FactCheck Q&A: is $30 billion spent every year on 500,000 Indigenous people in Australia?

By Dr Nicholas Biddle, Fellow, ANU Centre for Aboriginal Economic Policy Research (CAEPR) and Depity Director, ANU Centre for Social Research and Methods (CSRM). Reviewed by Prof. Dennis Foley (University of Newcastle) and Elise Klein (University of Melbourne).

This article first appeared in The Conversation on 5 September 2016.

The Conversation is fact-checking claims made on Q&A, broadcast Mondays on the ABC at 9.35pm. Thank you to everyone who sent us quotes for checking via Twitter using hashtags #FactCheck and #QandA, on Facebook or by email.

We sat down with the Productivity Commission. We looked at the Indigenous space. $30 billion is spent in this space annually. $30 billion on 500,000 people and you still see the problems you get to see. What that tells me straightaway as a businessman, because I run my own business, is there’s a lot of fun and games going in there and we need to sort that out and we need to find out where the wastage of our funding is. – Chair of the Prime Minister’s Indigenous Advisory Council, Warren Mundine, speaking on Q&A, August 29, 2016.

Chair of the Prime Minister’s Indigenous Advisory Council, Warren Mundine, told Q&A that $30 billion is spent every year on 500,000 Indigenous people in Australia.

Is that right?

Checking the source

When asked for sources to support his statement, Warren Mundine told The Conversation that:

The figure covers Commonwealth, state and territory expenditure and includes direct Indigenous funding and indirect funding (eg welfare payments). The figures come from a direct presentation by the Productivity Commission to the Prime Minister’s Indigenous Advisory Council meeting, which used their data from their reports.

Let’s check Mundine’s statement against original sources.

The Productivity Commission reports

The Productivity Commission creates two major reports of relevance to Aboriginal and Torres Strait Islander Australians. The first is the Overcoming Indigenous Disadvantage report, which focuses on socioeconomic and well-being outcomes.

The second report, titled the Indigenous Expenditure Report, attempts to identify the level of expenditure that relates to the Indigenous population. A key point in this 2014 report supports Mundine’s claim:

Total direct expenditure on services for Aboriginal and Torres Strait Islander Australians in 2012-13 was estimated to be $30.3 billion, accounting for 6.1% of total direct general government expenditure.

The same report also found that:

Estimated expenditure per person in 2012-13 was $43,449 for Aboriginal and Torres Strait Islander Australians, compared with $20,900 for other Australians (a ratio of 2.08 to 1 — an increase from a ratio of 1.93 to 1 in 2008-09).

But how much of that $30.3 billion is spent on Indigenous-specific programs?

First, $5.7 billion of that amount comes from general government expenditure that has nothing specifically to do with Indigenous Australians (defence, foreign affairs and industry assistance), but is seen to benefit everyone.

Second, around one in five Indigenous Australians live in remote areas, where the cost of providing many services is significantly higher. So, much of the spending is to achieve the same level of services that others are accustomed to (though arguably it fails to do so in many policy areas).

Third, Australia has a highly targeted social security system with support based on family and individual circumstances. The Productivity Commission estimates that 68.5% of the gap between Indigenous and non-Indigenous expenditure is “because of greater need, and because of the younger age profile of the population.”

Ultimately, the Productivity Commission estimates that only $5.6 billion or 18.6% of the total expenditure is provided through Indigenous-specific or targeted services, saying that:

Mainstream services accounted for $24.7 billion (81.4%) of direct Indigenous expenditure in 2012-13… with the remaining $5.6 billion (18.6%) provided through Indigenous-specific (targeted) services (a real decrease of $0.1 billion (1.2%) from 2008-09).

What’s the difference between Indigenous-specific and mainstream services? According to the Productivity Commission:

Mainstream expenditure includes outlays on programs, services and payments that are available to both Aboriginal and Torres Strait Islander and non-Indigenous Australians on either a targeted or universal basis.

Indigenous-specific expenditure includes outlays on programs, services and payments that are explicitly targeted to Aboriginal and Torres Strait Islander Australians. These programs, services and payments can be either complementary (additional) to, or be substitutes (alternatives) for, mainstream services.

How many Indigenous Australians are there?

Was Warren Mundine correct to say that there are about 500,000 Indigenous Australians? Not quite – though to be fair, the estimates have varied in recent years.

The Productivity Commission’s 2014 Indigenous Expenditure Report, which contains the figure of $30.3 billion, estimated that in June 2013 there were 698,309 Aboriginal and Torres Strait Islanders in Australia.

The 2011 Census counted about 550,000 Aboriginal and Torres Strait Islander Australians. However, many Indigenous Australians are missed from the Census, and the Australian Bureau of Statistics (ABS) estimates that there were around 670,000 Indigenous Australians in the country on the night of the 2011 Census.

Taking into account their best estimate of births and deaths since then, the ABS has then projected the Indigenous population to be around 669,000 in June 2013 (the year the Productivity Commission data relates to) and around 750,000 in 2016.

Verdict

Warren Mundine’s statement uses the most accurate and up-to-date estimate of government spending on Indigenous Australians – about $30.3 billion, according to the Productivity Commission.

However, only a small proportion of the overall Indigenous expenditure is on Indigenous-specific programs. The rest comprises the cost of providing mainstream services, such as schooling and health care, that all Australians enjoy.

His figure of 500,000 Indigenous Australians is a bit low, likely reflecting reasonably common uncertainty on this question (as well as him being on the spot on a fast-paced, live TV program).

The general point about needing “to find out where the wastage of our funding is” is important, and requires careful evaluation of the impact and cost-effectiveness of Indigenous-specific and other social programs. – Nicholas Biddle.

Review

I have reviewed this FactCheck. Mundine was right on the figure of $30 billion; total direct expenditure on services for Indigenous Australians in 2012-13 was estimated to be $30.3 billion, as detailed on page one of the Productivity Commission’s 2014 report. Based on the 2011 Census, the Indigenous population was approximately 550,000 people, with most living in urban areas. Researcher Sara Hudson’s August 2016 report, published by the Centre for Independent Studies, outlines the continued waste and duplication of government funding as raised by Mundine. – Dennis Foley.

While it’s true Warren Mundine used the most up-to-date figures, his quote didn’t quite convey the full story. It didn’t get across the fact that only a really small chunk of the overall Indigenous spending is on Indigenous-specific programs. Most is on mainstream programs.

As the article notes, Productivity Commission estimates that only $5.6 billion or 18.6% of the $30 billion Mundine refers to is provided through Indigenous-specific or targeted services. The Productivity Commission does not examine how much of this $5.6 billion actually goes to Indigenous organisations within community or Indigenous peoples themselves – and how much is spent on government businesses.

Warren Mundine’s broader point that current spending is not yielding results needs further attention. The government’s Closing the Gap targets are nowhere near being met, and in some cases, widening, suggesting that these programs are, by and large, failing. Policy logic underpinning spending should be examined. – Elise Klein.