Belinda Neal (Robertson, Australian Labor Party) Share this | Hansard source

The member for Greenway believes that a failing of the previous government that the pensioner community suffered for some 11 years should be remedied instantly. In fact, when the present government brings a bill before this chamber to remedy the problem that has been identified for the member for Greenway, she complains. She says it is a travesty of democracy. She says that the bill is being rammed through. The fact is that this bill does more for the pensioners of Australia than any legislation that was brought before this House by the previous Howard Liberal government did. I am constantly amazed at their incapacity to have insight into their own policy positions, particularly in relation to pensions.

The measures contained in this wide-ranging and important bill represent one of the most significant reforms of the age pension system since it was introduced in Australia in 1909. The Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009 will adapt the arrangements for paying pensions so that they are better suited to Australia’s changing demographic profile. The population of the country is ageing and these new measures will confront the challenges that this provides. The bill introduces increases in the amount of pensioner entitlements and makes the payment scheme simpler and more responsive to pensioners’ needs. It does not ignore them. We are not ramming it through. It is actually assisting our pensioners. The bill also brings forth new measures that make the pension system more sustainable in the long term. It is certainly my view and my submission that a more sustainable pension system also assists those who are required to rely on it.

The pension reform bill deals primarily with new arrangements for social security and aged-care legislation. A further bill to be introduced at a later date will deal with reforms in pensions paid to veterans and their dependants, a fact that the previous speaker, the member for Greenway, did not seem to appreciate.

The current bill will bring new benefits and increased payments to some 3.3 million of Australia’s age pensioners, disability pensioners, carers, wife and widow B pensioners, bereavement allowance recipients, special needs pensioners and veteran income support recipients. One of the major benefits under this new bill is an increase in pension payments. I would have thought that was a good thing, not something to be criticised by the opposition.

From 20 September 2009 single pensioners on the full rate will receive a total increase of $32.49 per week. This increase comprises a $30 per week rise in the pension base rate plus a $2.49 increase in the new pension supplement. Pensioner couples on the full rate will receive a total increase of $10.14 per week. These changes will bring the single rate of pension up to two-thirds of the combined couple rate. This reform restored equity in the relative rates paid to couples and singles by recognising that certain fixed household expenses have in the past impacted to a greater degree on single pensioners. That is certainly something that I have heard on a regular basis from single pensioners who reside on the central coast.

The new total weekly pension plus supplement will be an estimated $336.68 for singles and $507.50 for couples combined, with the estimate depending on the size of the September consumer price index rise. This amounts to $17,507.36 a year for singles and $26,390 for couples on a combined basis. It is important to note that these pension increases will come on top of the regular indexation increases that are due in September. In addition to this, increases in the cost of living and its impact will be better calculated to meet the needs of pensioners. Under the government’s reform package, a new pensioner and beneficiary living cost index will be calculated by the Australian Bureau of Statistics. This will reflect the increased cost met in reality by our pensioners, not a more broad increase in living costs that the broader community, maybe those not retired, might face. This will identify changes in the living costs for pensioners that may not be as readily reflected by the CPI.

From 20 September 2009 payments to social security and veterans pensions will be adjusted using either the pensioner and beneficiary living cost index or the existing consumer price index—whichever is the higher. Isn’t this a better option than the present situation? More significantly, pension rates will also continue to be benchmarked to male total average weekly earnings, as has been the practice in the past. From 20 March 2010 a new pension benchmark for a maximum combined couple rate of pension will set payments at 41.76 per cent of male total average weekly earnings. For single pensioners the rate will be set at two-thirds of the couple rate, at 27.7 per cent of male total average weekly earnings.

One of the most significant of the pension reforms contained in this bill is the new arrangements for supplementary payments and allowances. Under existing arrangements, separate supplements are paid to pensioners to make allowances for the costs of GST, pharmaceuticals, utilities and telephone and/or internet. Supplements are paid in addition to the pension base rate, the changes to which I have already outlined. These various payment categories are cumbersome, inflexible and significantly add to the administrative load in calculating a payment to pensioners. The new framework of pensioner and senior supplements introduced by this bill will make the supplement portion of the pension easier to calculate and understand.

All of the various supplementary payments and allowances will now be rolled into the one payment. From 20 September 2009 the pension supplement will mean that increases of $2.49 for singles per week and $10.14 combined for couples per week will be paid on top of the value of existing allowances. The pension supplement will be indexed twice a year, in March and in September, being adjusted in line with increases in the consumer price index. Like the pension base rate, pension supplements for singles will be set at two-thirds of the couple’s combined supplement.

As at 20 September 2009 it is estimated that the pension supplement will be worth up to $1,462.70 a year for singles, or $28.13 calculated on a weekly basis; and up to $2,199.60 a year for couples combined, or $42.30 calculated on a weekly basis. The pension supplement will be reduced as private income and assets increase until reaching a minimum payment of an estimated $790.40 a year for singles or $15.20 a week; and $1,190.80 for couples combined or $22.90 on a weekly basis. These are estimated amounts as final indexation figures will not be known until late August. However, pension payments will not fall below the minimum amount of the pension supplement until income or assets reach a level that would otherwise reduce a pension to nil. Arrangements for the new pension supplement will provide pensioners with a more flexible payment system and will enable them to better manage their own household and personal budgets. The pension supplement will be paid fortnightly from 20 September 2009 along with the base pension.

From July 2010 pensioners will have the choice of receiving around half of the pension supplement in quarterly instalments. In addition to these changes the new seniors supplement will be introduced from 20 September 2009, replacing the seniors concession allowance and telephone allowance currently available to holders of the Commonwealth seniors health card. The seniors supplement will only be available as a quarterly payment and will be paid at the same rate as the minimum amount of the pension supplement. The seniors supplement for a single person will be two-thirds of the seniors supplement for a couple combined. Single recipients will benefit in moving to a 66.33 per cent single-couple ratio, which delivers a small rate increase on top of the existing entitlements of $129 a year. Seniors supplement payments will be an estimated $790.40 per year for singles and $1,190.80 a year for couples from September 2009. Increases in the pension supplement and minimum amounts for couples combined and for singles will flow through to increases in the seniors supplement. This will mean pensioners cannot receive fewer supplements than eligible self-funded retirees.

Australia’s pension system faces enormous challenges in the face of long-term demographic changes. All the changes in the bill that I have outlined mean increases, higher payments and more flexibility for pensioners, but with an increasing proportion of older people in our population pressure is mounting to ensure the age pension is targeted at those most in need. Pension reforms must be framed with a view to the long-term sustainability of the system itself because, if the pension system is not sustainable, it will not continue to exist and it will not benefit those who receive payments from it.

With these principles in mind, the Rudd Labor government in its 2009 budget committed itself to the introduction of a secure and sustainable pension reform package. Part of this package proposed a tightening of the pension income test. The measure will provide long-term security and certainty for the pension system. From 20 September 2009 the pension income test taper rate will increase from 40c to 50c for each dollar of income over the income-test-free area. To ease a burden that this change may cause to some pensioners, the government proposes a transitional safety net. Current payment rates for part-time pensioners will be maintained in real terms, with indexation in line with increases in the CPI. Affected pensioners will also benefit from an increase of $10.14 per week for singles or couples combined. They will continue to receive those existing entitlements, including the increase, until they are better off under the new pension rules, including the new 50c income test withdrawal rate.

Another measure that is designed to enhance the sustainability of Australia’s social security system is the provision to increase the age pension age from 65 to 67 years—an item that received quite some coverage when the budget was first announced. This measure will be introduced gradually, with full implementation not to be until July 2023. There will be no impact on current pension recipients and the phased introduction will allow those who will be affected to plan for their retirement well in advance. The pension age for veterans will not be affected.

The increase in the age pension age is another recognition by the Rudd Labor government of the slow but immense demographic change occurring as we speak in Australia. Over the past several decades there have been significant improvements in the life expectancy of the Australian population. This measure is a response to the costs of that demographic change, costs that must be borne by all Australians and the shrinking working population of Australians.

The nation’s people are living much longer and are enjoying healthier and more active lives than they were in 1909 when the pension age was first formulated in law. Many older people are expecting and looking forward to continuing their active participation in employment. I have to say that that is certainly my experience. My father, who is now 70, continues to work full time and my mother, who is only 18 months younger, has only retired in the last year. Frankly, because they have continued to work I think they enjoy life more than they would have if they had retired and done less.

To recognise and reward those Australians of pension age who choose to take up paid work to supplement their pensions the government will introduce a work bonus scheme. This scheme will allow pensioners who do some work to keep more of their earnings. Employment income will be assessed every fortnight but only half of all employment income—up to a maximum of $500 a fortnight—will be assessed in the income test. Someone earning $500 per fortnight will thus be $125 per fortnight better off under the new work bonus scheme. This bill will close the existing pension bonus scheme, which the Harmer pension review found did little to encourage older Australians to participate in employment, which as I have said I think is good for both them and the community at large.

The object of increasing the flexibility of the pension scheme for those who receive a pension is behind another innovative measure in this bill that improves access to advance payments. Advance payments are lump-sum prepayments of a pensioner’s entitlements, which can then be repaid in instalments. The bill will increase the maximum allowable advance from $500 to around $1,000 for singles and $1,500 for couples. This provision builds in greater flexibility for pensioners, giving them greater control over their finances. It recognises that they are responsible individuals who are capable of managing their own affairs.

This bill also contains added benefits and protection for those pensioners who reside in aged-care facilities. Both pensioners in aged care and the aged-care provider will receive increases from this new pension arrangement. Of the pension increase for singles, $10.09 per week will go to the pensioner and $22.40 per week will go to the residential aged-care provider through an increase to the basic daily fee. Fees charged to self-funded retirees are based on the amount of pension they receive, but the bill includes some protections for them too. Self-funded retirees in residential aged care at 19 September 2009 will have their fees pegged until they leave the facility. Those entering after that date will have their fee rises phased in over four years.

This pension reform bill will establish the Australian pension system on a more equitable and sustainable basis. In the end I guess the most important thing about this bill is that it reforms the pension, takes action and provides pensioners with a better payment to suit the cost of living. That is a lot more than was done in the 11 years of the previous government. (Time expired)

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