Wednesday, 12 September 2012
Matters of Public Importance
Military Superannuation Pensions
I have received the following letter from Senator Fifield:
Pursuant to standing order 75, I propose that the following matter of public importance be submitted to the Senate for discussion:
The Gillard Labor Government's ongoing failure to deliver fair, just and equitable indexation of DFRB and DFRDB military superannuation pensions.
Is the proposal supported?
More than the number of senators required by the standing orders having risen in their places—
I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the Clerks to set the clock accordingly.
Before I start on today's matter of public importance, I want to say something, and I do so more in sorrow than in anger. The government in question time today reached a new low in its deliberate campaign of vilification and personal attacks on the integrity of the Leader of the Opposition. It was in true Labor form of playing the man and not the ball aka former Premier Anna Bligh's disgraceful attacks on then opposition leader Campbell Newman.
In question time today, Acting Prime Minister Wayne Swan attacked the Leader of the Opposition for not doing radio. It is true that Mr Abbott did not do radio today and the reason is that there was a private funeral today in Canberra for one of our own killed in Afghanistan on 29 August. As a mark of respect for the family and for the memory of this young man Mr Abbott had decided not to do radio and other media today. After Acting Prime Minister Swan's attack on the Leader of the Opposition, the Manager of Opposition Business in the House, Christopher Pyne, spoke to the Leader of the Government in the House, Minister Albanese, behind the Speaker's chair, which is convention, and explained all this to him. This was communicated to Acting Prime Minister Swan, yet, despite being alerted to the situation, Mr Swan again repeated the allegation, which left Mr Abbott with no choice but to publicly explain the situation to the House.
My views of Acting Prime Minister Swan's behaviour are, quite frankly, unprintable. His behaviour will quite rightly be viewed by the ex-service community and indeed all Australians as beneath contempt and, regrettably, will undoubtedly be a precursor to the behaviour of the Labor Party between now and the next election.
I will just read through the text of today's matter of public importance so that there is no doubt about it. It reads:
The Gillard Labor Government’s ongoing failure to deliver fair, just and equitable indexation of DFRB and DFRDB military superannuation pensions.
I know that some from the Labor Party will be speaking on this MPI today, and I know that Senator Wright, the Greens spokesperson, will be speaking on this today. When they do so, I want them to tell this chamber and I want them to tell representatives of the ex-service community who are here today and others who are not here today exactly what is precluding them from supporting fair indexation. If I get the chance, I will go through some of the comments that have been made by some in the Australian Labor Party and some in the Greens about this measure.
The Australian Labor Party went to the 2007 election with a policy to do something in relation to fair indexation; they promised to do something about it. Senator Lundy, the member for Eden-Monaro and others wrote a letter, which has been referred to in this place before, to Minister Wong and asked her to do something about implementing the Australian Labor Party's policy of the 2007 election. Nothing has been done. The coalition went to the last election with a commitment to do something about fair indexation. History shows that we were not elected. History shows that there was a convoluted relationship between the Australian Greens and the Australian Labor Party—a disastrous partnership on any account.
On behalf of the shadow minister for defence science, technology and personnel, I brought a bill into this chamber seeking fair indexation, seeking that those on DFRB and DFRDB would be treated in the same way as those on the age pension and the service pension. The Australian Labor Party and the Australian Greens had the opportunity then to match actions with words, deeds with commitments, but they failed at the hurdle. In my view, it was a dark day for the Senate when those men and women, the 57,000 DFRB and DFRDB recipients and their families, were denied fair indexation.
Two weeks ago, we sought to amend an amendment bill in the other place in relation to a variety of veterans matters. Indeed it was a bill that was not time sensitive. Despite the carry-on of members Oakeshott and Windsor and others about it, and the comments of the Greens and the other Independents in the other place, there was no time sensitivity in relation to it. Effectively, what we sought to do was to halt that bill until fair indexation legislation or a bill had been introduced. This was in the main a bill that was seeking to sort out a number of matters that were not time sensitive. They could have been done in March and April of next year. We had drafted the bill for indexation. We introduced the bill into this place. The government needed only to send it off to the parliamentary draftsman in the House of Representatives and it could have been introduced, quite frankly, the next day. It was not, and it was voted down.
Indeed, today in the other place, a motion will be moved by the Independent member for Lyne, Mr Oakeshott, who has been parading around the country giving some indication that he would be putting forward a motion for which there would be an outcome, which would address fair indexation. I will read the start of this motion. It says that it 'calls on the government to consider increasing military superannuation payment indexation'. 'Consider' is not seeking action. They are weasel words from the member for Lyne: 'consider fair indexation'. He had the opportunity to actually vote for fair indexation not consider it, and he failed at that hurdle. I want to make it absolutely clear that every senator on this side of the chamber and every opposition member of the House of Representatives has signed up to a commitment that Tony Abbott believes the opposition has signed up to—that is, in the first budget of an incoming Abbott government, if we are given the great honour to be elected, we will bring in that legislation and make the funds available for fair indexation. Indeed, this is a commitment signed by the Leader of the Opposition and signed by candidates and members all over the country. I ask Labor Party members to take a very long, hard look at this and see whether you are, indeed, prepared to make that commitment.
I will take that interjection. You are absolutely right, and I have said that from one RSL congress to another. I have said that at nearly 50 veterans forums around the country: we should have done something about it earlier. But, my fine feathered friend, what I will say to you is this—through you Madam Acting Deputy President: you went to the 2007 election with a commitment. Indeed, Senator Lundy and the member for Eden-Monaro, Mike Kelly—the current member for Eden-Monaro; not for long, because he has let down his own people in Eden-Monaro. They go into their electorates and they get in with ex-service community members and veterans and say, 'We're going to sort this out.' Mike Kelly has been doing it down in Eden-Monaro—'Don't worry, I'll sort this out.' And there is Mr Neumann, the member for Blair, was in the Ipswich Times, saying: 'This is outrageous. I have written to Minister Wong about this. It is unfair. They are not getting enough.' Of course, what did he do a week and a half ago in the other place when he had the opportunity to actually put a bill in place to achieve fair indexation? Of course he fell at the hurdle. Weasel words from people who are happy to go out and say what they think is appropriate and what people like to hear in their electorates, and when they get here and when they have got the opportunity they absolutely squib it. They have squibbed it on this occasion and they will continue to squib it.
There will be another opportunity for those opposite when this bill comes back from the lower house. I will move the same amendment and I will say at that stage: we will halt this bill until we get fair indexation legislation introduced by the government. That will be the big test. It will be the big test for Senator Lundy and it will be the big test for everyone over there who slimes around like snakes in the grass telling their constituents they actually care about this, but they do nothing. (Time expired)
The only people who would truly benefit from any changes to the indexation of military indexation are those already on higher pensions or with other incomes and significant assets. For everyone else, the changes to indexation are small but they would create significant difficulty for the federal budget. Those opposite understand this, which is why for 11 years they did nothing. In fact, this government's tax cuts introduced on 1 July 2012 are likely to provide more financial assistance for those veterans earning less than $80,000 per annum than any proposed changes to the indexation of military super.
When we discussed the Defence Forces Retirement Benefits Scheme, DFRB, and the Defence Force Retirement and Death Benefit Scheme, DFRDB, we must remember that these are not the same as the aged pension and they are not the same as the service pension. Neither scheme is even open any longer, with the more recent DFRDB closing in 1991.
Our military super systems are tailored specifically to meet the special needs of military service personnel and are already more generous than their counterpart Commonwealth civilian schemes. That, of course, is appropriate. Many people on DFRB and DFRDB retired from the military while still at working age, with time to continue to save for their retirement. The general trend has been that some 75 per cent of DFRDB members were under 45 years of age when they ceased service and 40 per cent of those were between 35 and 40 years of age. These are people who should have continued to work and continued to save.
Relying on an indexation system designed for aged pensioners is not the answer to increased retirement wealth. The majority of veterans who receive a pension from these systems still have access to other financial assistance such as the age or service pension—that is, it is not their only source of income. The DFRB and the DFRDB are guaranteed sources of income that are not subject to market fluctuations and are not subject to the same levels of risk that most Australians in the superannuation system are exposed to. These are generous schemes that receive benefits not received by other sectors and certainly not received by the average Australian. I think this is an appropriate juncture for me to note in the context of some of the more inflammatory correspondence I have received—care of the provocations of Senator Ronaldson—it is a more generous arrangement than prevails for people elected to this place since 2004.
Recipients of DFRB and DFRDB get higher contribution rates—up to 30 per cent—compared to the national legislated rate of nine per cent. Even as the national rate of super gradually increases to 12 per cent, another Labor achievement, it is still nowhere near the potential 30 per cent contribution for military personnel. Military pensioners get an annual payment that is not subject to market risks. Those under the DFRDB get the option to receive a larger payment upon retirement, a commutation of between four and five times, for a reduced annual payment. This is a choice exercised by over 99 per cent of retirees, and accessed immediately upon retirement after 20 years of service as opposed to the preservation age for the rest of the Australian community.
Changes to the indexation methodology for generous systems would be inappropriate. Changes would be inequitable. Changes would be costly. Vitally, they would have a minimal impact for those on lower pensions—minimal impact for those not on higher incomes. Finance and the Government Actuary costed of the opposition's bill, Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010 at a cost of $1.7 billion over the forward estimates. That is $1.7 billion to change a system that will provide little real help for retirees on lower incomes. If we are talking about fairness, if we are talking about justice, if we are talking about equality, then what about those under the current Military Superannuation and Benefits Scheme, the MSB? What about those on civilian Commonwealth schemes? Why are Senator Ronaldson and his colleagues absolutely silent on those important questions? We would also need to alter the indexation arrangements for those in other schemes if this were really about fairness and not entirely about politics. The opposition, right now, have a $70 billion black hole and it is growing and growing. Changes to these systems are not financially sustainable nor are they fair. This is just another unfunded promise by the opposition and it cannot be justified. That is why the coalition, after 11 years in government, never made the changes that they are spruiking today. Let me quote former finance minister, Nick Minchin. Former Senator Minchin said:
This … claim—
to change indexation—
was properly rejected by the Howard Government, of which I was a member. There is no inherent logic to the proposition that a public sector employment-related superannuation payment should be indexed in exactly the same fashion as a means-tested welfare benefit in this case, the aged pension.
Former finance minister Nick Minchin said that then and he says it now. He was right then and he is right now, and the Gillard government agrees with him.
Senator Ronaldson and his colleagues, in their spruiking of this policy, remind me of that old diggers' saying, 'What do you call a politician spruiking for veterans? A member of the opposition'—because when in government these obligations and promises were as nothing. This is a 'road to Damascus' conversion from a group of politicians who only comprehended this mission when they were in opposition. I predict that should they ever form a government this promise will be the first on the cutting-room floor. Today's debate is purely political in motivation. The proposed changes would be zero help for those under the current MSBS. For those under the MSBS who served in East Timor it would mean zero help. For those under the MSBS who served in Afghanistan it would mean zero help. For those under the MSBS who served in Iraq it would mean zero help.
The Gillard government is committed to providing an equitable and fiscally responsible competitive remuneration package for all current and retired members of the ADF that reflects the unique nature of military service. Changing the index arrangements is not the answer. There is no intention here to deny former servicemen and servicewomen their beneficial rights. Our military super schemes are generous, providing early access and a higher percentage of employer contributions than most other Australian workplace schemes. Comparing military super with the age pension is just not relevant. Super payments are an employment based benefit; the age pension is a means-tested income support system that forms part of our welfare system. For many, the age pension is their only source of income. Military super payments are a guaranteed level of income regardless of the person's other income or assets and does not remove their eligibility for the service or age pension. They are not the same and they are not comparable. The age pension is indexed so that the maximum basic rate of the single adult age pension, after indexation, does not fall below a rate equal to 25 per cent of total average weekly earnings. This was done so that pensioners would share in the increase in community living standards.
The DFRB and the DFRDB pensions, unlike the age pension, were not intended to ever be the sole lifelong income source for those who were still of working age when they ceased service either through choice or due to rank retirement age. The rate of indexation of the age pension is not relevant to military super payments and yet here we see the opposition trying to use it to justify changes. Criticisms of the DFRDB Scheme are not justified. It is a generous scheme, even more so than most other Commonwealth superannuation schemes, and changes to the indexation proposed by those opposite would be unfair, unjust and costly without helping those on lower pensions. It is not a habit of mine to fully agree with former Senator Nick Minchin but on this occasion he was right.
As the Australian Greens spokesperson on veterans' affairs, I am very aware of the cause of fairer indexation of military superannuation pensions. I have spoken at length to organisations representing veterans and their families and I, along with many other MPs, have received extensive correspondence from the veterans' community about this issue.
Let me say at the outset that this is not a new issue but the coalition is a recent convert to the cause of fairer indexation of military superannuation pensions. Perhaps we should reframe this MPI to include the failure of the coalition to deliver fairer indexation while they were in government too. After all, they were in government for 11 years and had numerous opportunities during that time to reform the system, but they did not do so. There were two inquiries during those years—in 2001 and 2002—which recommended that government consider fairer indexation for superannuation pensions to better reflect costs of living. But the coalition did not act. Why was it that they waited until 2010, when they were out of power and in opposition, to first introduce legislation to change the indexation arrangements? Could it have been that they wanted to make it a Labor government problem?
The current situation is unfair. The Defence Force and Commonwealth public service schemes in question have been closed to new members but they still have significant current membership which is affected by the issue. These Defence Force superannuation pensions in question are indexed to the consumer price index. Once a useful measure of increases in living expenses, it is widely acknowledged that this does not always reflect the underlying increase in prices affecting the costs people face every day. The CPI, as acknowledged by the Australian Bureau of Statistics, is not a measure of cost of living but a measure of inflation. This is an important distinction. In contrast, the age pension has an indexation formula which takes into account changes to wages by reference to MTAWE, or male total average weekly earnings, and the Pensioner and Beneficiary Living Cost Index. It is clear that the indexation applied to the age pension has seen increases on a greater scale than those to the defence and Commonwealth superannuation payments and they have been lagging behind over time.
It is important to acknowledge that there cannot be a direct comparison between the age and service pensions and superannuation pensions. The age pension is a safety-net payment to reduce poverty in retirement, while the superannuation pensions provide retirement pay and comprise part of a person's remuneration for services rendered. The two payments also differ in respect of the rate of payment and the impact of income and assets. The maximum rate of the age or service pension single is approximately $19,000 per year while the average rate for a defence superannuation pension is approximately $24,000. In addition, the age and service pensions are reduced according to income and assets, while the superannuation pensions are not.
However, the Greens accept there is unfairness in the current indexation measures for Commonwealth superannuation pensions, both military and civilian. I note that there have been a number of inquiries that have found that the CPI is not the most appropriate means of indexing Defence Force personnel superannuation pensions. Over the past 10 years, there have been three separate Senate inquiries and two government commissioned inquires that have made recommendations on this issue. The three Senate inquiries in 2001, 2002—both in the time of the Howard coalition government—and 2008, all recommended that government consider fairer indexation for superannuation pensions to better reflect costs of living.
Most recently, in 2009, the Matthews review commissioned by the government in 2007 recommended no change to the indexation measure unless a more robust measure of price inflation is available. The government appears to have accepted this recommendation, but we say that the government should further consider the matter of fairer indexation of Commonwealth superannuation pensions as a priority.
The Greens have been supporters of the campaign by both defence and civil personnel on this issue for some time now. Senator Bob Brown wrote to the Finance Minister in November 2009 asking the minister to-reconsider the-government's response-to-the-Matthews review and develop a fairer indexation method. The Greens formally requested that the federal government consider this policy change as part of this year's budget. We now know that a change to indexation was not included in the 2012 budget, but we will continue to negotiate with the government to urge them to find a way in which we can achieve a financially responsible reform of the indexation of pensions.
I acknowledge that this issue has a long history in the parliament. It has been an unresolved problem for governments of both of the old persuasions over many years and its significant cost and dispute over funding mechanisms have dogged its resolution. The cost impact of this is something that we need to be mindful of in the current fiscal climate. There are two costs involved in changing the indexation—the cash cost per year and the unfunded liability into the future. These are substantial. The Matthews review estimated the cash costs to be $111 million over three years from 2010 and $23 billion in unfunded liability by 2020. There is still some dispute between the government and the opposition as to the actual costs involved, but it is clear they are significant and it is essential that any serious proposal be properly costed.
In 2011, the Greens did not support the coalition's bill because the coalition did not propose a responsible means of paying for the reform. After 11 years in government, they introduced the reform, wanting to make it the government's problem without indicating how it could properly be paid for. After consideration in 2011, the Greens took the view that, without an identified and budgeted means of paying for the change, it was not fiscally responsible to support the legislation, however meritorious its aim. The money has to come from somewhere.
The Greens have consistently proposed serious revenue measures to fund reforms such as this and others which would result in a fairer share of our national income. Indeed, we called for the implementation of the original Resource Super Profits Tax, as advocated by Treasury, to see a fair return to all Australians from our shared mineral resources—resources that belong to all of us. Instead, in the face of a vociferous and hugely well-funded campaign by mining companies, the government settled for a mere shadow of the original tax, the Minerals Resource Rent Tax, which will net almost nothing, at a loss of up to $10 billion per year—$10 billion income which could have funded reforms like this.
I was very interested to see that billionaire Gina Reinhart has recently given her support to the campaign for fairer indexation. But, unfortunately, words are fairly cheap. I did not notice her suggesting that she would fund it herself from her own considerable wealth—and she reportedly earned $18.87 billion in 2011—or any acknowledgement that if she and the other mining companies who were so opposed to the original mining tax were to pay a fair share of the profits they make from mining our shared resources there would be more money available to the governments to fund outstanding and long-needed reforms such as fairer indexation of military superannuation, the NDIS, an increase to Newstart and more funding for Australian schools. Instead we have $10 billion a year forgone, supported by the coalition.
I acknowledge that there are many passionate and committed advocates for change to see fairer indexation for all Commonwealth and Defence Force superannuation pensions and I will continue to listen to these concerns. I continue to urge the government to find a way in which this reform can be effected in a financially responsible manner. I have been working with veteran organisations and their supporters on a range of measures to acknowledge the contribution and service they have provided to our Australian community, including their needs in relation to mental health services and welfare and support for their partners and families.
The bill that was introduced by the coalition in the House of Representatives was in a sense trying to jeopardise the passage of unrelated veterans entitlements legislation, to be put off to the never-never until some time when this sort of reform is funded. It was not done in good faith. In fact, the coalition were not prepared to allow the Greens to even see the amendments before they were tabled in that House. If they were genuine about negotiating with the Greens and trying to get that legislation passed, they would have been prepared to provide some information about the nature of that bill. Instead they did not, because it was a stunt. It was a stunt that was at risk of jeopardising the passage of other unrelated legislation which would have put on hold entitlements for veterans which were not related to this.
We did ask for it and we were told that it was not available, and we were not able to see it. It was disingenuous. It was a stunt. And that is what a lot of this has been. The coalition should have passed legislation when you had the power to do it. The Greens will continue to work with the government to find a way in which this reform can be effected in a financially responsible manner.
Today I must confess I have heard a load of nonsense. Senator Feeney says that this is not about fairness. What did they tell the electorate in 2007? What did they say to the veteran community? They said in their policy document very callously that there is perhaps no greater duty that we as a nation and as a parliament have than to honour, remember and express our gratitude to those Australians who have served in the defence of our nation. They went on to say:
A Rudd Labor government will provide a fresh approach to veterans' affairs and a fresh leadership team which is dedicated to working in partnership with the ex-service community on the issues that concern them.
They then nominated six goals. The first one was restore the value of compensation and repair further erosion to income due to unfair indexation.
A key concern with the veteran community is the impact of rising costs of living and the erosion of their entitlements over time due to unfair indexation arrangements under the Howard government.
It went on to state that Labor would change that indexation. It is not about fairness, Senator Feeney. I can tell you that, when you are trying to get elected, it is about anything you think can rip off a vote. Their policy document of 2007 further states:
… to help combat this, Labor is committed to indexing all disability pensions and the domestic component of the war widows pension to movements in the Consumer Price Index or the Male Total Average Weekly Earnings (MTAWE), whichever is the greater.
There is the promise. They go on to say:
A Rudd Labor Government will restore the value of the Special Rate Disability Pension … Intermediate Rate and the Extreme Disability Adjustment Pensions by indexing the whole of these pensions to movements in Male Total Average Weekly Earnings … or the Consumer Price Index … whichever is the greater.
These promises to the veterans community were exactly like and resemble and have the aroma of 'There will be no carbon tax under a government I lead.' This is the currency of this government. They will say or do anything if they think they can extract a cheap vote from anybody.
We should have changed this in government. Let us not be unclear about this. We should have changed this; we did not do it. But the one important thing I want to stand here and say is: we never lied to them and ripped them off for their vote. We never said to them: 'Vote for us and we will change it.' We have a policy, we have put it on the table and we have costed it. Senator Lundy has costed it—and I will get to her letter in a minute—it is about $45 million a year to index these pensions properly. Everything you hear from the Labor Party is utterly disingenuous.
Senator Feeney says, 'It is not about fairness.' If he thinks there is a vote in it, he will say and do anything to sucker you into voting for the ALP. Can I tell you there are a hell of a lot of veterans out there who really believe that they were suckered by the Labor Party. Can I tell you there are a hell of a lot of former and present Labor Party members who think they were suckered by their own party: Mike Kelly, Senator Kate Lundy, Bob McMullen, the former member for Fraser, and Annette Ellis, the former member for Canberra, wrote to Lindsay Tanner on 14 September. It is a great series of letters; I have tabled them before. But let me just read out what they said to their then finance minister.
Significantly, many people genuinely believe that prior to the 2007 election the ALP had committed to determining a fairer method of indexation, and a review would provide the direction. So the immediate acceptance of the recommendation of no change in government response is being seen as a reversal of the pre-election position espoused by the ALP in the campaign material.
There are their own members of parliament saying: 'Hang on. We promised the electorate we would give them fairer indexation. We promised. Why are we now breaking our promise?' The letter goes on:
We respectfully request you respond to both of these points—
that is, the points they have raised in the letter—
and clarify the government stance particularly since correspondence issued during the election enthusiastically pressed the point of finding a fairer method of indexation through the process of review.
They just callously, without a care in the world, suckered the veteran community into voting for them. Now they get up and say, 'Oh, it is all too expensive.' So these four members of parliament—including Mike Kelly, who is a complete goner in this coming election; he will not be back—says to the then minister
It is our view that the fair and reasonable way forward we have described is the best course of action because it honours the spirit and the letter our election commitment in the first instance, and secondly, opens the way for consultation and further progress towards fairness in the future.
If ever there was a confession that this Labor Party has ripped off the votes of these veterans, there it is in this letter. It is a beautiful letter. It is a confession. It is a smoking gun of the sort of misrepresentation and electoral fraud perpetrated in that 2007 election.
Kate Lundy has a website on which she said:
The first year’s gross cost of $42 million—
she is talking about the fair indexation cost—
which will compound, is a little more than one tenth of one per cent of the 2007/08 budget surplus. There will be indisputable clawback of approximately 40% due to increased income tax and GST collections and a reduction in Age Pension expenditure.
… … …
Unfunded superannuation liability estimates will increase but these are balance sheet figures only and are not estimated for far larger items such as Age Pensions, Veterans’ pensions, Medicare etc. They are big numbers only because they’re cumulative forty year estimates.
The government wants to give you the forward estimates out to 40 years to tell you, 'Oh, it is a huge amount of commitment.' Kate Lundy tells us the cost is 42 million bucks a year; probably about the same amount of compensation owed to a fishing trawler that has just had its job taken away from it. That is about the relevance.
So I want to say to all those who are here that the average DFRDB pension is 24,386 bucks, and these miserly weasel-word laden government members say it is not about fairness. It is everything about fairness. And if the Greens want another opportunity to vote for fairness, we will certainly give it to them.
I rise to make a contribution in this matter of public importance debate on military superannuation pensions. In the very short time that I have been a senator for South Australia I have had the experience of mixing it with service personnel in a number of different areas, including in a very short stint—in comparison to our serving personnel—in Afghanistan. I have also had representations made directly to my office from the service associations. I have to say there has not been a large number of representations—three, in fact—and in all the exposure I gained in Afghanistan, where I sought out every opportunity to talk to serving men and women, not one raised the matter of the service pensions.
I would point out that I have an interest in this matter. I have a niece who is a serving member of the Australian defence forces and has served in Afghanistan; I have a prospective son-in-law who is a veteran of Iraq and Afghanistan; I have a brother who is a returned soldier, a veteran of the Vietnam conflict—the list goes on and on, if you like. So I have listened very carefully to the debate here today, I have listened very carefully to the constituents who have approached me and I have sought out the views of many members of the armed forces. And it appears to me that this debate today is an extremely politicised one that is not succinctly and clearly addressing what the facts actually are. The contribution from former Senator Minchin was extremely illuminating when he said:
There is no inherent logic to the proposition that a public sector employment-related superannuation payment should be indexed in exactly the same fashion as a means-tested welfare benefit, in this case the age pension.
He also said:
This … claim was properly rejected by the Howard government, of which I was a member …
So someone had the courage of their convictions, both in political life and in the aftermath, to succinctly and clearly put their position on the public record.
It is very clear to me in relation to members of our defence forces, no matter what conflict they have served in. My next-door neighbour is a veteran of the 2/48 Battalion and at 92 years old, living independently, is a shining example of the contribution our servicemen have made to the community. He has never raised the indexation of benefits with me.
My point is that we are appropriately looking after members of the defence community. The special needs of military service are met more generously than is the case with the average Commonwealth civilian schemes—and rightly so. The risks for those who serve in the military are very clear and self-evident, but these Commonwealth superannuation pensions provide a guaranteed source of income that, very importantly, is not subject to market fluctuations. If we look at what has happened to people in superannuation in the private sector, they have been subject to the GFC and they are subject to market fluctuations. Very importantly, these schemes we are talking about are not.
A military superannuation pension is not necessarily a measure of the person's complete financial situation. Many complete 20 years of glorious service and retire prior to retirement age. They go on to have another career, easily supplemented by a pension. I have worked with and I have represented members of the Air Force who have then been engaged in the service industry, in particular at Armaguard or any of those industries, where they very clearly supplemented a Defence Force pension with another career and they got another nine per cent in superannuation, which is perhaps now going up to 12 per cent.
The reality is the pension is not designed simply to be indexed in the same way as the age pension. The availability of the service pension also recognises those people who have served in a theatre of war, in a conflict zone or a highly dangerous situation. Quite properly, as Senator Feeney outlined earlier, the current notional employer contribution rate for the DFRDB is 33.3 per cent. That is a contribution significantly—more than three times—higher than the nine per cent of the superannuation guarantee. So people are not in invidious terms here. I understand that they have a widely held and deeply felt grievance.
I do understand that, Senator Ronaldson. Access to the retirement income, as I have said, could conceivably have been achieved by these people at the age of 40 and they could have then gone on to have another career. Another really important thing that happens in this particular set of pension arrangements is that 99.5 per cent of people have commuted to a lump sum. I am not foolish enough to believe that that is not a win-win for both the provider of the pension and the recipient, though it is probably a job for an actuary to work out whether giving a lump sum or paying someone over the whole of their life is the cheaper benefit. But 99.5 per cent have chosen to take a lump sum, up-front, and therein lies the figure which has been put out here today of $24,000-odd for the pension. It is not subject to market fluctuations, is to be paid for all their life and to pass on to their next of kin.
So if people are going to come in here and get high and mighty and righteous about it, we really have to talk about the correct situation, as it exists. To put it quite simply: the proposition that a military superannuant who has retired at age 55, having received a lump sum payment of $200,000 or $300,000 or $400,000 or higher, and has an annual non-means-tested superannuation payment of $40,000 or $50,000 or $60,000, should have that annual superannuation payment indexed in the same way as an age pension is not something that I am supporting. Clearly, we need to treat an apple as an apple.
If we were able to digest all of the information that we get in this place on any given day, one of the really important pieces of information that has come across all of our desks this week was from the Actuaries Institute. It was entitled 'Australia's longevity tsunami'. Its opening paragraph in the executive summary sets up some of the problems that any government is going to face in this area. It said:
Australia is experiencing a major demographic and societal transformation. By 2050, almost a quarter of the population will be aged over 65 compared to 14 per cent now. Australians are already one of the longest lived populations on the planet, and our longevity is steadily improving.
Australian life expectancies are rising much faster than commonly understood and this has serious social policy implications—especially in economic, retirement incomes, health and welfare policy.
Anything that is done in this area will be tested against the ability of another group in our community to run and win the argument.
All governments should recognise that we may face an electoral tsunami if we put the wrong foot forward in this space. The baby boomers will vote and they will probably get a result that they enjoy, but the fiscal responsibility argument will not go away.
I said yesterday in the course of another debate that I sometimes wish there could be tears in the space-time continuum and people could hear from the future the words that they would be saying in the context of the present debate. I would love to have had the comments of Senator Feeney and others in this debate sent back to the debates that happened before the 2007 and 2010 elections because the tone and the comments were very different between then and now. Before the 2007 election in particular the Labor Party was sending very strong signals to the veteran community that it was going to fix this problem not only, incidentally, for the veteran community but also for all Commonwealth superannuants. There would be a process to deal with the inequitable arrangement with indexation for all Commonwealth superannuants. 'We will do a review,' they said, 'which will get to the bottom of this issue.' In commissioning that review, producing that review and, immediately the day that the review was tabled, backing the review, in its rejection of any adjustment to superannuation arrangements the government spectacularly dishonoured those promises.
I am not asking the Senate to take my word for that phrase 'spectacularly dishonoured its promises'. I am asking the Senate to accept the words of those members of the Labor Party who have already been quoted by Senator Johnston. A letter by the present member for Eden-Monaro and the Labor Senator for the ACT, Senator Lundy, belled the cat very nicely when it said to the then finance minister:
… there is huge disappointment in both the findings and the Government response announced on the same day—
that is, to the Matthews review. It went on to say:
Significantly, many people genuinely believed that prior to the 2007 election, the ALP had committed to determining a "fairer" method of indexation, and 'a review' would provide the direction, so the immediate acceptance of the recommendations of no change in the Government response is being seen as a reversal of the pre-election position espoused by the ALP in campaign material.
And indeed it was. It was seen as a broken promise, because the Labor Party wanted to play to that gallery before the election and now it wants to be fiscally responsible: 'We cannot possibly put that money forward because it would not be responsible.'
The problem is that the Labor Party is still playing to that gallery. Mr Neumann, the member for Blair, said to the Queensland Times a few weeks ago that he was sympathetic to the DFRDB lobby. He had written to the finance minister about the 'pitiful' increase in their pension:
It is ridiculous to expect people to accept a 0.1 per cent increase …That is unviable, given the cost of living. It is too meagre and it needs to change.
He asked the minister to consider a 'fairer' form of indexation for DFRDB benefits. The Labor Party has not given it up. It is still in the business of misrepresenting what it intends to do.
I want to correct the impressions created by both Senator Feeney and Senator Wright in this debate. Senator Feeney implied that we had broken some promise by never indexing these pensions during the time we were in government. We never promised to make any change to those pensions. We did not have that as a commitment of the government. We were tackling a huge amount of inherited debt, and I admit that there were philosophical views among many in the government that we should not make that change.
But after the 2007 election we reassessed all the policies of the coalition and came to the view that it would be fair to address this question with respect to the superannuation arrangements of veterans. We went to the 2010 election with a clear commitment to change that policy and to index those pensions on a fairer basis. We kept our promise when Senator Ronaldson introduced into this place the legislation to make that happen—we were not introducing the legislation just to facilitate it but putting before the members of the Senate the means by which we would fund those arrangements. We put savings proposals to the government which were obviously well-based savings proposals because, subsequently, in its following budget, the government accepted and reaped those savings in adjustments it made to spending within the Defence budget.
I also have to make some comments about Senator Wright's contribution. She talked about fiscal responsibility but seemed to ignore the fact that at the 2010 election—as at the 2007 election and, indeed, the 2004 election—the Greens promised to use their votes in the parliament to index not just veterans' pensions, military pensions, but all Commonwealth superannuation arrangements by the higher of CPI or MTAWE. They promised to do all of those things, and so for the Greens now tell us that fiscal responsibility demands that they cannot even partially index those pensions is very, very mysterious. If it was possible to promise everybody a higher pension, why could they not have supported even partially addressing that problem through the bill that Senator Ronaldson put forward?
A veteran has written to me, and I can only finish by citing what he had to say about the unfairness of the government's position. He said that the government had broken its commitment to the people of the Defence Force by refusing to support this important measure of reform:
A breach of many implicit and explicit promises (before the election!) to fix the problem.
… veterans are condemned to continued erosion of the purchasing power of their pensions, …
And he is right. He also said that the refusal of the government to follow through with its promises from before the 2007 election represents:
A betrayal of Labor's own core values of fairness and its principal of a fair go for all Australians.
There is unfinished business here. The coalition has made clear with its actions that it is going to follow this through, and it is time that the other parties who made similar promises to veterans in this country did likewise.
I bring a somewhat different perspective to this discussion, because I have been involved in this discussion for some 15 years or more as I have been in this place. So I bring a degree of corporate knowledge, history and experience as to the growth and development of veterans' benefits over the last 10 to 15 years.
I go back to the time when Mrs Dana Vale—I think she was the member for Hughes—was the Minister for Veterans' Affairs and Senator Sandy Macdonald was the Parliamentary Secretary for Defence in this place. I had some frontbench responsibilities in those days in opposition for some three or four years, in this area and in other areas. I remember at the time that we suffered a number of deaths of personnel in combat, and there was a raging debate as to the alleged inadequacy of benefits that their widows, partners or children might receive subsequent to the death of a soldier in operations. It became a very heated issue for some two or three years.
Arising out of that debate, the government of the day—the Howard government—introduced legislation into the parliament to improve benefits for veterans, their partners and their children if the particular soldier should be killed or become severely disabled in combat. That bill, of course, was referred off to a committee, and a roadshow developed as it went around Australia. It was a legislation committee, so of course it was controlled by the government members of the day. At the end it came up with a set of recommendations which were quite radical, quite expensive and, in some senses, seeking to overcome discrimination practice that had existed post-World War II in payments of benefits to some soldier's dependants and not to others.
Initially, the position of the government of the day was to reject that uniform set of recommendations from the particular committee to improve benefits in that particular way. There were then some discussions held that I was involved in, and those negotiations were conducted with Senator Sandy Macdonald, who was the parliamentary secretary at the time. Interestingly enough, Senator Macdonald, as I recall the negotiations in his office, made it quite clear that he had authority to negotiate on a range of points and that if we could reach a package of agreement then that would be taken back to his party and he anticipated endorsement, subject to approval.
Of course, the authority to engage in those negotiations came from his cabinet—he was the delegated person instructed to have the negotiations with the opposition, and the Acting Deputy President before us today was intimately involved in that authority because he was the head of the Prime Minister's office at the time. Without going into the detail, a significant package of benefits for widows, for partners and for children as to payment of benefits upon death or disablement—payment of lifelong allowances for children and payment of a whole range of other allowances in particular circumstances—was negotiated between the government and the then opposition, put to both parties and presented to the parliament, and the bill went through. Since that time, effectively, you would have noted in the last three or four years with all of the deaths in Afghanistan that there has been little to no public outcry as to the utility of benefits paid to the widows, wives and dependants of all of those men who have been killed.
I raise that history because the opposition—the government of the day—here today and the Labor Party in opposition for many, many years bring to this debate and discussion a proud record of involvement and activity over many years seeking to improve the health, the financial benefits and the welfare of our soldiers who we seek to send overseas to face death, and of their wives, children and others who are dependent should they pay the ultimate sacrifice. We bring—and we are proud to say it—a long and proud record of involvement and activity in this entire discussion. I have said it before and I say it here again today.
Why do we do that? Why do we say that? Because in the final analysis it is an irrational choice for a boy of 19, 20 or 21 to join the armed forces, to go to war, to face death and to eliminate his life, because that happens to many of them. We say that that irrational choice has to be provided for by the government, which asks soldiers to do that with an implied promise: that we will look after their wives, their children and their dependants as to their finances and their health for as long as they would remain dependants, if their husband or father should be killed. That is the philosophical justification for having higher, different and larger benefits, and for improving benefits for veterans across Australia.
So in that context, when this discussion comes before the chair what can we say?
Mr Acting Deputy President, on a point of order: I am really reluctant to do this, but we have not heard one word from the senator opposite about the matter that is the subject of this MPI, and I ask him please to address the MPI.
Mr Acting Deputy President, on the point of order: no-one else has bothered to put the history and context—the proud history—of the Labor Party in this debate, and that is why it is necessary to have it on the record so that veterans can understand—