Karen McNamara (Dobell, Liberal Party) Share this | Hansard source

Australia is a generous and compassionate nation. Our society has been built upon a commitment to help those less fortunate and to look after our mates. Throughout the years Australia has had a strong social safety net for those in need. It is crucial that we ensure the sustainability of this safety net and guarantee that it will be there for generations to come. Over the past 12 months the federal government has spent approximately $150 billion on social services and welfare. This spending provides Australians with pensions, aged care, benefits to families and individuals, and the National Disability Insurance Scheme. Of this, the age pension is our largest welfare payment, totalling an estimated $44 billion in 2015-16. This represents close to 35 per cent of the Commonwealth budget. In the coming decade the costs of delivering these services will increase as our population grows and ages.

The Intergenerational report stated that the number of Australians aged 65 and over is projected to more than double by 2055. Future projections anticipate that by 2055 there will be approximately 40,000 people aged 100 and over. Payments made through age and service pensions are projected to increase each year, and in real monetary terms spending per person is projected to increase from almost $2,000 in 2014-15 to around $3,200 in 2054-55. Currently, this spending accounts for 2.9 per cent of our gross domestic product; without changes to how we deliver the age pension this amount will increase to 3.6 per cent of GDP by 2054-55. This is an unsustainable path for Australia. It is essential that we address the sustainability of Australia's pension system to ensure that we are able to provide for senior Australians in future years. The age pension provides support for 2.4 million Australians and contributes to a broad retirement income system, which also includes superannuation and voluntary savings. This government will ensure that, as our population ages, our pension system is sustainable and fair.

The Social Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015 introduces several 2015 budget measures aimed at improving the fairness and sustainability of the pension system, and such measures commence from 1 January 2017. It also reintroduces measures previously introduced in bills last year, which are currently before the Senate. The government's measures to provide fairer access to a more sustainable pension will see more than 170,000 pensioners with moderate assets have their pensions increase by an average of more than $30 per fortnight. The government's changes will also see approximately 50,000 part pensioners qualify for a full pension. This bill will rebalance the assets test parameters by increasing the asset-test-free areas and the taper rate by which a pension is reduced once the free areas are exceeded. There will be no change to the existing assets test exemption for the family home.

  Currently, pensioners with substantial assets can still receive a part pension. Currently, in addition to their family home, single homeowners are able to hold assets up to approximately $800,000, and couple homeowners are able to hold assets up to approximately $1.2 million and still be eligible for a part pension. The generosity of this scheme long term is unsustainable. The changes outlined in the budget and contained within this bill will require pensioners with substantial means to draw down a maximum of 1.84 per cent of their assets to maintain their current income levels in retirement. In turn, the government will be better able to support those who need it most. Asset tests are applicable to social security pensions—pension payments are assessed under both income and asset testing, with the test that produces the lower rate applicable to an individual. The pension assets test includes an area for the value of assets, excluding the family home, below which a person's rate of pension is not affected by their holdings. The value of a pensioner's assets above these free areas currently reduces their pension by $1.50 per fortnight for each extra $1,000 in assessable assets over the free area.

Currently, the assets-test-free areas are $202,000 for a single homeowner, $286,500 for homeowner couples, $348,500 for non-homeowner singles and $433,000 for non-homeowner couples. As announced on budget night, the government will increase the assets-test-free areas by $48,000 for a single homeowner, $88,500 for homeowner couples, $101,500 for non-homeowner singles and $142,000 for non-homeowner couples.

This bill also makes amendments to increase the taper rate for pensions, providing that an individual's pension rate is reduced by $3 per fortnight for every $1,000 of assets above the relevant assets-test-free area. The lower taper rate placed an additional 110,000 people on the part-pension and increased the cost to taxpayers by almost $1 billion a year. These measures were introduced at a time when the budget was in surplus and there was $40 billion in the bank. But sadly, due to the economic mismanagement of the previous Labor government, this measure is no longer available.

I am pleased to say that, as a result of this government's budget measures, approximately 90 per cent of Dobell's age pensioners will see their pension remain the same or increase by an average of $30 per week.

Pensioners who lose pension entitlement when these changes take effect on 1 January 2017 will automatically receive a Commonwealth seniors health card or a health card for those under pension age without having to meet the usual income test requirements. With these changes, the government can confirm that plans to link increases in the pension to the consumer price index are off the table. Changing the assets test rather than changing pension indexation will ensure that pensioners with relatively low income or means of support are not adversely affected by changes to improve the affordability of the pension system.

In addition, the government will also ensure that a fairer proportion of superannuants' actual defined benefit income is taken into account when the social security income test is applied. From 1 January 2016, this measure will introduce a 10 per cent cap on the defined benefit income that can be excluded from the social security income test. Present arrangements allow some defined benefit superannuants to have a large proportion of their superannuation income excluded from the pension income test. For example, currently a couple receiving $120,000 per year from their defined benefit scheme would still be able to claim a part-pension of around $7,400 per year. Under the proposed income test, people with such benefits are recognised as being able to support themselves.

Approximately 65 per cent of income support recipients with payments from defined benefit income schemes will not be affected by this measure. It is worth noting that individuals receiving Veterans' Affairs pensions will not be affected by this change. Furthermore, defined benefit income streams paid by military superannuation schemes will be excluded.

The government is strengthening the residence based nature of Australia's social security system. Amendments proposed by this bill will reduce from 26 weeks to six weeks the period of absence from Australia after which a pension recipient's payment is proportionalised. After six weeks, the payment of a recipient who is outside Australia will be adjusted according to the length of the pensioner's Australian working-life residence. To retain their basic means-tested rate while overseas, a pensioner requires 35 years of working-life residence in Australia. This is calculated based upon the period beginning when the person turned 16 and ceasing when the person reaches pension age. Should an individual's period of Australian working-life residence be less than 35 years, their individual rate of pension after six weeks will be adjusted according to their years of working-life residence. After a six-week absence, payment will be based on the length of time a person has resided in Australia during their working life.

This bill also takes the opportunity to reintroduce measures relevant to pensions from the 2014 budget. The first of these measures is to cease payment of the seniors supplement for holders of the Commonwealth seniors health card or the Veterans' Affairs gold card. Additionally, the bill reintroduces two measures currently before the Senate that cease the pensioner education supplement and the education entry payment.

The necessity to ensure the sustainability of Australia's welfare system was entirely brought about by the economic mismanagement of the previous Labor government. The reality is that unfortunately government cannot be all things to all people. We have a fiscal responsibility to all Australians and future generations.

Many senior Australians have worked their entire lives without a superannuation system to support their retirement. We owe these men and women, who built this great nation that we enjoy today, support in their retirement years. The government flat out rejects Labor's plans to introduce a new superannuation tax as part of Labor's plan to raid the retirement savings of older Australians. Minister Morrison has clearly stated, in regard to Labor's plans:

… we will not increase the rate of tax on those who have saved for their retirement.

Our welfare system is there to support those most in need. We owe a great deal to those who have saved for their retirement and are able to support themselves without assistance from the Australian taxpayer. Before this parliament is a robust plan for a stronger and fairer pension system, helping those who genuinely need it.

Members opposite say that there is no need to address the future sustainability of the pension system. This is despite the fact that spending per person is projected to increase from almost $2,000 in 2014-15 to around $3,200 in 2054-55. Instead, they seek to hurt Australia's superannuation system and the retirement savings of thousands of Australians. Labor believe that they can improve the fairness and sustainability of our superannuation system by introducing a new tax on superannuants' annual earnings that are in excess of $75,000. On Labor's own figures, the introduction of a 15 per cent tax rate on earnings over $75,000 will impact approximately 60,000 superannuants. Once again, Labor have fallen back on their obsession with raiding the retirement savings of senior Australians. Unfortunately, this proposal does nothing to address the sustainability of our welfare system or the age pension.

The government has a mandate to balance the budget and spend taxpayers' money responsibly. Our plan, when fully implemented, will get the budget back on track to a sustainable surplus. The measures outlined in this bill will contribute to the budget repair job, saving $2.4 billion over four years. Under the Labor government and their policies, the underlying cash deficit would have reached 11.7 per cent of GDP in 2054-55, and net debt would have reached almost 122 per cent of GDP. Under our proposed policies, it is projected that the underlying cash balance will improve to a surplus of 1.4 per cent of GDP in 2039-40 and then to a moderate surplus of around 0.5 per cent of GDP in 2054-55. Furthermore, net debt is projected to be fully paid around 2031-32. These improvements can only be achieved by making the tough but necessary decisions across all facets of government spending, and it is important that changes do not impact those who can least afford it. The measures contained within this bill strengthen our pension system and ensure that Australia's most vulnerable are protected in their retirement.

Labor simply chooses to ignore the facts. When it comes to Labor's legacy and record of economic mismanagement, they are in utter denial. Under the previous Labor government, spending as a percentage of GDP was on track to grow to 37 per cent, far greater than the previous high of 28 per cent. If left unchecked, this would have resulted in drastic cuts to payments, higher taxes or both. Under our policy approach, expenditure will remain broadly in line with current levels, with real spending to grow at an average rate of 2.7 per cent per annum, thereby reaching a total of 25.9 per cent of GDP. This is where the Leader of the Opposition is exposed as an economic novice. You simply cannot maintain current service delivery without increasing taxes or reducing spending.

We have before parliament flair and sustainable change to the age pension. Our changes look after those who are most in need and protect those Australians who have saved to fund their retirement. The government's measures to provide fairer access to a more sustainable pension will see more than 170,000 pensioners with modest assets have their pensions increase by an average of more than $30 per fortnight. We owe today's senior Australians the best possible retirement, and we owe it to future retirees to ensure that there is a sustainable pension system which will address their needs.

I commend this bill to the House.

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