Jenny Macklin (Jagajaga, Australian Labor Party, Minister for Families, Housing, Community Services and Indigenous Affairs) Share this | Link to this | Hansard source

by leave—This weekend, the most significant reforms to the pension system in 100 years will start being rolled out. From Sunday, around 3.3 million age pensioners, disability support pensioners, carers, wife and widow pensioners and veteran income support recipients will receive an increase in their pension payments.

These increases are fair, sustainable and long overdue. And they will make a difference to the lives of so many Australians—including people like Rusty Woodward and Jan Petrie, who I met last week. They are peer educators for the Council on the Ageing and committee members of Communities@Work’s 55 Plus Club.

When the Australian government undertook its comprehensive review of the pension system, Rusty and Jan conducted a survey of local ACT pensioners. They heard many ‘heartbreaking stories’, including one pensioner who told his local greengrocer he kept chickens so he was able to get the leftover vegetables which could not be sold. These vegetables and cheap noodles were in fact his staple diet. As every member in this place knows, this is not an isolated case. The difficulties pensioners had making ends meet was a story told over and over again to the review conducted by the secretary of my department, Dr Jeff Harmer.

This is why the government has overhauled and reformed the pension system, to make it adequate for the millions of age and disability pensioners, carers and veterans who depend on it. And even in these very difficult economic times we have been able to introduce these reforms and also deliver savings to help meet the cost of the increases to make the pension system sustainable over the long term. For Rusty Woodward, for example, the extra $70.83 a fortnight she will now receive means—and this is what she told me—that she can live a more social life, go out with friends and enjoy activities like exercise and art classes.

I want to take this opportunity today to provide the parliament with a detailed overview of the range of changes to our pension system that will start this Sunday. Critical to the reform package are changes to address the particular inadequacy of the single pension. Recognising that single pensioners do not usually share household costs, the pension review found that the relativities between singles and couples needed to be adjusted.

The pension review also found that an increase in payments for couples was also warranted. A key structural change will see the single rate of the pension set at two-thirds of the combined couple rate. This two-thirds ratio will apply to both the base rate of the pension and the new pension supplement.

From 20 September, a single pensioner on the maximum rate of the pension will receive an increase of $60 a fortnight in the base pension. Single pensioners will also receive an increase of $5 a fortnight in the new pension supplement. Along with indexation, this will amount to a total increase for single pensioners on the maximum rate of $70.83 per fortnight, bringing total pension payments to $671.90 a fortnight for a full rate single pensioner.

For couple pensioners combined on the maximum rate there is an increase of $29.93 a fortnight—$20.30 due to the reforms and $9.63 indexation—bringing their total pension to $1,013 a fortnight. Pensioners will also receive their final quarterly payment of the utilities allowance and the telephone allowance with their regular pension payment after 20 September.

The pension reform package also addresses an existing inequity in the social security system where pensioner couples received a lower rate of allowances than those self-funded retirees on the Commonwealth seniors health card. From 20 September 2009, the new pension supplement paid to pensioner couples and the new seniors supplement paid to holders of the Commonwealth seniors health card will be at the same rate. The maximum pension supplement will be $56.10 per fortnight for singles and $84.60 per fortnight for couples combined.

Along with increases to pension payments, the government’s reforms are making the whole system simpler and more flexible.

The reforms introduce a new payment—the pension supplement. The new supplement will combine the full value of four existing supplements and allowances that have been paid in addition to the base pension over recent years, and will be further increased for both singles and couples. The new pension supplement includes the full value of the utilities allowance, telephone allowance (at the higher internet rate), the GST supplement and the pharmaceutical allowance—plus an increase of $5.00 for singles and an increase of $20.30 for couples.

From this Sunday, the pension supplement will be paid fortnightly and will appear on a pensioner’s Centrelink statement as an addition to their fortnightly pension. From 1 July 2010, pensioners will have the option to receive around half of the supplement paid quarterly instead of fortnightly. That will be their choice.

We have also introduced new indexation arrangements to respond to cost of living increases that pensioners face. A new pensioner and beneficiary living cost index has been developed by the Australian Bureau of Statistics to better reflect the spending patterns of pensioner and other households who rely on income support.

This new index provides another layer of protection for pensioners to help their pension keep pace with increases in the prices of the goods they buy. When the base pension rate is adjusted twice each year in March and September, it will be adjusted according to which has increased more—either the consumer price index (CPI) or the new pensioner and beneficiary living cost index.

Over the last six months, the government’s new pensioner living cost index has resulted in a higher pension indexation increase than the CPI. As a result of indexation the base rate pension is $5.50 for singles and $9.20 for couples combined. This is driven by the six-month movement of one per cent in the pensioner living cost index. Just to compare, over the same period, the CPI only increased by 0.6 per cent.

So pensioners will see an immediate benefit from the application of this new index from 20 September, when the next indexation increase will be delivered. This measure delivers the government’s election commitment to improve pension indexation to make sure that we keep the pension in touch with pensioners’ living costs.

Base pension rates will also continue to be benchmarked against improvements in wages as measured by male total average weekly earnings (MTAWE). From 20 March 2010, the benchmark for single pensioners will increase from 25 per cent—which is its current benchmark—to 27.7 per cent of male total average weekly earnings. The benchmark for a couple will be 41.76 per cent of male total average weekly earnings.

These indexation changes are consistent with the findings of the Harmer review and are guaranteed by legislation.

New income test arrangements will affect new pensioners entering the pension system after 20 September. I want to emphasise that existing pensioners will be protected from this change.

The need to better target the largest pension payments to those who most need support was reflected in the Harmer review of pensions which found that it was appropriate to ‘limit the flow on of the increase to pensioners with low to moderate reliance on the pension’.

The income test taper rate will increase from 40c in the dollar, to 50c in the dollar for income over the allowable income-free area. The higher income-free area for pensioners with dependent children will be removed. Changing the income test taper will mean the full benefit of the pension increase will flow to those with no or little private income, while making sure those with higher incomes receive proportional increases.

Transitional arrangements will apply for existing part pensioners to protect their current entitlement. These existing pensioners will receive an increase of more than $10 a week in their pension payments, have their payments maintained in real terms, and will remain on this transitional rate until they are better off under the new rules. There is no time limit on these transitional arrangements.

We expect around 70 per cent of all existing pensioners will be immediately better off following the reforms and will move to the new system immediately. This includes more than 90 per cent of all single pensioners.

A new work bonus is being introduced as part of the new income test rules to enable pensioners to keep more of the money they earn through part-time work. The work bonus will apply to pensioners over age or service pension age who receive employment income. From 20 September, only half of the first $500 of employment income earned per fortnight will be assessed under the income test. This will enable up to $250 of earnings a fortnight to be excluded from means testing.

In order to facilitate the introduction of the work bonus, new fortnightly assessment arrangements will apply to employment income for age pensioners. The current income test free area—$142 per fortnight for singles and $248 for couples combined per fortnight—will remain and be in addition to the new work bonus.

The new work bonus will replace the pension bonus scheme, which will be closed to new entrants from 20 September. People already registered in the scheme will be able to remain in that scheme and claim a pension and their bonus when they finish working.

The Australian government recognises and appreciates the contribution made by self-funded retirees, not only to their own retirement income, but also to the community in general. The Australian government is supporting self-funded retirees through this reform package by introducing a new seniors supplement. The new seniors supplement will be introduced from 20 September and will be paid to holders of the Commonwealth seniors health card. It will replace the old seniors concession allowance and the telephone allowance (at the higher internet rate).

The seniors supplement will be paid at $785.20 a year for singles and $1,185.60 a year for eligible couples, combined. The final payments of seniors concession allowance and telephone allowance will be made to eligible cardholders as soon as possible after 20 September 2009.

The first instalment of seniors supplement will be made as soon as possible after 20 December 2009, and will be paid in quarterly instalments in March, June, September and December each year. From 20 September 2009, the seniors supplement will accrue on a daily basis. This means that if a person becomes eligible during a quarter, the amount of their seniors supplement will reflect the number of days they were eligible during that quarter.

Similarly, if a person ceases eligibility before the end of the quarter, the amount of their seniors supplement will be adjusted so that they are paid for the number of days they were eligible. This replaces old arrangements that required seniors to be holding the Commonwealth seniors health card on set dates to receive a payment.

On 20 September 2009, the regular six monthly revaluation of all listed securities, such as shares and managed investments, will ensure that up-to-date asset values are being assessed. The revaluation of listed securities and managed investments occurs every six months on 20 March and 20 September as required by legislation. Around 900,000 pensioners have listed investments affected by the regular revaluations.

On 20 March 2009, the revaluation led to an increase in payments for those age pensioners whose listed securities and managed investments had fallen in value due to the global financial crisis. The last six months has seen an increase in the value of these investments. As the markets have improved and returns have increased, this has had a positive impact on pensioners’ assets and private income. This is good news for pensioners.

For most age pensioners, including those on the maximum rate, the bulk revaluation will have no impact on their payments. A single pensioner will need to have shares or other listed securities valued at more than $250,000 (after the revaluation) to have a small reduction in their base pension following the revaluation. The average pensioner holds just $23,000 in listed securities.

The Australian government has taken steps to provide certainty to pensioners who live in aged-care facilities and public housing. The government will make sure the increase in the base pension is shared between aged-care providers and pensioners.

The government has amended the Aged Care Act 1997 to reset the basic daily fee from 85 per cent to 84 per cent of the single age pension base rate. This means pensioners in aged-care homes will benefit from the pension increase. At the same time, it recognises that care providers also need additional funding to meet costs of services such as nursing care, food and cleaning.

For pensioners in public housing, the Prime Minister has written to premiers and chief ministers stating the Australian government’s expectation that public housing authorities will adjust their rent arrangements to make sure that the entire pension increase flows to pensioners. The premiers have agreed that there will not be a rent increase due to the pension rise on 20 September this year, and they have confirmed that the new pension supplement be excluded from rent calculations

Other key elements of the government’s pension reform have been legislated and are coming into operation at a later date. From 1 July 2010, there will be a substantial increase in the amount of pension that can be advanced, from around $500 to nearly $1000 for singles, and multiple advances will be allowed each year.

To help respond to the long-term cost of demographic change and to reflect improvements in life expectancy, the government has taken the very difficult decision to progressively increase the qualifying age for age pension. From 2017, the age pension age will begin to progressively increase to reach 67 by 2023—recognising that people now live longer and spend more retirement years in good health than when the age pension was introduced 100 years ago.

Pensioners are currently receiving letters from Centrelink or the Department of Veterans’ Affairs explaining the reforms to the pension system and their new payment rates. They do not need to do anything to receive the pension increases, but if they have any questions or want any further information they can contact Centrelink.

These are the most comprehensive reforms to the pension system since the age pension was introduced a century ago. They are long-overdue reforms which recognise that years of neglect had left many pensioners struggling to get by. They are comprehensive reforms achieved in the most difficult of economic times, because of the government’s commitment and determination to make the pension system fair, adequate and sustainable. They are reforms that have been framed for the future and the challenges of an ageing population.

I ask leave of the House to move a motion to enable the member for Warringah to speak for 19½ minutes.

Leave granted.

I move:

That so much of the standing and sessional orders be suspended as would prevent the member for Warringah speaking in reply to my ministerial statement for a period not exceeding 19 and a half minutes.

Question agreed to.

Tony Abbott (Warringah, Liberal Party, Shadow Minister for Families, Housing, Community Services and Indigenous Affairs) Share this | Link to this | Hansard source

I appreciate the goodwill that the minister brings to this subject and I do not for a second deny the importance of the matters that she has been discussing, but I do think I need to put it on the record again in this House that ministerial statements of this nature verge on abuse of the parliament. Ministerial statements are supposed to announce new policy; they are not supposed to re-announce old policy. They certainly should not be an opportunity for a government to engage in self-congratulation over something that was announced many, many months ago. The government’s new practice of bunging on several statements after question time is clearly a deliberate device to delay the matter of public importance debate and, in so doing, to deny opposition members of parliament the opportunity to get on the news bulletins on the subject of their political choice for the day.

Let me make it very clear, dealing specifically with the substance of this statement, that there is only one reason for the changes which the minister has re-announced today. Brendan Nelson, the member for Bradfield, forced the government to make these changes. By proposing a $30-a-week increase in the single age pension in the middle of last year, he made it inevitable that the government would follow suit. The pensioners of Australia have one person above all others to thank for the changes which the minister has yet again specified today; namely, the retiring member for Bradfield. This is a significant achievement—one of many significant achievements that the member for Bradfield has. It is to his credit that it is an achievement that he was able to bring about from opposition.

Not for one second do I begrudge the pensioners of Australia, particularly the single age pensioners of Australia, this increase in their money. But it is one thing to make this promise when the budget surplus was thought, when Dr Nelson did this, to be in the order of $20 billion. It is quite another to deliver on this commitment with a budget deficit in the order of $30 billion, as it was when the government finally made the commitment. The pensioners of Australia thoroughly deserve this money, let me make that crystal clear, but the extra $3 billion a year plus that these changes will cost when fully implemented will have to be paid for every year into the future, and there is certainly no provision whatsoever in this budget for the kinds of savings measures, extra revenue measures and additional productivity measures that our country will need in order to make these additional payments as affordable as they should be. In fact, far from giving us the kind of productive economy that would make these extra payments easily affordable, the government has gone backwards by re-regulating the labour market and by proposing a giant carbon tax that would cascade through every aspect of our economy.

Let me say this: paying pensioners more is not a reform; it is just a change. Paying single pensioners 66 per cent of the married rate is a structural change. It is still not a reform, although it is a structural change, but again let me say that it is one that has been forced on this government by Dr Brendan Nelson, the member for Bradfield. The only real reform in the package that has been re-announced today is the government’s decision to raise the pension age, by slow steps, from 65 to 67. I am not for a second saying that that is bad policy. It is good policy. It is such good policy that I have said that the government should go further faster. But it would only have been a courageous reform, as opposed to a rather sneaky by-the-back-door reform, if the government had had the guts to say that that was its policy before the election rather than springing it, as it has done, on the general public after the election.

Let me deal briefly, in conclusion, with the minister’s charge—and it is the standard line from members opposite. I thought the minister was better than that. I did not think the minister was quite such a slave to focus groups and to the Leader of the House’s edicts as to come in here and repeat the mantra. Nevertheless, I was wrong. She is lesser than I thought. So she has come in here and repeated the mantra about years of neglect. Let me remind her and the House that the real income of pensioners increased by 20 per cent—by more than two per cent a year—over the life of the Howard government. In addition to that, there were one-off bonuses paid to most categories of pensioner and there was a utilities allowance paid to pensioners for the first time. It was thanks to the good economic management of the Howard government that these increases were made possible. It is true that in the year or so before these changes the government has announced today came into being pensioners were under more pressure. And do you know why? It is because for the first time in 12 years wages rapidly exceeded the cost of living. Pensioners did so well under the Howard government because the growth of wages was so far in advance of the cost of living.

In conclusion, I welcome these changes very sincerely, but I do regret the other changes that the government has made that will make these changes so difficult to afford on an ongoing basis in the years to come. The highest duty of a compassionate and decent society is to make ample provision for the least fortunate, for those who are least able to look after themselves, and I regret that the poor economic management of this government will make it harder in the years to come to give the pensioners of this country the better life that they deserve.