Alan Ferguson (SA, Deputy-President) Share this | Hansard source

Pursuant to standing order 166, I present documents which were presented to the President and Temporary Chairmen of Committees since the Senate last sat. In accordance with the terms of the standing orders, the publication of the documents was authorised. In accordance with the usual practice and with the concurrence of the Senate I ask that the government response be incorporated in Hansard.

The list read as follows—

(a)

Government response to parliamentary committee reportCommunity Affairs Committee—Report—A decent quality of life: Inquiry into the cost of living pressures on older Australians (received 5 September 2008)

(b)

Government documentMedibank Private Limited—Statement of corporate intent (received 9 September 2008)

(c)

Statements of compliance with Senate orders1.     Statements of compliance with the continuing order of the Senate of 30 May 1996, as amended on 3 December 1998, relating to indexed lists of files:Finance and Deregulation portfolio agencies (received 5 September 2008)Department of Families, Housing, Community Services and Indigenous Affairs (received 5 September 2008)National Archives of Australia (received 8 September 2008)2.     Statement of compliance with the continuing order of the Senate of 20 June 2001, as amended on 27 September 2001 and 18 June, 26 June and 4 December 2003, relating to lists of contracts:Veterans Affairs portfolio agencies (received 5 September 2008)

1.

Statements of compliance with the continuing order of the Senate of 30 May 1996, as amended on 3 December 1998, relating to indexed lists of files:Finance and Deregulation portfolio agencies (received 5 September 2008)Department of Families, Housing, Community Services and Indigenous Affairs (received 5 September 2008)National Archives of Australia (received 8 September 2008)

2.

Statement of compliance with the continuing order of the Senate of 20 June 2001, as amended on 27 September 2001 and 18 June, 26 June and 4 December 2003, relating to lists of contracts:Veterans Affairs portfolio agencies (received 5 September 2008)

The government response read as follows—

Government Response to the Senate Community Affairs Committee’s report

A decent quality of life: Inquiry into the cost of living pressures on older Australians.

INTRODUCTION

The Commonwealth Government welcomes the Senate Community Affairs Committee’s report, A decent quality of life: Inquiry into the cost of living pressures on older Australians.

The Government understands that cost increases in the essentials like food, petrol, gas and electricity bills are having a significant impact on people on fixed incomes, including age pensioners and other seniors.

Before being elected in November 2007, the Australian Labor Party had growing concerns about claims that many age pensioners have difficulty managing on the base pension rate.

Acting on these concerns, the following matters were referred on 14 June 2007 to the Senate Committee on Community Affairs for inquiry and report:

(a)

the cost of living pressures on older Australians, both pensioners and self-funded retirees, including:

(i)

the impact of recent movements in the price of essentials, such as petrol and food,

(ii)

the costs of running household utilities, such as gas and electricity, and

(iii)

the cost of receiving adequate dental care;

(b)

the impact of these cost pressures on the living standards of older Australians and their ability to participate in the community;

(c)

the impact of these cost pressures on older Australians and their families, including caring for their grandchildren and social isolation;

(d)

the adequacy of current tax, superannuation, pension and concession arrangements for older Australians to meet these costs; and

(e)

review the impact of Government policies and assistance introduced across all portfolio areas over the past 10 years which have had an impact on the cost of living for older Australians.

After hearing evidence and taking submissions from a wide range of groups and individuals, the Senate Committee on Community Affairs released its comprehensive report on 20 March 2008. It highlights a number of issues relating to the adequacy of assistance for seniors and provides evidence that some groups, such as single women and people who rent, are not faring as well as others. The report provides thought-provoking material and provides a solid basis for further work. Through its recommendations, it clearly identified a range of issues for the Government’s consideration.

In other action before its election, the Australian Labor Party framed a number of election commitments in its “Making Ends Meet” package that would enable increased financial assistance to be delivered quickly to senior Australians.

Since the election, the Government has been implementing its election commitments, including those that provide more support to senior Australians, and also announced measures in the 2008-09 Budget that provide additional support.

All eligible seniors received a $500 bonus payment resulting from the Government’s first Budget. The $500 bonus was paid directly into bank accounts before 30 June 2008.

The Government is paying pensioners an increased Utilities Allowance of $500 a year (singles or couples combined). The first $125 instalment of the increased Utilities Allowance was paid in March and the second payment was made in June 2008.

For the first time the Utilities Allowance has been extended to all recipients of Carer Payment, Disability Support Pension, Widow B Pension, Invalidity Service Pension, Income Support Supplement, Partner Service Pension, Wife Pension and Bereavement Allowance.

Commonwealth Seniors Health Card holders and certain Veterans’ Affairs Gold Card holders have received an increased Seniors Concession Allowance of $500 a year, which is paid in quarterly instalments, in line with the Utilities Allowance.

The Government has increased the Telephone Allowance to $132 a year for those who have the Internet at home. This is available for eligible veterans, income support recipients of age pension age, Commonwealth Seniors Health Card holders and recipients of Carer Payment and Disability Support Pension who have a home Internet connection.

From 20 September 2008, almost four million Australians will receive an increase in their pensions and other income support payments and allowances. Indexation will deliver an increase of $15.30 a fortnight in the maximum single pension and $12.70 in the maximum partnered rate for each member of a pensioner couple.

The third instalment (now $128.50) of the increased Utilities Allowance and the Seniors Concession Allowance (now $514 per annum) will also be paid from 20 September.

In addition, the Government has provided extra assistance with dental and aged care costs. It is also working with State and Territory Governments to introduce national reciprocal transport concessions for older Australians with a Seniors Card when interstate. The Commonwealth Government is working with State and Territory Governments to have these concessions in place from 1 January 2009.

The Commonwealth Government also provides substantial income tax relief for eligible senior Australians through the senior Australians tax offset. When the senior Australians tax offset is combined with the low income tax offset, eligible single older Australians can have income up to $25,867 in 2007-08 without paying income tax.

As part of the Government’s plan to reduce income taxes, this has increased to $28,867 for 2008-09, and will increase to $29,867 for 2009-10 and $30,685 in 2010-11.

Similarly a senior Australian who is a member of a couple can earn up to $21,680 in 2007-08 without paying income tax. For 2008-09 this threshold has increased to $24,680 and will increase to $25,680 in 2009-10 and finally to $26,680 in 2010-11.

The Government recognises that housing affordability can be an issue for senior Australians. Through measures such as the National Rental Affordability Scheme (NRAS) and the A Place to Call Home Program, the Government is addressing these challenges. In relation to NRAS, a total of $622.7 million has been allocated for the implementation of the Scheme to create 50,000 new affordable rental dwellings over the next four years (2008 to 2012) for low and moderate income households.

Under the A Place To Call Home initiative the Government will implement its election commitment and spend $150 million over five years to deliver at least 600 additional homes across Australia for families and individuals who are homeless (2008-09 to 2012-13). It is anticipated that older people will benefit from the scheme.

The Government has already implemented a wide variety of measures, which are specifically targeted at helping seniors with cost of living pressures. However, the Government recognises that more needs to be done.

As this year marks the centenary of the introduction of legislation for the Age Pension, it is timely to consider the assistance being provided to senior Australians. The Government is committed to getting this right for the long term.

On 13 May 2008, the Treasurer, the Hon Wayne Swan MP, announced a comprehensive review of Australia’s tax system to create a tax structure that positions Australia to deal with the demographic, social, economic and environmental challenges of the 21st century and enhance Australia’s economic and social outcomes.

The inquiry into Australia’s Future Tax System will consider improvements to the tax and transfer payment system for individuals and working families. This will include consideration of the relationships of the tax system with the transfer payments system and other social support payments, rules and concessions, with a view to improving incentives to work, reducing complexity and maintaining cohesion.

As part of the Review, the head of the Department of Families, Housing, Community Services and Indigenous Affairs, Dr Harmer has been asked to investigate measures that may be adopted to strengthen the financial security of seniors, carers and people with disability. This will include appropriate levels of income support and allowances, including the base rate of the pension, with reference to the stated purpose of the payment; the frequency of payments, including the efficacy of lump sum versus ongoing support; and the structure and payment of concessions or other entitlements that would improve the financial circumstances and security of seniors, carers and people with disability.

In establishing the Review, the Government was cognisant of the Senate Committee’s first three recommendations, which call for a review of the base level of pension, of indexation arrangements and of incentives and initiatives related to superannuation savings.

On 11 August 2008, the Pension Review Background Paper was released. This paper begins to address the terms of reference for the Pension Review. A reference group comprised of representatives from seniors and community groups has been established and a public consultation process is underway to inform the Pension Review.

Finally, the Government recognises that its primary response to tackling climate change—the introduction of the Carbon Pollution Reduction Scheme in 2010—will have an impact on the cost of living for all Australians.

The introduction of the Carbon Pollution Reduction Scheme will result in changes to a wide range of prices, although the overall increase in the cost of living is expected to be modest. Nonetheless, the Government recognises that even a modest increase in the cost of living impacts on household budgets.

The Government has therefore committed to assist households adjust to the impact of the scheme. Notably, the Government will increase payments, above automatic indexation, to people in receipt of pensioner, carer, senior and allowance benefits and will provide other assistance to meet the overall increase in the cost of living flowing from the scheme. The Government also commits to increase assistance to other low-income households through the tax and payment system to meet the overall increase in the cost in living flowing from the scheme.

The following section provides a response to each of the Committee’s recommendations.

RESPONSE TO RECOMMENDATIONS

The Committee made fifteen recommendations. The Government response to specific recommendations is provided below.

BASE PENSION LEVELS

Recommendation 1

The committee recommends that the Government review the suitability of the base pension levels through economic analyses of amounts required to achieve at least a modest standard of living for retired Australians, with particular consideration given to the adequacy of the percentage rate for single older people receiving the age pension compared to couples. (Chapter 3)

Response

The income support system pays a higher rate to single people than to each member of a couple. This recognises that a single person living alone usually does not have the economies of sharing household expenses commonly experienced by a couple. The single rate is currently 60 per cent of the combined couple rate.

The Government is very concerned to ensure that assistance to older Australians is adequate, and has already taken steps to act on this recommendation. On 15 May 2008, the Government announced that a central element of the Australia’s Future Tax System Review will be an investigation into measures to strengthen the financial security of seniors, carers and people with disability. Dr Jeff Harmer, Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs, will undertake this investigation.

The investigation will examine issues including levels of income support and associated allowances, as well as the frequency and structure of payments and concessions. It will also consider the other issues specifically raised by Recommendation 1.

This work will be supported by a Reference Group of representatives from relevant groups. Dr Harmer will report to the Treasurer and Minister for Families, Housing, Community Services and Indigenous Affairs, through the chair of the Tax Review Panel, by no later than 28 February 2009.

The Government’s election commitments and budget measures provide additional support to older Australians. The Government has already taken the following action.

• Eligible seniors have each received a $500 bonus payment that was paid before 30 June 2008.
• The Utilities Allowance has been increased from $107.20 to $500 a year (singles or couples combined). The first $125 instalment was paid in March. The latest instalment has been paid in the fortnight beginning 20 June 2008.
• The Utilities Allowance has also been extended, for the first time, to all recipients of Carer Payment, Disability Support Pension, Widow B Pension, Invalidity Service Pension, Income Support Supplement, Partner Service Pension, Wife Pension and Bereavement Allowance.
• The Seniors Concession Allowance has also been increased from $218 a year to $500 a year. This benefits Commonwealth Seniors Health Card holders and certain Veterans’ Affairs Gold Card holders. Seniors Concession Allowance is also now paid in quarterly instalments, in line with the Utilities Allowance.
• The Government has increased the Telephone Allowance from $88 to $132 a year for those who have the internet at home. This benefits eligible veterans, income support recipients of age pension age, Commonwealth Seniors Health Card holders and recipients of Carer Payment and Disability Support Pension who have a home internet connection.
• The Government committed to index pensions in line with increases in the Analytical Living Cost Index for Age Pensioner Households produced by the Australian Bureau of Statistics, the Consumer Price Index or 25 per cent of Male Total Average Weekly Earnings, whichever is the greater. Indexation issues will be examined in the context of the Australia’s Future Tax System Review and the associated review of support for seniors.

STANDARDISATION OF INDEXATION

Recommendation 2

The committee recommends that:

(i)

the Government review and standardise the indexation methodology of pensions, social security and other government retirement benefits to ensure they maintain their relative levels. In particular, the Government should note limitations highlighted during the inquiry about the use of the Consumer Price Index, as well as other possible indexation mechanisms such as the Australian Bureau of Statistics’ Household Expenditure indices.

(ii)

the review should also address the particular financial disadvantage of single women, many of whom have had a life of broken working patterns and an inability to access superannuation arrangements.

(iii)

while the review is undertaken and to ensure immediate relativity, the Government should index Commonwealth funded superannuation benefits and the military pension to Male Total Average Weekly Earnings or the Consumer Price Index, whichever is the higher, as is currently the practice with the age pension. (Chapter 3)

Response

Parts (i) and (ii)

The Government committed to index pensions in line with increases in the Analytical Living Cost Index for Age Pensioner Households produced by the Australian Bureau of Statistics, the Consumer Price Index, or 25 per cent of Male Total Average Weekly Earnings, whichever is the greater.

The issue of indexation links to the adequacy of existing support provided to pensioners, and these issues will also be examined in the context of the investigation by Dr Harmer into measures to strengthen the financial security of seniors.

Part (iii)

On 26 June 2008 the Government announced a review of the pension indexation arrangements in the Australian Government superannuation schemes. The schemes that will be the subject of the review are those Australian Government superannuation schemes, civilian and military, that are indexed to increases in the Consumer Price Index.

Information about the review, including its terms of reference is available at www.finance.gov.au/super.

SUPERANNUATION

Recommendation 3

The committee recommends that the Government continues its review of incentives and initiatives related to superannuation savings. especially aimed at facilitating and encouraging greater savings for older people in vulnerable groups. In particular this review should consider measures that will ensure a reasonable standard of living for older people, especially women, those on below average incomes, those who have lived with long-term chronic illnesses and those whose earning capacity has been greatly limited by their caring responsibilities. (Chapter 3)

Response

The Government assists individuals to achieve their retirement income objectives by providing incentives to save and contribute to superannuation. For example, the Government co-contribution for low income earners matches eligible personal superannuation contributions made by a person at $1.50 for every dollar contributed. For contributions made in the 2008-09 income year the maximum Government co-contribution of $1,500 is payable for individuals on incomes up to $30,342. To qualify, the individual must meet other eligibility criteria.

Australia’s Future Tax System Review will be looking to make recommendations to the Government to ensure that there are appropriate incentives for individuals to save and provide for their future.

The Government recognises that some groups have little opportunity to accrue superannuation savings. In these circumstances, Government benefits play a more significant part in providing a retirement income. As part of the Review, an investigation into measures to strengthen the financial security of seniors, carers and people with disability will be undertaken by Dr Jeff Harmer, Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs. The investigation will examine issues including levels of income support and associated supplements, as well as the frequency and structure of payments and concessions.

In addition, on 15 May 2008 the House of Representatives Standing Committee on Family, Housing, Community, and Youth announced a parliamentary inquiry to investigate how carers can be better recognised and supported in their vital role.

The Committee will report on:

• the role and contribution of carers in society and how this should be recognised;
• the barriers to social and economic participation for carers, with a focus on helping carers to find and/or retain employment;
• the practical measures required to better support carers, including key priorities; and
• strategies to assist carers access the same range of opportunities as the wider community, including increasing the capacity for carers to make choices within their caring roles, transition into and out of caring and effectively plan for the future.

The Government has also established a Disability Investment Group which is identifying ways to encourage private investment (including from families) and avenues for new products and services to assist families make financial provision and plan for the future care of a family member with disability.

REVERSE MORTGAGES

Recommendation 4

The committee recommends that the Government monitor the usage and impact of older people accessing reverse mortgages and other similar products, including their effect on the eligibility of older people for government benefits and pensions. (Chapter 2)

Response

The Government agrees with the recommendation and has already begun taking steps to monitor these arrangements.

As credit products, equity release products including reverse mortgages are currently regulated by the States and Territories under the Uniform Consumer Credit Code (UCCC).

In light of concerns about the use of equity release products, the Government is participating in a working group with the Australian Securities and Investments Commission (ASIC), Office of Fair Trading New South Wales and Consumer Affairs Victoria on behalf of the Uniform Consumer Credit Code Management Committee to introduce an information statement in the pre-contractual disclosure requirements for reverse mortgage providers under the Uniform Consumer Credit Code. The information statement is intended to provide relevant warnings for consumers interested in taking out a reverse mortgage and information on where to obtain further advice including avenues to seek advice regarding the impact on benefits.

Looking ahead, the Council of Australian Governments has decided in-principle that the Government will assume responsibility for the regulation of mortgages (including reverse mortgages). This issue is canvassed in the Green Paper on Financial Services and Credit Reform—Improving, Simplifying and Standardising Financial Services and Credit Regulation which the Government released on 3 June 2008.

When considering the most appropriate regulation of reverse mortgages, the Government will consider, among other things, the work being undertaken on the information statement discussed above.

Reverse mortgages are one of many financial products available to Australians. For some older Australians they may be suitable products for their particular needs.

However, reverse mortgages have particular characteristics and given the complexity and the many detailed conditions, the Government encourages people who are considering them to seek independent financial and legal advice.

Like all financial products it is important that people understand the benefits, costs and risks that are involved with reverse mortgages, as well as their possible effect on social security benefits including the Age Pension. The Government recognises the importance of assisting senior Australians to understand money management issues.

Through ASIC, which is responsible for delivering the Government’s financial literacy response, the Government provides consumers with readily accessible and easy to understand information on a range of money management issues including reverse mortgages. Information on reverse mortgages which covers important considerations such as “no negative equity guarantee” clauses, fees and charges (including interest rates) and terms and conditions, is on the FIDO and Understanding Money websites. FIDO (the consumer watchdog website for ASIC) has a reverse mortgage checklist and a reverse mortgage calculator that provides consumers with an indication of the cost implications of reverse mortgages.

Centrelink’s free Financial Information Service (FIS) also provides information to consumers on reverse mortgages and their possible effect on social security benefits including the Age Pension. General information is available through public seminars and more detailed information relevant to people’s particular circumstances is available by making an appointment with a FIS officer.

INDIRECT BENEFITS INCLUDING CONCESSIONS AND REBATES

Recommendation 5

In order to increase the capacity of indirect benefits to meet the needs and ameliorate financial stress experienced by older people, the committee recommends that:

(i)

the Government review the efficacy of indirect benefits.

(ii)

governments at all levels should provide services, subsidies, rebates and concessions for older people which recognise the limited incomes available to this age group and should ensure these indirect benefits are set at a fair and appropriate level and are sufficiently indexed to maintain their real value.

(iii)

the financial thresholds for eligibility for indirect benefits, including the Commonwealth Seniors’ Health Card, should also be set at a fair and appropriate level, and be indexed to maintain their relative accessibility.

(iv)

in order to achieve greater national uniformity, Commonwealth, State, Territory and Local Governments work together to develop a nationally recognised senior’s card to provide concessions and benefits to eligible older people and to negotiate reciprocal arrangements across jurisdictions with respect to public transport concessions. (Chapter 4)

Response

Parts (i), (ii) and (iii)

The Government agrees that the efficacy of indirect benefits should be reviewed. The role and structure of services, subsidies, rebates and concessions impact directly on the adequacy of existing support provided to pensioners and seniors, and will be considered in the course of the investigation by Dr Harmer into measures to strengthen the financial security of seniors, carers and people with disability.

The Government has direct responsibility for some subsidies, rebates and concessions provided to older people. Other subsidies, rebates and concessions are administered by State, Territory and Local Governments and some private organisations. The Commonwealth Government provides funding through a Special Purpose Payment to State and Territory Governments (estimated at $220 million for 2008-09) to assist with the costs of providing core concessions such as utilities, municipal and water rates, public transport and motor vehicle registration to part-rate pensioners with a Pensioner Concession Card.

Eligible older people also receive indirect benefits through aged care subsidies and concessions, the Pharmaceutical Benefits Scheme and the Medicare Safety Net.

Aged Care Subsidies and Concessions

The Government subsidises the costs of care for older Australians receiving residential or community aged care. All residential care subsidies were reviewed recently and changed fee and subsidy arrangements were introduced on 20 March 2008. The new means testing arrangements are simpler and fairer, and care subsidies are better matched to the costs of care for residents with complex health care needs.

Pharmaceutical Benefits Scheme

Older people who are self-funded retirees and who hold a Pensioner Concession Card, Commonwealth Seniors Health Card, or Health Care Card are currently able to obtain medicines supplied under the Pharmaceutical Benefits Scheme (PBS) at the concessional co-payment of $5.00, compared to $31.30 for the general population. Once reaching the concessional safety net amount of $290.00 (equal to 58 prescriptions) in expenditure on their PBS medicines over a calendar year they are eligible for PBS medicines free of charge for the remainder of that calendar year. Changes to the co-payments and safety net thresholds occur on 1 January each year, based on the Consumer Price Index.

Medicare Safety Net

The extended Medicare Safety Net assists Australian families and individuals who have high out-of-pocket costs for out-of-hospital services that are covered by Medicare. Out-of-hospital services include GP and specialist attendances and services provided in private clinics and private emergency departments. Once the relevant annual threshold has been met, Medicare will pay for 80 per cent of any future out-of-pocket costs for out-of-hospital Medicare services, in addition to the Medicare Rebate, for the remainder of the calendar year.

In the 2008 calendar year, eligible families and individuals qualify for the extended Medicare Safety Net when their out-of-pocket costs for eligible services exceed $1,058.70. The Government caters for families and individuals on low incomes through a lower extended Medicare Safety Net threshold. In the 2008 calendar year, people who hold a Pensioner Concession Card, a Health Care Card or a Commonwealth Seniors Health Card or families who are paid Family Tax Benefit (Part A) payments are eligible for a lower safety net threshold of $529.30.

There are no current plans to change the way the extended Medicare Safety Net operates. However, the Health Legislation Amendment (Medicare) Act 2004 requires that a review of the operation, effectiveness and implications of the extended Medicare Safety Net be conducted. It is anticipated that this review will be completed in 2008.