Carol Brown (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary for Families and Payments) Share this | Hansard source

I rise to speak on the Social Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015. This bill seeks to implement changes to the assets test and assets taper arrangements for the age pension—changes which will provide billions of dollars in savings to the government and leave some single pensioners $8,000 worse off and some couples as much as $14,000 worse off.

Before the last election, as we have heard in the debate here this evening, Mr Abbott had a clear position on pensions, and we all know what it was. The government members in the chamber know what it was. It was no cuts and no changes. And yet, in last year's budget we saw the Abbott government launch one of the most savage attacks on Australian pensioners in living memory. The government's plan to cut indexation would have seen every single pensioner in this country left worse off. Within 10 years, this cut would have amounted to $80 per week. But Labor stood by side with pensioners, their families and the community and defeated these unfair changes. But apparently those opposite did not get the message. They did not get the message that Australians will not stand by and let the government attack pensions while they give the big end of town a free ride.

So again, here today, we see the government attack pension incomes in their second budget. Make no mistake, this measure might spare some pensioners the pain of last year, but it will still have very serious negative impacts for pensioners. This bill will cut pensions for some 330,000 part pensions. They are not millionaires, as those opposite might have you believe, but people who have worked hard and made modest savings for their retirement. They are people who have made modest savings, maybe because they have downsized their family home or because they have worked hard and made voluntary contributions to their superannuation. This bill is a clear attack on middle Australia. According to the government's own figures, 236,000 pensioners will be on average $130 a fortnight worse off—that is $3,380 per year—and a further 91,000 pensioners will lose their pension altogether. This will leave them on average $190 a fortnight—$4,940 a year—worse off.

Before I speak about the specific measures in this bill, I would like to take a moment to put on record my concerns about the Community Affairs Legislation Committee inquiry into the Social Service Legislation (Fair and Sustainable Pensions) Bill 2015. As a member of the Community Affairs Legislation Committee, I wish to take the opportunity to express my deep concern about the circumstances under which the inquiry was conducted.

Pursuant to a Senate resolution on 13 May, the provisions of this bill were referred to the Community Affairs Legislation Committee for inquiry and report by 15 June 2015 after it was introduced into the House of Representatives on 4 June 2015. The reporting date was extended to 22 June 2015 and then, in recognition of the significant implications and complexity of the bill, the reporting date was extended to 10 August 2015.

However—as we know and as other senators have said in their contributions—the very next day the Greens joined forces with the government to shut down scrutiny of the bill and further examination of the impact. Because of that, many people who would have put submissions forward to this inquiry and had an opportunity to give evidence in public hearings have been denied that right, because of this dirty deal that the government and the Greens have done to cut the pension. The government and Greens agreed to change the reporting date back to 22 June, shutting down the Senate inquiry nearly two months before it was due to report and removing the opportunity, as I have said, for the committee to hold public hearings on this bill.

The Senate resolution which originally saw this bill referred to the Senate committee for inquiry is intended to allow time for critical bills to be referred for inquiry and report by 15 June 2015. For the purpose of this resolution time, critical bills are those introduced into the House of Representatives between 14 May and 4 June 2015, which contain substantive provisions commencing on or before 1 July 2015.

Of the six measures in the bill, only one has a commencement date prior to 1 July of this year, with the other measures starting as far out as 1 July 2017. On the same day that the reporting date for the inquiry into this bill was cut short, the government also gagged debate in the other place and moved amendments to remove five of the six measures in the bill, including the measure that commenced before 1 July 2015. The only measure remaining in this bill, the proposed changes to the assets test for the pension, has a proposed implementation date of 1 July 2017.

But for the seriousness of this measure, I would say that this had to be a joke—a complete farce. The way the Abbott government and the Greens have worked to block scrutiny of this bill is an insult to the 330,000 pensioners who will lose up to $8,200 each every year, because of these cuts to pensions.

But, when you look at the evidence that the committee received during the course of this very short inquiry, you can see why the government did not want to allow the Senate committee the necessary time to do a fulsome inquiry into the bill. The majority of submissions to the inquiry raised concerns about the proposed changes, in particular the changes to the pension assets test and taper rates outlined in the bill.

In their submission to the Community Affairs Legislation Committee inquiry into this bill, Industry Super Australia provided detailed analysis which shows that the impact of these pension cuts will fall hardest on people with below average incomes. This analysis also showed that, in the long run, there are more people affected on below average incomes than above. For example, a pensioner with $500,000 in assets achieving a five per cent return is on an annual income from superannuation of only $25,000. This pensioner will lose $8,210 in pension payments every year because of these cuts.

These people are not rich, as the government would have you believe. They are Australians who have worked hard and saved hard for their retirement. As the Industry Super Australia submission states:

[The changes to the asset threshold and the "asset taper rate"] would reduce the retirement incomes of Australians who currently are on modest incomes, and whose retirement incomes are projected to be below that sufficient for a comfortable standard of living in retirement.

The submission goes on:

Consequently, the proposed change is poorly targeted and inconsistent with the public policy objectives of the retirement security system.

In their submission, Industry Super Australia also highlighted that:

The proposed changes in the taper rate will amount to a 15 per cent overall cut in the retirement income of some people who are on incomes below a comfortable standard …

In contrast, people on higher incomes are largely untouched. This analysis of the impacts of this bill is supported by the analysis undertaken by NATSEM which found that nearly 80 per cent of the cut will be shouldered by Australians in the lowest income quintile.

We also had a submission from National Seniors, who had this to say as part of their submission to this truncated inquiry:

The changes reduce benefits to households with relatively modest assets while leaving benefits to high-wealth Australians, such as super concessions, untouched. National Seniors cannot support reforms that tighten eligibility to the Age Pension while generous tax concessions to high net wealth individuals remain in place.

And, for the benefit of the chamber, National Seniors Australia is the largest organisation representing people aged 50 and over, with around 200,000 individual fee-paying members nationally. So it is a broad based organisation, which enables them to act as a truly independent and representative voice for older Australians. And that is what they had to say.

It is not just those at or approaching retirement age who will bear the brunt of these changes. The negative impact of the proposed taper rate changes will extend over the coming decades, with the proportion of new retirees impacted by these changes increasing sharply over time. The analysis provided by Industry Super Australia shows that, within ten years, half of all new retirees leaving the workforce will be impacted by this measure. This analysis shows that:

The proportion of new cohorts of retirees affected by the proposed asset test change increase from one in three today to seven in 10 by 2050.

So it is one in three today, increasing to seven in 10 by 2050. The submission goes on:

This influx will increase the overall proportion of the Age Pension population who are worse off from just over 10 per cent in 2017 to over 40 per cent by 2055.

Women will be hit particularly hard by these changes over time. Industry Super Australia's modelling showed that, under the proposal in this bill, eight in 10 single women retiring in 2055 will do so on incomes below that needed for a comfortable living standard. This amounts to a 30 per cent increase in the number of women retiring on incomes below what is needed for a comfortable standard of living. In contrast to the millionaires that the government would have you believe will be impacted by this measure, the independent analysis shows that single women on very modest incomes will feel the negative impacts of this bill. Women aged between 55 and 59 will be affected from earnings above $46,220, while women aged between 45 and 49 are affected from earnings above $40,568, and those aged 25 to 29 from earnings above $23,954. These women are not well off by anyone's definition. And, as I said earlier, this bill will not affect millionaires—as those opposite would like the community to believe—but it will affect people who have worked hard and made modest savings for their retirement.

Furthermore, this bill will not benefit as many people as those opposite would have you believe. Those opposite claim that about 170,000 current pensioners will benefit by, on average, $30 a fortnight, due to increases in the assets free area. However, we know that this positive impact may be significantly inflated.

In their supplementary submission to the Senate Community Affairs Legislation Committee's inquiry into this bill, Industry Super Australia again provided analysis that refuted the government's assertions about how many pensioners will be left better off by the changes in this bill. The analysis by Industry Super Australia suggests that:

… the gains presented are overstated, with a significant proportion obtaining no increase or lower increases than suggested.

This is largely due to the operation of the dual means test. So the limited benefits of this bill are completely overblown.

Evidence presented to the Senate Community Affairs Legislation Committee inquiry also showed that these changes will act as a significant disincentive for people to save. In their submission, National Seniors Australia said:

The changes will also result in unfair treatment of some partially self-funded retirees, and create perverse incentives for middle income households to spend rather than save for their own retirement.

So the evidence also showed that the changes will also act as a strong incentive for people to spend their assets down more quickly. That was the evidence that we received. So in the end what these changes will do is to have a negative impact on the adequacy of retirement incomes.

While the government would like to portray this measure as only affecting millionaires, as I and others have said in their contributions the reality is that this pension cut is an attack on middle Australia. In her submission to the Senate Community Affairs Legislation Committee inquiry into this bill, Professor Miranda Stewart, the Director of the ANU's Tax and Transfer Policy Institute, labelled the proposal poor policy because it penalises savers. Professor Stewart wrote:

The proposed asset test tapers effectively doubles the rate of the wealth tax on pensioners while simultaneously narrowing the tax base, contrary to generally accepted good principles of tax and transfer design.

Put simply, the changes in this bill are an attack on pensioner households and a tax on middle income Australians who are planning to retire in the next 10 to 15 years. Professor Stewart goes on to say:

Assuming a return to savings of 5%, a consequence of the asset test is that income from savings is heavily taxed at an effective marginal rate around 160% …

The Committee for Sustainable Retirement Incomes clearly summarised the impact of these changes when they said that there was a 'serious danger of the proposed test encouraging unwise investment behaviour.' This bill, which Minister Morrison has incorrectly called a bill for fair and sustainable pensions, will impact on those with only modest savings, while leaving those on higher incomes largely untouched. It will cause adverse impacts by providing a significant disincentive for people to save and providing a strong incentive for people to draw down on their assets more quickly. This has to be the definition of a poorly thought out policy, a policy which is neither fair nor sustainable for Australian pensioners.

What makes these cuts even worse, even more unfair and even more poorly thought out is that while the government is happy to take thousands of dollars a year off part pensioners with one hand, they are more than happy to hand over tax concessions to millionaire superannuants with the other hand. Labor has put forward a sensible and fair proposal to limit the tax concessions that superannuants with millions of dollars in assets receive. But the government has rejected this proposal. What should we expect from a government with no understanding of fairness and equality?

While those opposite protect the rich and raid the pensions of middle Australia, it is Labor who is left to stand up for what is right. It is Labor who will stand up for people who have worked hard and tried to save for a liveable retirement income. It is Labor who will stand up for pensions, and we will stand up for them every day until the election, when the government will be held to account for the promises they have broken. We will stand with pensioners once again.

As others have so eloquently articulated in their contributions, we are standing here because of the deal between the Greens and the government. What have we really got with the deal with the Greens? We have got a six-week extension period on the tax white paper, and the government is already on record in Mr Hockey's press release saying that the government has given a clear commitment that there will be no unexpected adverse changes to superannuation in this term of government, nor do they have any plans for such changes beyond the next election. Specifically, the government will not increase taxes on superannuation and will not remove any current flexibility in assessing superannuation in retirement. So the deal has been a complete sell-out by the Greens to the government, and it will achieve nothing but to hurt pensioners. I urge the Senate to stand with the Labor Party in opposing this bill.