Jenny Macklin (Jagajaga, Australian Labor Party, Shadow Minister for Families and Payments) Share this | Hansard source

Just before the member for Groom leaves, I will just add my remarks to yours, Mr Deputy Speaker. I want to thank him for his incredibly good nature during his time in the parliament. I cannot comment on why he is going now. Ian, I just really wanted to say: all the very best for the future. I think you have made, in your own terms, a contribution that many of us here would be very proud of.

I am speaking on the Social Services Legislation Amendment (Interest Charge) Bill 2016. This bill seeks to apply a new interest charge to former recipients of social security, family assistance, paid parental leave and student assistance who have outstanding debts and who have failed to enter into an acceptable repayment plan.

Just a little bit of history about the application of interest charges on debts in recent decades: under the current arrangements, an interest charge may be applied of up to 20 per cent, but up to 2005 a three per cent interest charge was applied. Since 2005 no interest has been applied to these debts. According to the government, the initial rate of 20 per cent was considered too high and risked plunging people into financial hardship. The three per cent rate was considered too low and did not provide much of an incentive for people to repay their debts. In short, the administrative costs of recovering the debt outweighed the recovery of debt, and the interest charge scheme has not applied since 2005.

If this legislation is passed then an interest charge will be applied to a debt if, by the 28th day after receiving the relevant notice, the debt has not been paid in full or the person has not entered into a repayment arrangement. The new rate of the proposed interest charge, approximately nine per cent, will be based on the 90-day bank accepted bill rate of approximately two per cent plus an additional seven per cent. This charge will be applied across the different payment types. There will be exemptions for debtors who are currently in receipt of relevant payments, including social security payments and family payments, by instalment. This change is expected to commence on 1 July 2016.

The bill is expected to provide savings to the fiscal balance of $24.4 million over four years, with an underlying cash balance saving of $416½ million. As with its companion bill on enhanced welfare payment integrity, this bill has been referred to a Senate committee that will report on 20 June 2016. Labor will not be opposing the bill in the House. We will reserve coming to a final position until we see the findings of the Senate committee inquiry. Just like with the companion bill, we take the view that these changes need to be examined carefully. We know how complex some aspects of the social security system are. We know that with any change there are risks of unintended consequences. We need to guard against such outcomes. We need to carefully consider how these changes may affect some of the most disadvantaged people across the country. So Labor believe the Senate should be given the time to properly scrutinise these bills. We will reserve coming to a final position until we have seen the recommendations of the Senate inquiry.

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