House debates

Tuesday, 23 June 2015

Bills

Social Services Legislation Amendment (Defined Benefit Income Streams) Bill 2015; Second Reading

12:22 pm

Photo of Scott MorrisonScott Morrison (Cook, Liberal Party, Minister for Social Services) Share this | | Hansard source

I move:

That this bill be now read a second time.

Once again I do thank the opposition for the opportunity to have this matter dealt with today and to enable this bill to be introduced to the House of Representatives and considered on this day; and, in moving that the bill be read a second time, I would like to outline a number of things. That is that this bill takes schedule 1 of a bill that was considered by the House yesterday under the Social Services Legislation Amendment (Fairer and Sustainable Pensions) Bill—it was actually schedule 1 of that bill—and it reintroduces it into this place in the new bill, the Social Services Legislation Amendment (Defined Benefit Income Streams) Bill 2015. Members of the House will know that last night in the Senate the fairer and sustainable pensions bill passed the Senate, which was welcome news for the government. In addition to that, there was another measure, which was originally in the fair and sustainable pensions bill which was schedule 4 of that bill, relating to the cessation of the seniors supplement, which was also passed in separate legislation in the Senate last night.

That means that some $3.5 billion of savings that are in the have-a-go budget have been passed already by the Senate. That means that the have-a-go budget is having a go. The have-a-go budget is getting a go and it is having a go, and today in this bill we are reintroducing schedule 1 of the fairer and sustainable pensions bill. That bill presents measures that will result in further savings of $465.5 million for the budget. The bill will introduce a further budget measure improving the fairness and sustainability of the pension system, and I note that it relates to defined benefit income stream, which usually comes from an employer superannuation fund or government employee superannuation scheme. It currently includes military defined benefit income streams.

The payments received from a defined benefit income stream less the deducted amount are taken into consideration as ordinary income when determining whether an individual is eligible for income support payments and, if eligible, the rate of payment. The deductible amount for a defined benefit income stream is defined in section 9 of the Social Security Act. Currently, the deductible amount is calculated by reference to the tax-free component of the amount payable under the defined benefit income stream as determined in accordance with the Income Tax Assessment Act 1997 or the Income Tax (Transitional Provisions) Act 1997.

Amendments to the Income Tax Act 1997 and 2007 resulted in an increase to the tax-free component for some individuals, and this had the effect of increasing the deductible amount for the purposes of the Social Security Act, resulting in individuals becoming entitled to income support payments or higher rates of income support.

For improved fairness and equity, the bill will make sure a fairer proportion of a superannuant's actual defined benefit income is taken into account when the social security income test is applied. From 1 January 2016, this measure will introduce a 10 per cent cap on the defined benefit income that can be excluded from the social security income test.

A defined benefit income stream is a pension paid from a public sector or other corporate defined benefit superannuation fund, where the pension paid generally reflects years of service and the final salary of the beneficiary. Current arrangements allow some defined benefit superannuants to have a large proportion of their superannuation income excluded from the pension income test. I note that that will now be restricted to 10 per cent.

People receiving veterans' affairs pensions, I note, will not be affected by this change, and defined benefit income streams paid by military superannuation schemes will be excluded.

The combined savings, I note, of $465.5 million, when added to those that have already passed the Senate, will mean combined savings of almost $4 billion as a result of these measures that were originally included in the fairer and sustainable pensions bill, and now schedule 1 of that bill, as I noted, is now specifically addressed and reintroduced in this measure.

Photo of Ross VastaRoss Vasta (Bonner, Liberal Party) Share this | | Hansard source

Is leave granted for the debate to continue?

Leave granted.

12:27 pm

Photo of Jenny MacklinJenny Macklin (Jagajaga, Australian Labor Party, Shadow Minister for Families and Payments) Share this | | Hansard source

As the minister has just indicated, this bill relates to specific social security treatment of defined benefits and will cap the deductible amount from the pension income test at 10 per cent. The information provided indicates that there are 48,000 pensioners on defined benefit schemes. As I understand it, most people claim less than 10 per cent. Only 17,000 people will be affected by this change.

As the explanatory memorandum of the bill explains, this bill ensures that a proportion of a superannuant's actual defined benefit income is taken into account when applying the social security income test. As the minister indicated, from 1 January the deductible amount, which is the amount that can be excluded from the income test for a defined income benefit stream, excluding military defined benefit schemes, will be capped at a maximum of 10 per cent. As I indicated, the vast majority of people with defined benefit income streams actually already claim less than 10 per cent, so it is only a minority of people in these circumstances who will be affected by this change.

It is the case that these defined benefit income streams usually come from employer superannuation funds or government employee superannuation schemes. The change that is being effected emerges from amendments that were put in place in 2007 that did result in an increase to the tax-free component for some individuals. This has the effect of increasing the deductible amount for the purpose of the Social Security Act, resulting in individuals becoming entitled to income support payments or higher rates of income support.

These are difficult decisions, certainly for those of us who are very concerned about this government's attack on pensioners, but we do understand that these are very difficult economic times. The minister tries to make out that the economic situation under this government is rosy. In fact, as the government's own budget papers show, the government, in less than two years, has doubled the deficit, and unemployment is up and confidence is down. So we actually find that the economic circumstances that this government is imposing on Australia are becoming more difficult, just as they are becoming more difficult for the millions of Australian pensioners who have been subjected to the most horrific attack by this government over the last 18 months. This change to the social security treatment of defined benefit schemes is just the latest change.

We all recall that, before the last election, the then Leader of the Opposition, Mr Abbott, said to every single pensioner in Australia that there would be no changes to pensions, no changes whatsoever. Of course, in last year's budget that was found to be a complete untruth, when the Liberal-National Party government introduced the most substantial attack on the pension that Australia has ever seen. This government wanted to cut the indexation rate for the pension. It anticipated cutting over $23 billion from the pension over the next 10 years. This would have taken around $80 a week from pensioners—so a huge cut to pensions and a huge amount that would have been taken out of the pockets of pensioners. We saw the Prime Minister in here every single day in question time defending that cut to the pension that he was determined to try to implement through this parliament. Fortunately, pensioners around the country joined together with Labor and fought this change, and we were able to defeat it in the Senate. I remind every single member of the House of Representatives from the Liberal and National parties that they actually voted for this cut to pension indexation. We will make sure that pensioners remember this as we go to the next election. When Mr Abbott tells pensioners that he is not going to change anything, that he is not going to hurt pensioners, not one of them will believe him, because of the broken promises that pensioners have seen over the last two budgets.

It was not just the change to indexation. The government did not stop there. It realised it could not get that measure through the parliament, so it came into this budget with more changes to the pension. The minister has just indicated that last night in the Senate we saw the Greens party team up with the National Party and the Liberal Party to cut the pension for 330,00 pensioners. These are middle-income Australians, people who have worked hard and saved hard all their lives. As a result of this government's broken promises, these middle-income people—they are by no means millionaires, as the minister likes to suggest; in fact, some of these people have incomes as low as $15,000 a year from their superannuation investments—will be facing cuts, if they are single pensioners, of anything up to $8,000 a year, each and every year. If they are couple pensioners, they will face cuts of up to $14,000 a year. These are very substantial changes, changes that the government promised that it would not make. It said, 'No changes to pensions,' and yet here we have the government rushing through the parliament a very substantial cut to middle-income pensioners who have saved hard all their lives and who now find that this government wants to completely move the goalposts and make them worse off in their retirement.

It is not only people who are currently retired who will be affected by that change. It is also those hundreds of thousands of people in their 50s and 60s planning their retirement who now know that they too will be affected by this toughening-up of the pension assets test. The independent analysis that has been done of the impact on people who are planning their retirement over the next 10 years estimates that around half of all new retirees in the next 10 years will be affected by this measure. These will be people who in fact have less than average wages, so they certainly are not millionaires. They certainly never were going to be millionaires. And yet they will find that their retirement is going to be that much harder because of this government's attack on the pension. It is an attack on middle Australia, on those people who are still working hard, saving hard for their retirement, and yet we see the government deciding to really take the sledgehammer to people who are working and saving very hard.

The government also has legislation that it wants to pursue through this parliament to increase the pension age to 70. Go and tell a hardworking nurse, bricklayer, carpenter or builder that they are going to have to keep working till they are 70. I have not found one of them who is happy about that. They know how hard that will be on their bodies. If it were the case that this government got this increased pension age through the parliament, we would see Australia have the oldest retirement age in the developed world. I can assure you that Labor will not support that increase to the age pension age. We think it is too harsh, particularly too harsh on the many thousands of Australians who do very tough jobs, particularly jobs that are tough on their bodies every single day. We understand that some older people do want to keep working. We want to support and encourage them. But we are not going to make it a requirement for access to the pension that you have to be at least 70 years of age.

One of the other cuts in last year's budget, which is just starting to be felt by pensioners—but I can tell you they are very worried about it—is the unilateral decision by this government to cut $1.3 billion from the amount of money that goes from the Commonwealth to the states for concessions to pensioners and seniors. This is money that helps pensioners with the costs of their rates, their utilities, their water bills, their transport—all of those concessions. These are concessions that are delivered by the state and territory governments. The Commonwealth previously provided $1.3 billion to help with the costs of those concessions. It is just another cut imposed by the Abbott government on pensioners through the states and territories. Some states have done the right thing by pensioners and made up the difference. But there is a limit to what the states can do. The states are already having to also confront the huge cuts in health and education that will also, particularly in the case of hospitals, have a disproportionate effect on our older Australians.

I assure the government that each and every marginal seat member on that side of the House will get used to seeing me in their electorates telling pensioners that this government does not tell the truth to them and this government is intent on attacking pensioners. Labor will not stop our campaign. There are millions of Australian pensioners who know that Mr Abbott did not tell them the truth before the last election. Labor will do everything in our power to stand up for Australian pensioners.

12:39 pm

Photo of Luke SimpkinsLuke Simpkins (Cowan, Liberal Party) Share this | | Hansard source

What a free-ranging debate this will clearly be. Obviously I endorse this bill. The shadow minister raised a number of very interesting issues. She talked a fair bit about reminding pensioners—and other matters as well—so I will also do some reminding. As we know, before the last election there was a promise of no changes to pensions during this term of government. When we talk about changes from 1 January 2017 it can be very clearly pointed out that that is indeed after the first term of this government. The changes that were introduced and have been passed by the Senate were very clearly to wind back the access to part pensions for those who have assets exceeding $1 million, and to a degree under $1 million as well. We talked about self-funded; self-funded it will be.

Labor talk about how they will remind people about what passed in that bill yesterday. I too will take great pleasure in reminding people, particularly in suburbs like Girrawheen and Koondoola—the Girrawheen Koondoola Senior Citizens Centre, Alexander Heights seniors centre, Ballajura seniors centre, Wanneroo seniors club—that, under the changes this government has passed, from 1 January 2017 they will be $15 a week better off. Clearly, from what the opposition have said, their intention is to take that away. So for all those age pensioners in Homes West houses throughout the electorate of Cowan, in yesterday's vote the opposition of the Labor Party to the bill was about making sure that that $30 never appears. I will take great pleasure in reminding people of that. And I will not wait till the next election; I will be talking about it very soon indeed. That will be a great opportunity. This bill was about making things fairer: about making sure that the support payment, the welfare payment, goes to those who are in the most need. Much has been said about the increase of the pension age to 70. Sixty-seven is okay as far as the Labor Party is concerned but 70—that is just a bridge too far. It is most disingenuous of them to talk in those terms.

This bill will add another $465 million in savings. That is very important. The entire country will remember that, at the change of government in November 2007, there was money in the bank. The federal government had run things in the black. Then the series of events took place whereby this country went deep into the red. There was only one side in government at that time, and that was obviously the Labor Party. What they did to this country, the intergenerational debt that they have inflicted on this country—on the children, toddlers and babies of this country—is an absolute disgrace. They can never walk away from that. What has been achieved since the budget this year is that $3.5 billion of savings have already passed. That is good news for future generations of Australians.

This bill will give a fair assessment of someone's contribution to their pension, which means the government will be able to be more equitable when it is determining who needs support and who can support themselves. Around 65 per cent of income support recipients with payments from defined benefit schemes will not even be affected by this measure. Being ex-service—ex-Army—myself I would also say that this does not apply to those on the Defence side of things. By that I mean that service pensioners will not be affected and defined benefit income streams from military defined benefit schemes will also be exempt from the proposal. I certainly welcome that element as well.

This bill really does address the anomalies in the income test treatment of some defined benefit income streams that have resulted in highly concessional income test deductions for some people. Under this measure, the social security income test deductible amount for the defined benefit income streams will be capped at a maximum of 10 per cent of gross payments from 1 January 2016.

Without delaying the House anymore, it is certainly my view that this is a very good bill. I am very pleased that it will, by all accounts, pass today. It will deliver important savings to help with the budget bottom line and to help get the country back to a sustainable level. It is fair and it is absolutely appropriate that the House should pass it.

I would just finish by saying, again, that I very much appreciate the passing of the bill about fair and sustainable pensions last night. Particularly, I think it is a great thing for those who are on the most modest of government provided incomes. The majority of pensioners will be $15 a week better off. That will be greatly welcomed in the electorate of Cowan and I certainly look forward to telling as many pensioners about it as I can.

12:46 pm

Photo of Ms Anna BurkeMs Anna Burke (Chisholm, Australian Labor Party) Share this | | Hansard source

I also rise to talk about the Social Services Legislation Amendment (Defined Benefit Income Streams) Bill 2015, which was a schedule in the original fair and sustainable pensions bill before the House. It was rapidly taken out of that bill in a bit of a strange incident last week, where the poor deputy chair was left in the situation of having a dissent from his ruling moved because of the confusion about what was going on with that bill.

We are a bit perplexed as to why this is all happening at many levels, but no more perplexed than the poor pensioners and part pensioners out there who are on the receiving end of these changes. Whilst the opposition will support these changes in the bill before us today, they will have an impact on many people.

There are many Commonwealth superannuants in my electorate; Commonwealth superannuants who do not live on excessive amounts of income. They live on a defined benefit. That is what this is. They know what they are getting and they have no way of supplementing that income. So if you take away some part pension or if you introduce the 10 per cent cap that is being done today, that has quite a strong ripple effect on these peoples' lives.

In an electorate like mine, where housing costs are very high, that also relates to local government rates, which are coming around and being put up as we speak. A lot of my pensioners who are living on defined benefits struggle each time the rates notice arrives because they are living in a house which, when they bought it, was quite a modest house. It is now quite an expensive house and therefore the rates go up in correlation with the cost of that home. You might say, 'Well, sell the home.' Where do you live then? Any of these movements have unintended and quite dramatic impacts on people who are living on defined benefits. That is what a lot of the people who are impacted by these changes are.

The fair and sustainable pensions bill that went through the parliament last night—thanks to the participation of the Greens, a party that the government said they would not do dirty deals with—proposed to reduce assets tests for age pension eligibility in order to cut the pensions of around 330,000 retirees across Australia and to alter dramatically the plans of 700,000 people aged between 55 and 65 who are currently planning their retirement. Again, many of them live in my electorate. And 90,000 part pensioners will lose their pensions entirely.

One very nervous individual is my mother, who has rung me and is quite concerned about how this will impact on her. Again, living within a set income sounds okay until the car breaks down or until you need to get—as in my mother's case recently—a whole lot of bricks removed from the back of her fence because someone decided to dump them there. That sounds ridiculous to us here but, as a part pensioner—who does not move easily at the best of times—faced with a very large bill from council for a tonne of bricks that she had not dumped at the back of her property, she was quite traumatised. Of course, coming to her aid and support was not the man who was going to charge her a couple of hundred dollars to do this but my younger brother, who went round with a wheelbarrow and moved all the bricks—which caused him an enormous amount of back pain!

If you think about these things, they seem slight, but they have the ripple effect on individuals who do not have the wherewithal to raise money to meet those costs that they face from time to time. Again, this has a huge impact in my electorate. The fair and sustainable pensions bill, which this bill now rolls out from, proposes to cut $2.4 billion to pensions. Before the election it was the Prime Minister who promised no change to pensions. Well, we have seen massive change to pensions. Chisholm is home to more than 17,000 age pensioners. Of these, 8,410 are part pensioners who will see their pensions either reduced or lost entirely due to these measures. Some single pensioners will be $8,000 a year worse off and some couples may lose as much as $14,000 a year. Pensioners with as little as $289,000 in assets will lose because of this cut.

Following the Treasurer's second unfair budget, the biggest complaint from constituents in Chisholm was about the cut to pensions. I am sure that I am not the only member in this place who has been inundated by concerned pensioners and part pensioners in their electorate about what this means and how it will impact on them. Again, I go back to the fact that they are living on a defined benefit—a defined amount of money. They have no way of adding to their income, so any change has a massive effect on them and on their households.

Part pensioners are in a better position than people who are solely on the pension, particularly those who own their own homes and are in a slightly better position than those who are renting. I feel for those who are on a part pension and pension who rent, because any movement has a huge impact on them. These are people who have worked hard, who have had the ability to save money and who have contributed to superannuation but who do not quite make it to being wholly self-funded in retirement. Going back to the bill before us, many of these are Commonwealth superannuants in my electorate who worked at CSIRO and the old PMG—the movement before Telecom and Telstra—and so are living on their defined benefits. Many of them have struggled and many have written to me over many years about how their pensions are already indexed. So, for them, any changes at the margin have a ripple effect.

People earning around $55,000 from their super represent the top end of the income bracket that this government is targeting with this legislation. It is doing this instead of targeting the top 10 per cent of earners who receive the largest tax concessions on massive superannuation portfolios. The top 10 per cent receive 38 per cent of the unsustainable super tax concession and they are seriously hurting the budget. The biggest impost on the budget and the sustainability for the future are not pensioners; it is the tax concession given to those on massive amounts of superannuation. Many, as I said, have written to me with local comments. David in Mount Waverley wrote:

We were not big earners but we were prepared to go without in our younger days so that we could live with some comfort in our later years. Now we are to be penalised for our thrifty ways. We are not millionaires by any stretch of the imagination. We do not want to reduce our cash reserves because we want that for any emergency—such as health problems where we might need expensive medication. Home repairs are also something that might be needed as well. We are already drawing down on our superannuation in order to live comfortably. Perhaps that is what you want—all pensioners living below the poverty line.

Colin from Box Hill North hit the nail on the head when he wrote:

Changing retirement rules for people in middle Australia who have already retired is unfair and wrong—particularly when the big end of town still avoids paying its fair share of tax. While the dream of experiencing many of the things we put off over the past 20 years so that we could save for our retirement appears to be over, there is still one thing we can do—we still have a VOTE which no government of the day can control.

Robert in Box Hill wrote to me to say that these unfair changes to the pension should be knocked back and that the government should only consider pension changes:

… when the Government commits to exposing the richest in our society to their fair share of pain, a commitment they have singularly failed to make. This will have the effect of immediately relieving suffering from those with the least, while supporting the general thrust towards making the pension system more sustainable.

And many more wrote in the same vain, but I think it was Colin who said, 'We are not going to be experiencing our dreams of travel now in our retirement, but we still have a vote.' They are out there, and they are going to be using their vote.

At $2.4 billion, these bills altogether represent the single biggest saving measure in this budget. It is achieved by cutting the incomes of 330,000 middle-income retirees. Labor has proposed that, instead, the generous tax concession for around 70,000 very wealthy people be slightly reduced to save the budget more than $14 billion. This was condemned by the government as not a large enough measure—as not being sufficient. It is a lot more sufficient and it hurts a lot fewer people. Indeed, the people targeted probably would not feel it at all. Superannuation tax concessions, if left unchecked, are fast outstripping the cost of pensions. According to the budget papers, the annual cost of the concession on employer contributions to super is set to climb from $16.3 billion to $20.15 billion in the next four years. The annual cost of the concession on super fund earnings is set to climb from $13.4 billion to $30.4 billion. Thirty-eight per cent of these concessions go to the top 10 per cent of account holders—Australians earning more than $260,000 per year; the top one per cent.

The set of bills before us mean that from 2017 the assets test threshold for home-owning couples will be lowered from $1.15 million to $823,000. For single home owners it will drop from $775,000 to $547,000. In addition, the current $1.50 taper rate will change to $3. Pauline Vamos from the Association of Superannuation Funds Australia said:

… increasing the taper rate for part-pensioners from $1.50 to $3.00 per $1,000 of assets, while also increasing the threshold at which the asset test starts to apply, would require a couple to save around $120,000 more for a comfortable retirement, requiring a super balance of $630,000. This will have a greater impact on single retirees, who will need to save $180,000 more in superannuation or a total balance of $610,000.

The Treasurer may well say that all you need is a 'good paying job', but the reality is that many people simply will not be able to achieve this without extra savings. Under Labor's plan, rather than hurting the people stuck in the middle, people with very high superannuation balances in excess of $1.5 million will have overly generous tax concessions reduced. The tax-free status of superannuation earnings disproportionately benefits high-income earners. Labor's policy would mean that people with very large superannuation accounts would still enjoy $75,000 a year of tax-free income before earnings over that amount attract a concessional tax rate 15 per cent. I would argue that in retirement, in this bracket, if you own your own home, $75,000 is a pretty good income to be living off. Contrast this with the government's set of bills which will see a part-pensioner couple with a superannuation income of less than $40,000 now lose $13,500. This is a huge amount, a huge impact, and, again, there is no way of making up this shortfall, because the individual has no way of actually earning any additional income.

We are a long time retired nowadays. This is the issue. This is the drama. It is not something new and it is not something the government recently discovered. If we go back to the days of Peter Costello as Treasurer, he produced the first Intergenerational report many years ago, indicating that we needed to be doing something about this to sustain both the budget and good retirement incomes for individuals—not welfare; retirement incomes. These set of measures will not do that. Even though we are supporting the bill before us today, it will still have a ripple impact upon those who are living within their means and have no way of adding to those means. Before us we have a bill that seeks to hurt those who can least afford it, as opposed to Labor's policy which is fairer. It reduces generous concessions to those who can afford it, and it would save $14 billion.

This is coupled with the Greens who proudly trumpet the fact that by supporting this suite of measures they would secure agreement from Tony Abbott to look at reducing tax concessions and high-income super. They are wrong. They are completely wrong. The Prime Minister confirmed it the day after they reached this so-called agreement. He said that the government will not include the super tax concession in its tax white paper. So the Greens have done a deal, got through a suite of measures that are going to hurt people, on a promise that they would have some discussion into the future. What do they get? A couple of weeks extra for people to make submissions to an inquiry. This will make no impact. It will certainly do nothing to assist in finding savings measures or ensuring that we have good retirement incomes for the future.

All the Greens have done is strip middle-income retirees of their pensions. They have received no gains from the government, who always focus their sights on lower- and middle-income earners, never the top earners. It is a shocking betrayal by a political party that pretends to care about people.

We have a suite of bills before us; one passed last night. This measure was carved out of it and is being reintroduced today. Whilst it is being supported by Labor, it will still have impacts upon pensioners now and into the future.

1:01 pm

Photo of Terri ButlerTerri Butler (Griffith, Australian Labor Party) Share this | | Hansard source

I rise to speak on the Social Services Legislation Amendment (Defined Benefit Income Streams) Bill 2015 before the House today, which covers the social security treatment of defined benefit streams. Today's bill relates to that specific issue. It will cap the deductible amount from the pension income test at 10 per cent.

Labor does not like this bill but we understand that in tough economic times we must make tough economic decisions. And these are tough economic times, because this government in less than two years has absolutely smashed the Australian economy. They have doubled the deficit in the federal budget. They have overseen an economy in which unemployment went above six per cent—it is still has a number with a six in front of it, which is a disgrace. Unemployment is higher than at the height of the global financial crisis. This is the highest unemployment that we have had in a decade—in fact, the last time unemployment was as high as it has been under this government was when Tony Abbott was the employment minister.

So unemployment is up, and confidence is down. And why is confidence is down? Last year's federal budget was an absolute disgrace. It was a federal budget that smashed confidence, smashed household and consumer confidence, and smashed business confidence. And we know that wages are at their slowest growth in the period since the wages price index started being kept in the late 1990s. It is clear that the economy is in a very poor state at the moment as a consequence of the decisions of this government and the cuts that they sought to make in last year's federal budget and this year's federal budget. So we accept that these are tough economic times as a consequence of the disgraceful mismanagement of this appalling government.

But we will not oppose the passage of this measure today. We will do this very reluctantly, but let me make one thing very clear, as the shadow minister has, Labor will keep standing up for pensioners. Labor will keep standing up for pensioners, as we have done for the entire period of this terrible federal government, this Abbott Liberal-National government, and as we did when we were in government. When we were in government, Labor did not take an axe to the pension—in fact, Labor looked at the age pension and said, 'We can do better as a nation to support the retirement incomes of people who have worked in this nation their whole lives and who deserve dignity in retirement.'

Under Labor in 2009 there was a review of retirement incomes, and we looked at the way the pension was indexed and we said, 'You know what? The pension needs to do a couple of things. It needs to keep up with the cost-of-living changes for pensioners, and it also needs to keep up with community standards and community increases in living standards.' So, in addition to the traditional CPI indexation for the pension, we looked at indexation and we changed the law so that the pension would be indexed by the greater of the CPI or an index that was specific to pensioners, called the pensioner and beneficiary living cost index.

We also looked at the benchmarking against male total average weekly earnings and we increased the benchmarking to 27½ per cent. That was a double indexation arrangement, where you took the higher of the two indices and then, to make sure that the pension was also keeping up with living standards, it was benchmarked against male total average weekly earnings.

Of course, what was one of the first things that the Abbott government did when they got into office? In their first budget they decided to try and slash the indexation of pensions. It would have been an $80 per week cut to the pension over a decade. It would have seen cuts to the pension that would have seen the pension decline from 28 per cent of average weekly earnings down to just 16 per cent. Of course we opposed these cuts; we will always stand up for the age pension and for age pensioners. We opposed them for the entire period, since they were announced in last year's federal budget.

We worked with seniors groups and other civil society groups around this nation to mount a case against these cuts to the pensions, because these cuts not only flew in the face of fairness but flew in the face of a commitment that Tony Abbott, the now Prime Minister, made prior to the last federal election, in which he promised that there would be no cuts to pensions. That promise was not met. That promise has been broken. That is a terrible thing. And what is more terrible is the fact that Mr Abbott, the Prime Minister, sees the pensioners of Australia as some sort of piggy bank that he can go to—to get money, to take away pensioners' chance at dignity in retirement, and to use those pensioners as a way to seek savings in the federal budget.

As I said, we opposed those cuts to the pensions. We—and the civil society groups and seniors groups who opposed those changes—were successful in our campaign. We were successful in stopping the Abbott government from making those cuts to the pension because they were fundamentally unfair, and we will continue to oppose any of those changes to indexation that the Abbott government sought to make last year.

This year we have seen a new attack on pensioners, a new attempt to make cuts to the pension, when the Liberal Party, the National Party and the Greens teamed up to cut the pension. What a disgrace. Australians now know—if further proof was needed—that the only party committed to protecting pensioners is Labor; the only party committed to protecting pensioners and pensioner living standards is the Australian Labor Party. As I said, the day before the federal election the now Prime Minister promised that there would be no changes to pensions. He also promised that there would be no deals with any Independents or Greens. Both of those promises have since been broken.

What will this new cut to the pension do? Well, within 10 years, more than half of new retirees will be affected by this. Around 330,000 pensioners are set to lose, including 90,000 pensioners who will be kicked off the pension altogether, with single pensioners to lose as much as $8,000 and couples to lose as much as $14,000. As the member for Jagajaga, the shadow minister, said, while the government might claim that all these pensioners are rich, that is just not true. Pensioners with as little less $289,000 in assets will lose out because of this cut. Labor has stood beside Australia's 3 ½ million pensioners to fight Tony Abbott's cuts to pension indexation. We continue to stand up for pensioners.

The seniors group, National Seniors Australia, recognised the importance of what we were doing to stand up for pensioners and to oppose these cuts in their press release of 16 June headed: Seniors welcome Labor's pension stance to protect mid to low income retirees. They welcomed our stance. Just today, National Seniors Australia put out a statement about this new Green's-National-Liberal deal to cut the pension. It is headed: Coalition cuts pensions and turns its back on middle Australia. The press release went on to say:

The Coalition, supported by the Greens, has turned its back on middle Australia with the passage of its $1 billion-a-year pension cuts through the Senate last night.

Michael O'Neill, who is the chief executive of National Seniors, is quoted as saying:

The Coalition’s victory will ring hollow for the several hundred thousand older Australians who have saved and gone without for decades only to see the rules change at retirement,”...

He said:

It is disappointing that these cuts have been sold to the public on the pretext of ending welfare to millionaire retirees in Sydney Harbour homes.

He said:

It is this single old woman living in a little house with moderate savings who will be hit hardest.

He said:

All the experts confirm this. On current deeming rates, her yearly income will be well under $20,000 or several thousand dollars less than that of a full age pensioner.

He went on to give some examples of how people would be affected. He also made the point that in its submission to the Senate Community Affairs Committee, the ANU's Tax and Transfer Policy Institute, an institute of which you would be well aware of, Deputy Speaker Whiteley, confirmed that asset test changes would penalise savers outside of superannuation and create perverse incentives to spend and leave the wealthiest retirees untouched.

He spoke of a single person with a small home and an income of $17,875 per annum, which is 3.25 per cent of the current upper level DSS deeming rate, and with $550,000 in savings would no longer qualify for a part pension. Yet a single person with a small home and no savings would receive the full age pension of around $22,365 a year plus state concessions on rates, utilities and registration. Does that example not demonstrate why National Seniors is taking this strong position that they are against the changes to the pension, the cuts to the pension and the deal between the Greens, the Liberal Party and the Nationals?

The Australian Council of Trade Unions has also spoken out. In a release headed: 'Women and low to middle income earners workers will lose out thanks to Greens pension deal,' the union said:

The Australian Greens have sold out women and low to middle income workers by agreeing to the Abbott Government's cuts to the age pension this week.

Analysis by respected research firm Rice Warner and superannuation experts Industry Super Australia shows those hit the hardest by the Greens - Abbott deal are ordinary workers on low to middle incomes earning $75 000 or below.

In fact, the research reveals that around 80 per cent of single women retiring in 2055 will be disadvantaged.

Even with current superannuation, pension payments and other savings combined, nearly 63 per cent of single women will not be able to retire comfortably through to 2055. These cuts will make this situation even worse.

Single men will also be adversely affected by the cuts, including those currently aged: 55 to 59 years who are earning between $52,000 to $160,000; 45 to 49 years who are earning between $56,000 to $183,000; and 25 to 29 years who are earning around $27,500 to $143,000.

The ACTU quite rightly said:

Combined with the Abbott Government's decision to freeze the 0.5 per cent increase to the superannuation guarantee at last year's Budget, these new measures will deepen social inequity.

And haven't we seen so many new measures that will deepen social inequity under this government? This is a government that—we saw in a leaked green paper the night before last—is considering things like further cuts to schools and hospital funding and has in its leaked green paper some suggestion of means testing of access to public school. You cannot imagine a more reckless government, a more outrageous government than a government that would actually consider the further attacks on public education and public health that this government now seems to be considering—if you go by the leaked green paper. Those are, of course, on top of the $80-billion of cuts in health and education that were in the government's own budget papers in the federal budget announced last year.

This is a government that will stop at nothing to break apart the social contract of this nation. This is a government that will stop at nothing to not take steps to slow the growing inequality that we face in this nation but will actively take steps to increase the inequality in this nation, that will increase the inequality that we have.

As most people across this nation and this globe know, extreme inequality actually slows economic growth. It is not just my view; it is the view of the IMF as well. We all know in this place that we are in a low growth phase globally at the moment. But even taking into account global conditions, the things that this government has done to actively damage Australia's prospects of improving our economic growth are nothing short of economic vandalism. It is a phrase they like to use on us, 'economic vandalism'. But people who are in the coalition who like to say those words about Labor ought to take a good hard look at themselves in the mirror. If you wanted to try to slow growth, if you wanted to make our economic conditions worse then well done on last's federal budget—if you were trying to arrange situations where people were not spending, where people found that their confidence was being smashed, where business confidence was smashed.

If you want a great example of the damage that this government has done to the economy, look at the number of business insolvencies in the past year. Look at the way that small business has been hit by this government. It is running around town talking about the measures that it had in this federal budget about small business. Well, congratulations on finally reversing the axe that you took to the instant asset write-off—Labor's measure. You took an axe to it. What else did we have? We had loss carry-back provisions. We had accelerated depreciation of motor vehicles because Labor, unlike the coalition, which likes to talk a big game in this space, actually understand small businesses. We understand the benefits that unincorporated small businesses need. Let us hope that the greatly belated acknowledgement that this government has now given to small business actually starts to repair some of the damage that its fiscal vandalism caused last year in smashing confidence, stopping people from going out and spending money, and driving unemployment up to above six per cent—as I said, an absolute disgrace—not to mention the immense attacks that we saw on the social fabric of this nation with the cuts to education and the cuts to health.

Deputy Speaker, if you want to find a government that epitomises why Australians lack trust in politicians, just look at the government that we have on the benches at the moment, a government that broke every single promise that it made before the federal election, including the promise not to make any changes to pensions and not to make any changes, for that matter, to superannuation. After the freezing of the SGC, the taking away of the lower income superannuation contribution and now this new attack on pensions, these new cuts to pensions, it is quite clear that the only party that cares about retirement is Labor. (Time expired)

1:16 pm

Photo of Lisa ChestersLisa Chesters (Bendigo, Australian Labor Party) Share this | | Hansard source

I rise to also speak on the Social Services Legislation Amendment (Defined Benefit Income Streams) Bill 2015, which is before us today in the House. I just want to talk very quickly about process and how we got to be here today. It appears that the government's new approach is to bring piece-by-piece legislation before the House, denying us the opportunity as a country and as a community to debate retirement income.

What frustrates me about the government's approach when it comes to retirement income is that they refuse to look at all retirement income. They have a bit of a track record on this. Before the election, the now government said—and we all know the promise; what the Prime Minister said when he was the Leader of the Opposition, time and time again—there would be no cuts to pensions. But then, after the election, they did something very similar. What the government also said when they were in opposition prior to the last election was that there would be no changes to super. When we talk about retirement income, about what our older Australians live on, we cannot consider one without the other. What frustrates me about the government's process in this entire debate is this piece-by-piece coming forward and that it is not a genuine attempt to have a conversation about what a fair retirement income is.

They have broken promises on super—just to focus on those for a moment. One of the first things that they did when they got elected was that they scrapped the low-income co-contribution. This enabled people who were on a low income to contribute more to their super. As a government that claim to be the best friend of super, they have scrapped something that would have helped to ensure that low-income earners were not reliant on a pension or a part-pension when they retired.

What the government also did after they got elected was that they froze the increases to the compulsory super guarantee. They froze them, again denying workers, particularly low-paid workers, the opportunity to earn more in their super during their working life so that they would not be reliant upon a pension when they retired. They would not be reliant on a part-pension when they retired because they would have earned more in their super through the increasing of the compulsory guarantee.

Another decision that the government made in terms of retirement income when they first got elected was that they reversed the decisions to make those on a very high super account pay some tax. They reversed that decision, and now they are ruling out even talking about it. It is just not fair that in today's age we are not talking about retirement income. We are not talking about what a fair rate of retirement income is and trying to do what we can in terms of government policy to get to that point.

Let us just remember where this debate first started. In 1992, the Labor government at the time introduced the compulsory super guarantee. That allowed working people for the first time to put away money for their retirement. Coming to that point where we have a decent retirement income is going to take a generation. It will take a generation for people my age, from when we first started working, to have a working life of retirement income that is enough for us to retire on.

There needs to be some kind of logical acceptance. Until we get to a stage where the 30-somethings are retiring and have a working lifetime of super to retire on, there is going to have to be a part-pension and pension rate. There is going to be the need to pull together a comprehensive government policy that takes into account where people are in the transition towards superannuation and being able to live on superannuation. We need to draw a line and say, 'This is a fair retirement income,' and work towards helping as many people get to that point as possible. This is what has been missing in this debate to date, and it is disappointing that this legislation is coming before us piece by piece.

1:20 pm

Photo of Scott MorrisonScott Morrison (Cook, Liberal Party, Minister for Social Services) Share this | | Hansard source

I thank members for their contribution to the debate on the Social Services Legislation Amendment (Defined Benefit Income Streams) Bill 2015. I do not wish to delay the House any further, and I thank the opposition for their indulgence in allowing these matters to be considered now.

I note that the debate canvassed a wide range of issues, not just the bill before us, and I note that those opposite referred much to the assets test rebalance measure, which was passed by the Senate last night. There is just a simple proposition there. If the opposition wish to continue their opposition to this measure, they have to answer one simple question, and that is: will they reverse it? I note that the Leader of the Opposition failed to give that commitment this morning, and I imagine that will be the case.

I thank members for their contribution, and I commend the bill to the House.

Photo of Brett WhiteleyBrett Whiteley (Braddon, Liberal Party) Share this | | Hansard source

The question before the chair is that this bill be now read a second time.

A division having been called and the bells having been rung—

As there are fewer than five members on the side for the noes, I declare the question resolved in the affirmative in accordance with standing order 127. The names of those members who are in the minority will be recorded in the Votes and Proceedings.

Question agreed to, Mr Katter and Mr Wilkie voting no.

  Bill read a second time.