings with a employment provider and applying for jobs – to continue to receive their payments. After jobseekers receive five demerits in the mutual obligation system, they enter what is called the “penalty zone”, where they may have their payment completely cancelled.
The IT system was incorrectly extending the period of time a participant remained in the penalty zone, not exiting jobseekers from the penalty zone or putting them into the penalty zone when they should not be.
In July the department found the payments of a further 964 people had been cancelled unlawfully, prompting the government to pause all cancellations while it undertakes a review into “all payment cancellation decisions which may not have been validly made” between 8 April 2022 and 4 July 2024.
Officials on Wednesday confirmed reports in the Saturday Paper that when the government went to repay individuals, it found 10 had died. The government said it did not know if these deaths were related to the payment cancellations.
The department is now conducting two more reviews: one into the legality of the targeted compliance framework, the mechanism which ranks and penalises jobseekers when they are not meeting mutual obligations requirements and places them into the penalty zone, and an external review by Deloitte, which is investigating whether the mutual obligations system is functioning properly.
The department secretary, Natalie James, said she could not say “categorically” if the system was functioning legally.
“The statement makes it clear that I have concerns about the alignment between the legal framework and the system,” she told the Senate estimates hearing last week. “That is, in part, what has driven the legal review.”
Asked by Penny Allman-Payne, a Greens senator, if she would apologise for the harm against “the most vulnerable”, James said she did so “unreservedly”.
“I absolutely and unreservedly apologise on behalf of the department that we cannot have full confidence in this system delivering what it’s intended to deliver,” she said.
“It’s not acceptable, and it is my responsibility and not the minister’s [Murray Watt’s], in this respect … I am responsible, legislatively and administratively, for overseeing this process.”
Mutual obligation requirements are sometimes paused during severe weather events and national emergencies such as pandemic lockdowns.
On Thursday the peak body Economic Justice Australia wrote to Watt to ask for an immediate suspension of the penalty zone system. EJA’s chief executive, Kate Allingham, said the system was so complex and involved “so much jargon” that “even the people that are working within the system do not understand it”.
Allingham said there were “too many cooks” administering the system: Services Australia manages the payments while the department is responsible for mutual obligation requirements, which are subcontracted to private companies. If a person has an issue they may be bounced between departments and providers and could go without payments until the issue is resolved.
“They all work in total silos of each other,” Allingham said. “So you end up with this very complicated situation and the person that loses out every time is the individual.
“People should not be living on reduced payments or having suspended payments or payments cancelled when the government has no faith in the legality of the system.”
There are about 1.8m suspensions each year, with approximately 500 payment cancellation decisions and 5,800 payment reductions occurring annually under the targeted compliance framework.
Jeremy Poxon, an antipoverty activist, said payment cancellations caused untold harm and the compliance framework and mutual obligation requirements should be abolished.
“These are most like disadvantaged people in our society who live in a pretty constant fear of the threat of a payment suspension or a cancellation,” Poxon said. “It’s so patently absurd and cruel to continue a system going when you’re not when you have no confidence that it’s operating legally.”
The commonwealth ombudsman is also investigating whether income support payments cancellations are being made in a way that is lawful, reasonable and fair, following a complaint by the Australian Council of Social Services.
Cassandra Goldie, the Acoss chief executive, said the council had “consistently opposed the compliance framework and formally warned successive ministers about the serious harm it causes”.
The ombudsman, Iain Anderson, said if he found that the department had made “decisions that were not made in a lawful, fair and reasonable manner” he would recommend changes to the system or remedies for affected jobseekers.
“The ombudsman cannot compel an agency to agree to its recommendations, but in practice most recommendations are accepted,” he said.
In estimates, James said if she was concerned about the application of the framework after the reviews were completed she would take the “necessary actions” to ensure that the department was working within the law.
“This remediation could be by process or system changes, or legislative amendment,” she said. “The assurance and review processes which are under way will enable me to make relevant decisions.”
