Wednesday, 2 December 2020
Questions without Notice
Pensions and Benefits
My question is to the Treasurer. 2020 has been a challenging year for older Australians. Many retirees have put savings in government guaranteed term deposits because they are concerned about the share market and need cash reserves to help them get through. With the current cash rate at 0.1 per cent and term deposits at 0.6 per cent at best, the upper deeming rate of 2.25 per cent is clearly too high. Treasurer, when will the government assist older Australians and cut the deeming rate?
I thank the honourable member for her question. On 12 March this year the minister for social services announced that the government had made a decision to reduce the deeming rates by 50 basis points each. On 22 March it was announced the deeming rates would be cut by a further 25 basis points. These reductions reflected the low interest rate environment that the honourable member has pointed to.
As of 1 May a lower deeming rate of 25 basis points and an upper deeming rate of 2.25 per cent applied. As the honourable member will be aware, the deeming rate takes into account the returns that can be achieved by investors on a range of assets—not just cash deposits, it can be on stocks in the stock market, fixed interest investments and a whole range of assets—hence there are two levels to the deeming rates.
Our changes to the deeming rates have benefited around 900,000 income support recipients, including 565,000 people on the age pension. As a result, they will get, on average, an additional $313 from the age pension in the first full year that the reduced rates apply, and this is expected to be at a cost of $876 million over the forward estimates. So I would say to the honourable member that the government has already acted on deeming rates. We continue to monitor movements, obviously, in the cash rate, but the government has taken action which has benefited pensioners right across the country.