Institutional moral hazard in the multi-tiered regulation of unemployment in Australia Background paper

This paper has been written in preparation of a research project funded by the European Commission (on the Feasibility and Added Value of a European Unemployment Benefit Scheme, contract VC/2015/0006). This paper adds information and detailed analysis to the following deliverable of that research project: Institutional Moral Hazard in the Multi-tiered Regulation of Unemployment and Social Assistance Benefits and Activation - A summary of eight country case studies; but it was not a deliverable. We use the concept ‘institutional moral hazard’ to analyse intergovernmental relations within multi-tiered welfare states, specifically the domain of in unemployment-related benefits and related activation policies (the ‘regulation of unemployment’). This paper is one of eight separate case studies, it focuses on Australia. The Australian regulation of unemployment involves two federal departments, the federal Public Employment Services (PES) and private agencies. Australia gradually privatised the activation of the only major unemployment-related benefit. Reforms moved the Australian system away from a ‘black box’ approach towards more detailed minimum requirements, monitoring and control of those private agencies. The Australian experience suggests a trade-off between the need for control on one hand, and the need for flexibility in activation processes on the other hand.