Emma Husar (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I am proud to rise this morning to move the first motion in my name in this place. For the benefit of the House and those in my electorate who are affected by deeming rates I would like to read the motion into Hansard as part of my speech. I move:

That this House:

(1) notes that:

(a) the Government is short changing Australian pensioners;

(b) despite interest rates falling from 2.25 per cent in February 2015 to 1.50 per cent today, the Government has failed to adjust deeming rates for Australian pensioners;

(c) currently a single pensioner's savings are deemed at 1.75 per cent on the first $49,200 and any amount over that is deemed at 3.25 per cent;

(d) deeming rates are supposed to reflect returns across a range of investment choices available in the market, but the Government is failing to act by lowering deeming rates; and

(e) Australian part-pensioners are doing it tough in a low interest rate environment and pensioners are crying out for some relief; and

(2) calls on the Prime Minister to immediately reduce deeming rates in line with falling interest rates, so that pensioners' assets are deemed fairly and Australian pensioners finally get some relief.

This is an issue that is seriously affecting pensioners in my electorate of Lindsay and right across the country. We currently have a situation where the assumed rate of return on investments made by pensioners is significantly out of step with the economic conditions that we see in Australia at the moment. As a result pensioners, effectively, are being ripped off because the government is assuming they are earning income—which, in many cases, they are not.

The government is using this non-existent income to determine the pensioner's benefits. It is a fact that interest rates in Australia are at a record low. This lowers the rate of return on safe investments across the board. Traditionally, pensioners have opted for low-risk financial products from well-established institutions so their hard earned money is protected in their later years. Generally, term deposits are preferred.

If you were to go onto the financial products ratings agency Canstar and search the thousands of term deposit products available to Australian investors, I would invite you to guess how many products were on offer at a return of 3.25 per cent or above. It is just one. Out of thousands upon thousands of products just one offers 3.25 per cent. It is with Big Sky. It has a four-year minimum term and interest is paid annually at 3.25 per cent. But too bad if you do not want to lock up your funds, for whatever reason, for 48 months or if you need to be paid more often than yearly. Anything less than a four-year term gets you a guaranteed rate of return less than the government's deeming rate, and for any product that pays monthly, quarterly or six monthly, again, you are guaranteed a rate of less than the government's deeming rate.

As I am sure those on the opposite side are very well aware, this is an issue that causes significant distress to pensioners as they try to manage their financial affairs. It is simply not fair to assume that pensioners are earning income that they are not and then use this fake income to decide their benefits. It is a despicable situation this government is presiding over and it is causing undue stress and anxiety among our pensioners who have worked hard to get where they are.

To make it worse, I have heard from some of the more detached and apathetic commentators, in this space, that there are plenty of financial products out there that offer higher rates of return than term deposits. We might even hear that from those opposite today, seeing as they have managed to conjure up just two speakers on this motion. That is true: if you are in a position to take on more risk and invest over a longer period there are plenty of financial products for you. But following the global financial crisis there is good reason for pensioners to invest their hard earned money safely and securely. They simply cannot ride out a downturn without it having an immediate impact on their quality of life.

Why this government is forcing pensioners to invest their money in ways that take on more risk is beyond me, but it is not surprising. After all, this is a government that is hell-bent on cutting the energy supplement, meaning pensioner couples will be $500 a year worse off. And this is a government that wants to increase the pension age to 70. In all, these things show that when it comes to Australian pensioners Malcolm Turnbull and his Liberal government are completely out of touch.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

Is the motion seconded?

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I second the motion on deeming rates for Australian pensioners. It gave me great pleasure to see this private member's motion on the papers this morning and I thought it would be appropriate to come in and make a contribution. The reason I want to speak on this bill is that I grew up in a household in Queensland—a very humble household—and our sole source of revenue in the house was a widow's pension. My father passed away when I was eight years old. As a result, I can speak with some form of authority about what it is like to grow up in a household where your only income is a pension.

I will break down my contribution into two parts. One will be on pensioners. The member who moved the motion spoke predominantly about self-retired fundees, so the second part of my speech will shift to self-retired fundees and what the government's position is on it. This will help clarify the member moving the motion's understanding of the issue and the government's position.

Growing up in a household on a widow's pension I—along with many other children in the street—did not know we were poor. We thought it was completely natural that the shoes you wore were handed down from a sibling. We thought it was completely natural that the school uniform you got, that everyone in the school got, was from a second-hand shop or St Vincent de Paul. That is how we went about business in our family.

Never, at any stage, were we hungry and it never, at any stage, did we think we were poor. We thought every kid played cricket in the main street by knocking off a fence paling from Mr Dixon's place, down the road, and that became the bat. The cricket ball of choice was either an avocado, if in season, or a mango we, again, had knocked off from a neighbour's place—one who would have been contributing to the game of cricket. So, they were very humble beginnings. It gives me great pleasure to be here in the House to share those humble beginnings with the House, because I know there are others from both sides of the House who have that genesis.

To speak more aptly to the private member's motion, when we move into the space of self-funded retirees, what the mover of the motion has not taken into consideration with the building of the revenue stream for self-funded retirees is the interest generated from their investments, plus the ability for them to draw down from their capital investment. The government does take that into consideration. We encourage Australians, particularly in the self-funded retirees space, that we do need to advertise and promote the mindset that that bucket of money needs to be drawn down on in the future—not all the time. My family is in exactly the same boat. When my mum's second husband passed away she sold the family home and that money is now invested. Part of that makes up part of her revenue and it is topped up by a part pension.

So the government does have compassion, does have an ability to make sure that those who are most vulnerable in our community are looked after. But as a nation we need to shift away from what has been described by other commentators as a welfare mentality, whereby the bucket of invested capital is seen to be an investment that is kept in perpetuity and then gifted to a sibling or to someone else. That is not the intention of superannuation—it is not the intention of large-scale capital investments that you have the capacity to draw down. I know from experience that there are those who have a fear of drawing down—some might be reasonable amounts of money and some might be quite humble amounts. They fear drawing down because they have assessed that next year the return on their investment will be less because they have drawn down some capital. That is where the government safety net comes in, because if you are on a part pension that will then go to a full pension as your assets are recalibrated and reassessed. The government will play a role in looking after that.

If the Australian Labor Party comes into this place and talks about the protection of and rights of pensioners, be careful when introducing carbon taxes. Be careful when introducing legislation that has direct costs on households across Australia. There are two ways that we can help pensioners. One is by putting more money in their pockets by reducing taxes and the second is to reduce the amount of expenditure they have in their household budgets.

Susan Templeman (Macquarie, Australian Labor Party) Share this | Link to this | Hansard source

In my electorate of Macquarie, the coalition made a great many promises during the last election, ranging from $310,000 for a local environment plan to $30,000 for an irrigation system for Knapsack Oval in Glenbrook. So far, the Turnbull government is yet to make good on any of these promises, and I, of course, will be pushing for them to do so. But today I ask: where were the Prime Minister's promises for Macquarie's pensioners, part pensioners and self-funded retirees? These are people who had a deal with the government that if, over their lifetime, they worked hard and saved what they could, there would be a pension to help make ends meet, if they needed it, at the end of their working life. They trusted they would be cared for in return for their economic and social contribution to our country. Sadly, this is a promise that the Prime Minister and the dysfunctional coalition government are failing to deliver.

What has this government and the previous Liberal government delivered for pensioners? In every single budget the Abbott and Turnbull governments have handed down they have tried to cut the pension; they are trying to abolish the pensioner education supplement; and they are increasing the pension age to 70. In 2014 they tried to change pension indexation, a change that would have left pensioners around $80 a week worse off within ten years. Most recently, they attempted to cut the clean energy supplement. They want to penalise migrant pensioners who go overseas to visit family and friends by cutting their pensions just six weeks after their departure.

As a result of the government's changes to the assets test, legislated with the help of the Greens, from 1 January 300,000 pensioners will have their entitlements cut, and just under 100,000 of those will lose the pension entirely. It is an appalling record, and that is why deeming rates are today so important. Unless you are retired and looking at your eligibility for a pension, part pension or seniors heath card, deeming rates do not actually matter that much. But deeming rates are supposed to be a practical way for government to efficiently estimate the interest and dividend income earned by retirees on their assets, inclusive of term deposits, share portfolios, bank accounts and more.

Despite the fact that interest rates are currently at record lows of 1.5 per cent, the government has insisted on leaving deeming rates artificially high at 3.25 per cent; meaning that individuals applying for pensions are estimated to have an interest based income much higher than they actually do. The result will be that thousands and thousands of people will be excluded from accessing pensions and part pensions because this government—overseen by the Treasurer, the social services minister and the Prime Minister—will calculate that they earn more income than they actually do. It is very convenient for the government. They get to reduce the budget bottom line and shift costs from government to individuals, and these individuals have the least capacity to find alternate sources of income to meet their costs of living.

Let's get really practical here. The absolute highest rate an individual investing their money in the Commonwealth Bank's pensioner security account would receive is 2.25 per cent per annum. Even if you had a balance significantly over the threshold for pension eligibility at the highest interest rate, that rate is still lower than Minister Porter's deeming rate of 3.25 per cent. And that is the case with all of the big four. A single pensioner with a bank balance of $60,000 in such an account would have their earnings deemed at a rate 68 per cent higher than the interest they would actually be receiving. This will lead to people being excluded at the means-testing stage for having an income that is, thanks to deeming, too high.

This issue has been raised by the Blue Mountains branch of the Association of Independent Retirees and by many individuals, like Ron from Blaxland east, John from Richmond and Brenda and Arthur from Bligh Park in my electorate. These people do not want to be forced into higher, riskier investments in order to get a return that more closely matches the deeming rate. They want security; they want not to be getting more than they should; they want to be treated fairly and the current deeming rates do not do that.

Therefore, we call on the Prime Minister to immediately reduce deeming rates in line with falling interest rates so that pensioner assets will be deemed fairly and Australian pensioners will finally get some relief. All it takes is the stroke of a pen. We do not need to pass legislation; we just need this government to make the right decision.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I would like to correct some of the comments made by the member for Macquarie. She gave the impression in her speech that that 3.25 per cent deeming rate cuts in if you have $60,000 in savings and it is done on the whole lot. That is simply not correct. For a couple, their first $81,600 is only deemed at 1.75 per cent. So the example that the member for Macquarie gave was of someone who had $60,000 in an account and she pretended that that was to be deemed at 3.25 per cent. If that $60,000 is with a couple and that is their savings, that will only be deemed at 1.75 per cent. If they are getting two-point-something per cent, as the member for Macquarie indicated, that is actually above the deeming rate. In her speech, I think the member for Macquarie misunderstood that for a couple their first $81,600 is deemed at 1.75 per cent not 3.25 per cent—a very important distinction. As the member for Macquarie pointed out, there are many accounts available out there in the marketplace for someone with $80,000. For a couple with $80,000 there is actually well above the deeming rate. For those fortunate enough to have more than $80,000 of investments we must remember the return on superannuation accounts. Let us look at the last three years. In 2013-14 the average return on superannuation funds in this country was 12.7 per cent. In 2014-15 it was 9.7 per cent. In the last year it has been down—it has only been 2.3 per cent. But if we look at the average of those last three years, it is an 8.2 per cent return on superannuation accounts averaged over the last three years, which is well above the deeming rate.

The member for Macquarie also talked about how she wants to give more to pensioners, and wouldn't it be wonderful if we could do this for pensioners? That is absolutely correct. Both sides of this parliament would love to be able to do more for pensioners. But the reality is that in this nation we pay for the pension by the money and income earned by the nation each year. We do not have some big savings deposit like they do in other countries, where the interest from that amount pays the ongoing pensions. It is the wealth created by people working today that pays pensions today. Is the wealth of those who earn wealth in this nation tomorrow that will pay the pensions tomorrow. I am sure the deeming rate raises issues for some people, but I say the greatest concern that pensioners should have is the risks of higher costs coming through. We have seen that with the closure of the Hazelwood power station. Estimates of increases in electricity costs—

Opposition Members:

Opposition members interjecting—

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

They laugh. I do not know if Hansard can record laughter. We have the prospect of pensioners in this country facing a 25 per cent increase in their electricity bills from the closure of Hazelwood, and what do we hear from the other side? Laughter. This is simply not good enough. At the moment, with the high cost of electricity in this country, pensioners are paying twice the price for electricity as they are in North America. There are many pensioners that go to sleep in winter in cold homes in Sydney, Melbourne, Victoria and other parts of this nation because they cannot afford to turn their electricity on. And yet we have policies that are going to push that price up by 25 per cent. What do we have from the other side? Instead of expressing some concern about that, they laugh and snigger. This is a disgrace. We need to do the best we can for our pensioners, and the most important thing— (Time expired)

Wayne Swan (Lilley, Australian Labor Party) Share this | Link to this | Hansard source

I would like to say a few words about this important motion. I would like to compliment the contributions from the members for Lindsay and Macquarie, who clearly understand the importance of cost of living pressures, not only on full pensioners, but on part pensioners and of course on self-funded retirees. It does not matter where you look over the period of the Abbott-Turnbull government, there has been one common theme: a concerted attack on the living standards of pensioners and self-funded retirees, and a failure to recognise the importance of dignity in retirement for people who have worked hard all of their lives to make our country great.

Today I want to talk on behalf of the 17,000 full and part pensioners in my electorate that are being short-changed and attacked, year in, year out by the Liberals in this parliament. Of course Labor has historically been the party that has stood up for pensioners. We put in place the biggest single increase in the age pension in its history. We did that so that people on the single pension did not have to live in dire poverty. We put in place a scheme of compulsory superannuation, which has produced a savings pool of $2 trillion, because we understand the importance of a self-funded system, as well. What we understand, and those opposite do not understand, is the intersection between superannuation savings on one hand and the importance of being able to access the aged pension, either in full or in part, on the other.

What we have seen under the Liberal government has been an attack on the full age pension: an attempt to cut the indexation on the age pension by up to $80 a week over a decade—a massive attack on the living standards of many full pensioners as well as part pensioners with superannuation in savings. We have seen them attack indexation of the age pension and we have seen them attack pensioner concessions to the tune of $1.3 billion, and now they are seeking to short-change pensioners by failing to lower the deeming rate to reflect lower interest rates overall. The failure to do that shows how sneaky those opposite are. They want to crib away at the incomes of people who are on part pensions. That is why they want to make this sneaky, under-the-radar attempt to once again cut the income of full pensioners and part pensioners who have a modest level of savings. Remember this: in this low-interest-rate environment, income from a given level of savings is now far less than it was five years ago and a decade ago. Many people on what may appear to be substantial assets are receiving little income, and this government is out there ripping away the little income they are receiving from those assets. That is why the deeming rate is so important.

For a single age pensioner on a full pension of around $20,000 and with modest assets, failure to adjust the deeming rate means they could lose around $1,000 a year—$1,000 a year!—in pension income. Meanwhile, the government sits there and waves through massive tax avoidance by so-called respectable companies such as BHP. Under this government, millions of pensioners and part pensioners get their income cut while multinational companies get a tax cut. That is the priority of those opposite: attacking the incomes of those who have worked hard all of their lives by sneaky measures like this through their failure to adjust the deeming rates. That is why this motion today is so important.

Those opposite could not even martial a speakers list on something that is so important to the living standards of millions of Australians. They could not even get a speakers list together. There are a lot of people who are a lot worse off as a result of the refusal of the Minister for Social Services to adjust the deeming rate. This is not a mistake. He is not that stupid and he knows exactly what he is doing: by stealth, reducing the private income of people on some of the lowest incomes in our community. And this comes on top of the attempt to cut the base rate of the pension by $80. This is a government that is strong in attacking the weak and very, very weak in supporting the sorts of measures that need to be taken against multinational tax evaders and all of those who deserve to pay.

Peter Khalil (Wills, Australian Labor Party) Share this | Link to this | Hansard source

I am glad I have an opportunity to speak on this very important motion. As the member for Lilley said, the government could not even muster enough speakers to speak on this motion.

I am glad I have the opportunity, because of the importance of this motion to pensioners around Australia. The government's attack on the living standards of pensioners has been an issue which has come through the doors of my electorate office with alarming frequency since my election as the member for Wills just a couple of months ago. Only last month I met with two pensioners, Vic Guarino and Gino Iannazzo, from Australian Pensioners' Voice. They formed in 2007 to represent the interests of Italian-Australian pensioners in my electorate. Of course, pensioners from all backgrounds, multicultural backgrounds, face the same problems, such as struggling to meet the costs of living, paying essential bills and receiving appropriate health services. Gino and Vic highlighted the mammoth issue faced by those who live, particularly, in the inner city, as well as other parts of Melbourne, where house prices have increased exponentially over the past decade. As such, for them, paying council rates has been very difficult on fixed incomes because, over the last decade, pensions and other fixed income streams have not increased at the same pace as home values have. I have heard countless similar stories from people who have worked hard all their lives who are now struggling in the current climate amidst skyrocketing costs of living coupled with a low interest rate environment.

Everyone should understand why pensioners crave the stability of cash interest. Retirees inherently do not have a high appetite for risk; they cannot weather periods of market volatility, and they do require a high level of liquidity of their assets. This is the simple reality of living off a nest egg—a finite pool of money. The low returns on cash interest are tough enough. As we know in reality, the rate of return on a term deposit from a major bank equates to only a skerrick of profit after inflation and usually requires you to freeze your money for an extended period.

My constituents know the impact of falling interest rates on the standard of living because they can feel it every day; it has a direct bearing on their standard of living. Let me be clear about this: these people are not at risk of taking fewer holidays or struggling to buy a new car this year; they are talking about the difference between eating or going hungry, buying medications or skipping prescriptions. These are not luxuries. We owe these people, who have contributed so much to our nation, something better.

My constituents also know that the rate used to assess income from financial assets, which determines how much pensioners receive, has not been adjusted by the federal government for 18 months. This means that pensioners already squeezed by low interest rates are also are being hurt by the Turnbull government's failure to adjust deeming rates, as we have heard. Deeming rates assume financial assets earn a certain rate of income, regardless of what the actual earnings are. Currently, a single pensioner's savings are deemed at 1.75 per cent on the first $49,200. Any amount over that is deemed at 3.25 per cent. It can be considered in no way fair to assume some are earning income that they are not, and then use this fake income to decide their benefits.

I know this issue is not limited to the people of Wills. We have heard in the chamber already this morning similar stories of pensioners been ripped off by illogical calculations being used in the determination of their pension amount. So I stand here and say loud and clear: the coalition is scalping pensioners through sham calculations. And I repeat here what I have said to many of my constituents already: this government is not looking after you; it is not looking after pensioners. The rates are supposed to reflect returns across a range of investment choices available in the market, but the Turnbull government is failing to act to lower them. That is simply not good enough. It is time for the Turnbull government to take action to reduce the pressure on pensioners by adjusting deeming rates. The government's inaction on deeming rates comes as thousands of pensioners brace themselves for the effect of the changes to the pension assets test that will commence on 1 January 2017. In 2015, the Liberal government, in partnership with the Greens in another unholy alliance to attack the livelihoods of Australia's pensioners, legislated new measures to tighten the assets test for the pension. From January 2017, the pension will reduce by $3 for every $1,000 in assets above the assets limit, increased from $1.50. Many experts think that this will create perverse disincentives for Australians to save for their retirement. This is one of the reasons that Labor wants to see a review into the pension means test. We believe that this review needs to examine the current interaction between the pension and superannuation systems, how the pension works and how the system might be improved to more effectively encourage super and other savings now and into the future.

Debate adjourned.