Christian Porter (Pearce, Liberal Party, Minister for Social Services) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill will reintroduce four measures previously introduced in the Social Services Legislation Amendment (Budget Repair) Bill 2015, which lapsed on 17 April 2016 due to the prorogation of parliament.

The measures in this bill are designed to improve the fairness and sustainability of the pension system.

These measures include:

Tightening proportionality requirements

With respect to tightening proportionality requirements, the first measure was announced in the 2015 budget. This measure reduces the time that age pension recipients, and a small number of other payments with unlimited portability, can continue to be paid overseas at their basic means-tested rate.

The term 'portability' refers to the continuation of Australian income support payments during a recipient's overseas absence. Portability policy acknowledges that travel is an integral part of modern living. This is particularly true in ethnically diverse societies such as Australia, where almost a quarter of the population is overseas born.

'Proportionality' refers to the adjustment made when certain income support payment recipients have their payment amended so that it is in proportion to their working life residence, defined as the period of time that person has resided in Australia between the ages of 16 and the age pension age.

Under current arrangements, age pension, wife pension, some widow B pension recipients, and disability support pension recipients with unlimited portability and whose continued inability to work occurred overseas rather than in Australia have their rate of pension proportionalised after 26 weeks overseas based on their working life residency in Australia.

From 1 January 2017, this bill will reduce from 26 to six weeks the length of time that the age pension, and a small number of other payments with unlimited portability, will generally be paid at the basic means-tested rate while the person is outside Australia.

After six weeks overseas, payment will be proportionalised according to the pensioner's working life residence.

Pensioners overseas on the implementation date will stay under the current 26-week rule until they return to Australia, but subsequent trips overseas will be under the new six-week rule.

This measure does not impact on the length of the portability period. The age pension, and a limited number of other pensions, will continue to be payable overseas indefinitely. Only the amount a pensioner may receive after the six-week absence period may change.

Pensioners with 35 years or more of Australian working life residence, and those already exempt from the proportional payment rules will not be affected by the changes in this bill.

For example: an age pensioner who has lived in Australia their whole life, who travels overseas for more than six weeks, will not have their basic means-tested pension rate adjusted. In contrast, a pensioner who has only resided in Australia for 10 years of their working life will have their rate adjusted at six weeks. In such a case they would receive 10/35ths of the basic means-tested pension they would receive if they stayed in Australia.

This measure will affect around 190,000 recipients over the forward estimates budget cycle and is expected to generate net savings of $168.4 million.

There is a fundamental difference between overseas insurance based contributory systems and the Australian social security system. Australia's income support system is residence based and is funded from general taxation revenue. The rate of benefits paid in Australia depends on need as assessed through income and assets tests rather than the length of time or amount that an individual has contributed.

This measure contributes to ensuring that countries share the cost of social support and retirement in the new transnational labour market. This measure will more fairly distribute the retirement costs between countries based on the period of time that people have lived and worked in Australia, and it reflects the principle of shared responsibility—that is, the idea that each country should pay a benefit which reflects a person's association with that country.

It is not considered reasonable for taxpayers to pay pensions indefinitely to people outside Australia, without regard to their period of residence in Australia, for anything other than short absences. This measure will therefore reinforce and strengthen the residence-based nature of the Australian social security system.

Cessation of the pensioner education supplement and the education entry payment

With respect to the cessation of the pensioner education supplement and the education entry payment, this bill introduces measures to cease the pensioner education supplement and the education entry payment from 1 January or 1 July after royal assent.

Introduced in 1987, the pensioner education supplement was purposed to assist single parents with the ongoing costs of education. It recognised the difficulties that single parents experienced in obtaining employment after being in receipt of the sole parent pension for up to 16 years.

Since then, eligibility has been extended to people undertaking full-time or part-time study and in receipt of a qualifying income support payment. The pensioner education supplement is $62.40 per fortnight or $31.20 per fortnight depending on the person's study load.

Despite its name, the pensioner education supplement is not available to people receiving the age pension. The most common recipient of the pensioner education supplement is likely to be on a parenting payment (single), followed by a disability support pension and, following that, a carer payment. As at March 2016, there were approximately 33,000 recipients of the pensioner education supplement.

The education entry payment was introduced in 1993 to help remove financial barriers to education by providing assistance to long-term payment recipients with up-front costs of study when they begin approved education courses. In 2014-15, around 83,000 recipients received an education payment worth $208 per year, paid annually as a lump sum.

When they were introduced, both of these payments aimed to assist long-term income support recipients who had been out of the workforce for a long period of time by helping them improve or rebuild skills to be more competitive in the labour market.

However, since the introduction of these payments, individuals wishing to undertake study have access to more targeted support and financial assistance—for example, the HECS-HELP, FEE-HELP and VET FEE-HELP tuition loan programs assist people of all types to access education and training.

Certain income support payments, particularly Youth Allowance (student), Austudy and Abstudy, are also specifically targeted towards people undertaking education and training, taking into account their circumstances and needs. These student payments and supports will continue and are not affected by the removal of the pensioner education supplement or the education entry payment.

The removal of the pensioner education supplement and the education entry payment is also consistent with the simplification of the income support system and the recommendations of the McClure review of the welfare system, A new system for better employment and social outcomes.

The removal of the pensioner education supplement and the education entry payment will help to ensure long-term sustainability of the income support system by improving the Commonwealth's fiscal position. The measures will save an indicative $300 million in administered funds in program outlays over the forward estimates.

Indexation

This bill also reintroduces two elements of the 2014-15 budget measure to maintain eligibility thresholds for Australian government payments for three years.

The first element is to maintain at the present level for three years the income free areas for all working age allowances, other than student payments, and for parenting payment (single) from the first 1 July after the bill receives royal assent.

A further element is to maintain at the present level for three years the income free areas and other means-tested thresholds for student payments, including the student income bank limits, from the first 1 January after the bill receives royal assent.

Under the current rules, income free areas and means-test thresholds are indexed annually in line with increases in the cost of living as measured by the consumer price index. Not indexing the value of these free areas and thresholds for three years will mean that increases to payments that would have occurred on either 1 July or 1 January of each year of the three-year period will not occur.

Indexation of these thresholds will recommence after three years.

Approximately 220,000 recipients will be affected by these changes in the 2017-18 financial year. The majority of those affected are receiving Austudy, Abstudy, youth allowance, Newstart allowance and parenting payment (partnered). A small number are receiving parenting payment (single), partner allowance, sickness allowance and widow allowance. These recipients will, of course, also be affected. However, people's payments will not be reduced unless their circumstances change.

Pausing indexation is a common lever that has been used by successive governments to realise budget savings. It has the effect of slowing the growth in social security expenditure and is expected to generate, in these measures, savings of $107.4 million over the forward estimates.

Conclusion

Collectively, these changes are expected to generate savings of more than $580 million over the forward estimates. This will help guarantee the long-term sustainability of the payments system, while ensuring Australia has a targeted, means-tested income support system that provides financial assistance to those most in need, while encouraging self-provision.

Reintroducing the amendments in this new bill reflects the government's ongoing commitment to the measures. All of the changes in this bill are important measures necessary to support the sustainability of the social security system and of the nation's budget.

Each of the measures contained in this bill were clearly proposed by the government in the 2014-15 and 2015-16 budgets, and they were previously presented to the parliament. They, of course, were also well known as and a part of coalition election policy.

These measures formed an important part of the government's election costings which were supported by the Australian people. They must be in the best interest of Australia's finances and future generations of taxpayers, and I seek the support of the parliament for their passing.

I commend this bill to the House.

Debate adjourned.