The Australian Department of Employment and Workplace Relations (DEWR) has acknowledged that more than 10,000 JobSeeker recipients may have had their welfare payments wrongfully reduced or cancelled.
The decision follows an internal review which revealed that the mutual obligations system — a key compliance mechanism for unemployment benefits — was not being implemented in accordance with the law.
The issue has prompted the suspension of several components of the payment compliance system. The announcement comes amid three ongoing reviews of the mutual obligations framework and a formal investigation by the federal ombudsman.
Welfare advocates and legal groups have voiced concerns over the scale of the error, drawing comparisons with the previous robodebt scandal.
Compliance System Fails to Meet Legal Standards
According to Natalie James, Secretary of the DEWR, the suspension of parts of the system was prompted by findings that it “is not operating in alignment with the law and policies or is not operating with the rigour that I expect”.
The mutual obligations regime requires unemployed individuals to meet specific conditions — such as attending appointments and applying for jobs — in order to continue receiving benefits. Failure to comply can result in accumulating demerits, eventually placing individuals in the “penalty zone”, where payments may be halted.
James stated she had considered her “legal duty to administer the law and take decisions as intended by the law” in pausing certain enforcement measures. She also highlighted the vulnerability of those affected, including homeless individuals, First Nations people, and those with disabilities, who are disproportionately impacted by such compliance failures.
The department’s findings have triggered widespread criticism, particularly from welfare groups who argue that the system is punitive and lacks accountability.
According to Jacqueline Phillips, executive director of policy and research at ACOSS, the issue represents a “massive and fundamental failure of government”, raising questions about post-robodebt safeguards.
Advocates Demand Accountability and Compensation
Civil society organisations have urged the government to not only fix the current flaws but also compensate those affected. Economic Justice Australia (EJA) has called for automatic compensation, arguing that the burden should not be placed on individuals to prove they were wrongly penalised.
EJA CEO Kate Allingham described the department’s reviews as a “positive step”, but stressed the need for transparency and reparative action. In a letter sent to Employment Minister Murray Watt in February, EJA had already requested the immediate suspension of the penalty zone system.
According to Allingham, “the government has a duty to ensure everyone impacted is fully compensated without being forced through an arduous and unworkable appeals process”.
Meanwhile, Jay Coonan, a spokesperson for the Antipoverty Centre, called for the complete abolition of the mutual obligations framework. He described it as “immoral and destructive”, adding that accountability must extend to those responsible for designing and enforcing the policies.
