I can't say I know much about Australian welfare systems, but here in the US it can be a bit of a trap, since welfare benefits drop fast once your savings or income rises, resulting in a huge disincentive to get off welfare, and furthering the sense of hopelessness, and presumably, the drug and alcohol use.
To what extent does Australian welfare gradually taper off as a means to incentivize saving, instead of punishing it?
The Australian welfare system has lots of perverse incentives, but the tapper off is not too bad. The effective marginal tax rate is quite low and we have a very high minimum wage by OECD standards.
The real problems come when everyone in the community is unemployed. We really need to work on new societal structures to make sure that we don't follow the same path our remote communities have fallen into.
I'm not sure how well it would work, but one of my longest-standing justifications for basic income is capitalism itself. If you have enough to live on from what you get from the state, then you'll be content at best, or spin your wheels and with racks of VB at worst. But if your neighbor was in the same situation and works to increase their earnings, and you see them driving nicer cars and wearing nicer clothing, then you'll want to live at that level as well.
Then again, it might remind them of their own failures and they get double drunk that night. I'm not sure.
To what extent does Australian welfare gradually taper off as a means to incentivize saving, instead of punishing it?