Serena Wilson, a former deputy secretary to the social services department, told the inquiry into the illegal scheme it was her recollection the government rarely started policy discussions about the problems but rather focused on “finding cost savings”.

Asked about Morrison’s comments of being a “welfare cop”, she said the government “appeared to be looking for a problem”.

In one email, she wrote: “They had a strong view of ‘deserving’ and ‘undeserving’ poor. In my opinion, there was little empathy for, or understanding of, those needs (of disadvantaged people) within the coalition government and ministerial staff.”

Wilson said this was exemplified in coalition budgets between 2014 and 2018, where the vast majority of her work involved identifying savings options to cut social security expenditure.

Former human services department manager Scott Britton said finding savings was the biggest imperative and there was a lot of pressure “to get on with it”.

“There was a lot of pressure to get it through,” he said, later describing it as “unrelenting”.

“It was focused on the savings.”

An email to Britton said the social services department lawyers suggested the foundations of the scheme “doesn’t accord with social security legislation”.

Britton said he was never shown legal advice that explicitly said the scheme was illegal.

“I’d heard: probably, maybe, possibly,” he said.

But he added in hindsight, he would take the wording in the email to mean it wasn’t legal.

Wilson also said the government held a “fairly pejorative view” of many people on welfare, particularly those on Newstart – now JobSeeker – or youth allowance who were receiving the payments because they were unemployed.

The commission has been told senior bureaucrats were aware of the potential illegality of the scheme but were either overruled by the people in charge of deciding the department’s policy or too scared to come forward.

Wilson said despite feeling “intimidated and bullied” by a former department secretary, she had no reason to doubt her assurances that income averaging wasn’t being used.

She said she was “surprised” when she found out income averaging was being used.

Wilson denied deliberately looking the other way to palm off responsibility to other bureaucrats.

She said she failed to pick up income averaging was being used in a document – which she had marked by hand – that outlined more than 860,000 “likely incorrect payments” from tax file data between 2010 to 2013.

The income averaging method using tax office data was later ruled to be illegal.

“I regret it slipped through,” Wilson said, saying she had been distracted by other tasks.

“It wasn’t a ‘hear no evil, see no evil’ situation. We were an extremely stretched area of the organisation,” Ms Wilson said in response to the accusation she turned a blind eye.

Assisting counsel Justin Greggery didn’t accept Ms Wilson’s defence.

“Your evidence, where you claim not to recall all of the points in time at which these things ought to have been obvious, is you reconstructing events to protect your own interests,” he said.

Wilson rejected the assertion.

“I have acknowledged that I wish I had done things differently, that I had asked more questions, but I reject that entirely,” she said.

-with AAP