Scott Ryan (Victoria, Liberal Party, Special Minister of State) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

SOCIAL SERVICES LEGISLATION AMENDMENT (OMNIBUS SAVINGS AND CHILD CARE REFORM) BILL 2017

This bill includes the Jobs for Families Child Care Package from the Education and Training portfolio, and a range of new and previously introduced social services measures to improve the fairness and sustainability of government payments. Together, the measures in this bill will help us:

- provide a fair and reasonable safety net for those who need it;

- encourage participation in work and study; and

- contribute to bringing the budget back to balance.

The government wants a welfare system that supports the most vulnerable, encourages those capable of work or study to do so, reduces intergenerational welfare dependency, and is sustainable for the future.

While the Australian welfare system is highly targeted, sensible changes that contribute to longer-term sustainability should be pursued given the budget context. Otherwise, the next generation of Australians will be left with more debt to repay and higher taxes.

Workforce participation and self-reliance are central to improving long-term wellbeing. This is why the government is committed to making changes that will encourage and support greater workforce participation for those who have the capacity to work.

Both the Education and Training and the Social Services components of this omnibus bill have been repeatedly examined by their respective Senate Legislation Committee. I thank the Senate Education and Employment Legislation Committee, the Senate Community Affairs Legislation Committee, as well as all those individuals and organisations who contributed to these inquiries. The government welcomes and accepts the recommendation from each of the committee's majority reports that the childcare bills be passed and looks forward to the report of the most recent Inquiry being tabled.

Jobs for Families and family payments structural reform and participation measures

The government remains committed to investing in child care to provide parents with more choice and opportunity to work, and to provide children with high-quality early education.

But the significant investment in child care must be fiscally sustainable. Combining fair and reasonable changes to the family tax benefit system and childcare reforms into a single bill enables the government to reduce spending and increase workforce participation through an affordable childcare system.

The Jobs for Families Child Care Package delivers genuine, much-needed reform for a simpler, more affordable, more accessible and more flexible early education and childcare system. In supporting around one million Australian families who are balancing work and parenting responsibilities, this package of measures is fundamentally fair—it will provide the greatest hours of support in child care to the families who work the longest hours, and the greatest financial support to the families who earn the least. Families on incomes of around $65,000 or less will receive the highest 85 per cent rate of subsidy, which is an increase on the current rate of about 72 per cent. It is estimated that our reforms will encourage more than 230,000 families to increase their involvement in paid employment.

New data released just yesterday showed that there are nearly 18,000 approved child care services nation-wide, caring for roughly 1.25 million children.

But the data also illustrates a broken early education and care system that is not working for Australian families who in the annual June 2016 quarter faced a fee spike of almost eight per cent. While the Turnbull Government has done everything it can to reduce fee increases in the current system, this latest 7.6 per cent increase in child care fees – including a 6.3 per cent increase in Long Day Care fees demonstrates that Australia's child care system needs to be reformed.

We need to fix this broken system with a complete overhaul.

The reforms will place downward pressure on what have been incessant child care fee increases through an hourly rate cap; abolish the current child care rebate cap for most families and increase it from $7,500 to $10,000 for those on higher incomes; introduce new compliance powers to further strengthen the government's efforts to clamp down on fraud; provide a child care safety net for the most vulnerable children and slash red tape so that services can offer more flexible hours.

The Jobs for Families Child Care Package also includes a number of other important measures that are not formally part of the bill being introduced today. This includes the Community Child Care Fund which will help new and existing services, particularly in rural, regional or vulnerable communities, increase the supply of places in areas of high, unmet demand.

Much has been said, in both the HoR debate and in the Senate Inquiry, about the transition of Budget Based Funded services under this package, otherwise known as BBFs, and the support they will receive from the Community Child Care Fund.

There are 300 BBF services nationwide, caring for around 22,000 children, amongst those are around 5,000 children in 45 mobile services.

In order to address concerns with the current block-funded program, which is capped and closed, this package brings BBFs that are delivering child care into the broader funding model. For the first time, families using these services will receive direct support from the government through the Child Care Subsidy and, for those requiring extra support, through the Additional Child Care Subsidy.

Recognising that many of these services go to great – and costly – lengths to travel to small communities with limited numbers of children, our third funding source for BBFs, including mobiles, is the Community Child Care Fund, which is an annual fund of $110 million a year. A significant portion of that fund will be provided as a supplementary funding stream to BBFs that need extra support in order to remain viable. As is the case for the BBF program, Community Child Care fund guidelines will not be legislated – this has the benefit of flexibility and the ability to tailor the program to meet emerging needs into the future. However, having listened to the need for certainty going forward, I can assure the Senate that these BBFs will benefit from longer term grants of between 3 and 5 years. Great care has been taken to support BBFs in the Jobs for Families child care package, including service based reports developed by PwC for each and every BBF. This careful work will continue after the Bill has been passed, particularly with regard to further consultation on the Guidelines governing the Community Child Care Fund, which will be published by July 2017. We will also examine this program, along with every other provision of the bill, as part of the Post Implementation Review scheduled to commence within one year of implementation.

I also note the government's ongoing engagement with both the child care sector and with the Senate cross-bench on a range of policy settings under the Jobs for Families Child Care Package.

The government is absolutely committed to the Jobs for Families Child Care Package, however the additional expenditure on child care must be paid for, and the family tax benefit measures in this bill are to offset this expense. A key component of reducing this expense is to phase-out both the family tax benefit part A and part B end-of-year supplements.

The family tax benefit supplements were announced in 2004 in response to high levels of reconciliation debt experienced by family tax benefit participants. This debt was often due to families not being able to accurately predict changes in income or changes in circumstances such as a return to work. The phasing out of the family tax benefit supplements recognises that the government's investment in service delivery reform improves the accuracy of income reporting and significantly reduces the need for supplements to off-set this type of debt.

While the changes to family payments in this bill will pay for the Jobs for Families Child Care Package, they will also simplify the family tax benefit system and enable us to provide more money on a fortnightly basis to those families who need it the most.

The government will increase the maximum fortnightly payment rates of family tax benefit part A by $20.02 for each child in a family aged up to 19. This represents a doubling of the government's previous proposal to increase family tax benefit part A fortnightly rates by $10.08. What this means in practice is that more than 1.2 million lower-income families (including income support families) who receive family tax benefit part A for around 2.2 million children will now receive higher fortnightly payments from 1 July 2018. The increase in fortnightly payments will help families better manage their day-to-day and week-to-week budgets by providing them with timely, regularised assistance at the times when they need it the most.

We will also provide an additional $19.37 per fortnight for under 18-year-old youth allowance recipients who are living at home, bringing the payments to the same standard rate as a family tax benefit part A child aged between 13 and 19.

Aligning these two rates of payment is in itself a much-needed part of the reform process to simplify payment systems where possible. Just as workforce participation is the key to growing wealth for families, educational attainment is the key to getting a job. The government understands this and increasing the fortnightly rates of these payments will encourage secondary students to stay in school. This is fundamental to giving children the best start in life so that they become productive, contributing members of the Australian society. Importantly this reform will also affect people who are on a disability support under the age of 18, special benefit and ABSTUDY.

To encourage greater workforce participation, single parent families with older children will only be able to receive family tax benefit part B until the end of the calendar year when their youngest child turns 16 years old. These families will still receive family tax benefit part A for each eligible child. The government, by this bill, will not proceed with a previous proposal to introduce a reduced standard rate for family tax benefit part B for single parent families with a youngest child between 13 and 16.

Single parents aged at least 60 years of age and grandparents and great-grandparents will continue to access family tax benefit part B at the current rate until the end of the calendar year their youngest child turns 18. This recognises that grandparent carers and single parents who are 60 and over perhaps take on a large responsibility when caring for children but also are somewhat less likely to be working and are more likely to be retired.

Budget repair measures

This omnibus bill also includes measures previously in the Social Services Legislation Amendment (Budget Repair) Bill 2016.

The measures in that bill will help to ensure Australia has a targeted income support system that provides financial assistance to those most in need, while encouraging self-provision. For this reason, and the reasons to follow on each measure, the government supports the measures previously introduced in that budget repair bill.

Tightening proportionality requirements

Under the 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 adjusted after 26 weeks overseas. This adjustment is based on their period of working-life residence in Australia.

The proposed measure would reduce from 26 to six weeks the length of time the age pension, and a small number of these other payments with unlimited portability, are paid at their normal means-tested rate of payment overseas before they are adjusted based on the person's working-life residence.

This change only affects pensioners who have spent less than 35 years of their working life in Australia. A pensioner who has resided in Australia for less than 35 years of their working life would have their pension rate adjusted at six weeks after being overseas. For example, a pensioner who has resided in Australia for 25 years of their working life would receive 25/35ths of the normal means-tested pension they would receive if they had stayed in Australia; after six weeks overseas.

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

I will outline further pension changes announced in the 2016-17 MYEFO later in this second reading speech.

Cessation of the Pensioner Education Supplement and the Education Entry Payment

With the cessation of the Pensioner Education Supplement and the Education Entry Payment, when the Pensioner Education Supplement and the Education Entry Payment were originally implemented, they aimed to give some assistance to 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, recent analysis of the outcomes for recipients of these payments demonstrates that these objectives are not being met. 93 per cent of recipients who moved off the Pensioner Education Supplement during 2015 remained on income support after 12 months.

Since the introduction of these payments, individuals wishing to undertake study also have access to more targeted support and financial assistance. For example, the HECS-HELP, FEE-HELP and VET student loans tuition loan programs all assist people to access education and training.

The removal of these supplements will assist with simplification of the income support system and help ensure its long-term sustainability.

Pause the indexation of income-free areas for working age payments, parenting payments, and student payments.

With respect to pausing the indexation of income-free areas for working age payments, parenting payments and student payments, this bill also reintroduces two elements of the 2014-15 budget measure, maintaining eligibility thresholds for Australian government payments for three years.

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

Pausing indexation is a lever that has been used by successive governments to realise budget savings by slowing the growth in social security expenditure in a reasonable and fair way.

Youth employment measures

With respect to youth employment measures, this bill will reintroduce four measures previously introduced in the Social Services Legislation Amendment (Youth Employment) Bill 2016. With youth unemployment more than twice as high as the general unemployment rate at 13.3 per cent compared to 5.8 per cent as at December 2016, it is imperative that the income support system provide the greatest incentives for young people to find work and be self-sufficient where they are able to, or to undertake further education or training to increase their employability. The reintroduction of the measures in this bill is designed to achieve that end.

One-week ordinary waiting period

With respect to the one-week ordinary waiting period, this bill will make a number of changes to the existing one-week ordinary waiting period to ensure more consistent, targeted and effective operation of this waiting period. Waiting periods, including the one-week ordinary waiting period, are applied to ensure that people support themselves in the first instance, where they are able to, before receiving income support payments. This one-week waiting period is a longstanding feature of the income support payment system but currently applies only to new claimants of Newstart Allowance and sickness allowance.

Under this measure, the one-week ordinary waiting period would be extended to new claimants of youth allowance (other) and parenting payment.

This measure will also modify the current severe financial hardship exemption from the ordinary waiting period to better target this exemption to those who are most vulnerable and in need of immediate assistance, including those who have experienced domestic violence. It will also provide that the ordinary waiting period is served after any other waiting periods to ensure that it operates consistently and effectively in conjunction with all other waiting periods.

Increasing the age of eligibility for Newstart allowance and sickness allowance from 22 to 25 years

This bill contains a key measure designed to encourage more young people to pursue further education or training as a pathway to long-term, sustainable employment. It does this by increasing the minimum qualifying age for Newstart allowance and sickness allowance from the present 22 years to a proposed 25 years of age. Future young people aged between 22 to 24 years will be able to apply for and receive youth allowance (other) instead of Newstart.

This will align the age qualification requirements for youth allowance (other) with youth allowance (student) and will ensure that young people receive the same rates of payment, irrespective of whether they are studying full time or looking for work.

This will remove any perception that there is financial advantage in continuing to receiving unemployment payments rather than pursuing study or training.

Youth allowance also provides broader financial incentives for young people to take up paid work where they can. Youth allowance (other) has a more generous income free area than Newstart or sickness allowance which allows young people to retain more of their payment if they are working casually or part time while they look for full-time work

Those aged 22 to 24 and already receiving Newstart allowance or sickness allowance when the changes commence will be grandfathered and will not have their current payments reduced or otherwise affected.

Four-week waiting period for youth income support and rapid activation of jobseekers

This bill will introduce a new four-week waiting period for job ready young people aged under 25 years who are claiming youth allowance (other) or special benefit.

This measure is intended to set clear expectations that young people who are job ready should make every effort to look for work and maximise their chances of finding work before receiving income support. Critically, young people will have access to tailored support from their jobactive provider during the waiting period to assist them to look for, prepare for, find and transition into work. This measure is complemented by a fourth measure, called RapidConnect Plus, which will require job ready young people to complete pre-benefit activities during their four-week waiting period.

The four-week waiting period and RapidConnect Plus will only be served by those who have been assessed as being job ready, assessed as having no significant barriers to work and assessed as being in stream A of jobactive. An extensive range of exemptions will apply, including for jobseekers who are not job ready, who face additional barriers to work or who are in particularly vulnerable circumstances, including those young people placed in streams B or C of jobactive, those in disability employment services, those who are principal carer parents, and those with any form of temporary exemption from mutual obligations, for example, due to temporary incapacity or a major personal crisis.

The government is contributing to additional relief funding through the government's network of emergency relief providers to support any young people who may find themselves disadvantaged.

Close the energy supplement

Another important measure in this bill seeks to close the energy supplement to new welfare recipients, particularly new income support recipients from 20 September 2017. The energy supplement, or carbon tax compensation as it is commonly known, was introduced on 20 March 2013 as part of the household assistance package to compensate people for the introduction of the carbon tax—a tax which no longer exists.

The carbon tax was repealed from 1 July 2014. The government does not consider that it is reasonable to continue to compensate people in the form of a carbon tax compensation for a tax that no longer exists, particularly people who only started receiving income support after the carbon tax was abolished.

Fairer paid parental leave

Last year the government introduced a suite of measures designed to enhance and better target the Paid Parental Leave scheme—referred to here as the PPL scheme.

The government considers that all working parents should be entitled to paid leave to spend important bonding time with their newborn or newly adopted child in those important early months after birth. The government's commitment to supporting parents in caring for their children must of course be balanced with the responsibility to ensure that family assistance and social security payments are well targeted and sustainable for future generations.

Presently, mothers can access both 18 weeks of paid parental leave as well as any employer-provided parental leave pay. They can also choose to access parental leave pay at the same time as other paid leave if they wish, an approach that does not necessarily extend the time taken off after birth.

From 1 January 2018, the maximum number of weeks of government-provided parental leave pay will be increased from 18 to 20 weeks. This means that 53 per cent of eligible mothers who do not have access to employer-provided paid parental pay will receive an additional two weeks of leave or approximately $1,300 extra. Mothers who do have access to employer-provided paid primary carer pay will have their access to government-provided parental leave pay limited to 20 weeks when looking at the combination of their employer-provided and government-provided parental leave pay. This revised PPL scheme aims to provide fair and equitable support for all Australian working mothers, by ensuring the government funded safety net provides all mothers with an equitable amount of time off to spend with their newborn child.

In addition, this bill amends the work test for PPL eligibility to help employees such as casual teachers and mothers in physical professions such as building, horse racing and mining to join the system for the first time. In 2011, there were 1.23 million female employees in casual jobs, 30,798 women working in mining and 109,705 women working in construction that could potentially benefit from the government's proposed changes to the work test. To ease administrative burdens on business, we are also removing the requirement for employers to act as paymasters for the government's PPL payments. This is estimated to save Australian businesses $44 million a year in compliance costs.

New measures

In addition to consolidating measures previously introduced into the parliament, this bill will also introduce a small number of new measures aimed at strengthening and simplifying the government payment system.

Seasonal workers

As part of the 2016-17 Mid-Year Economic and Fiscal Outlook, the government announced a two-year trial of incentives aimed at increasing the number of eligible jobseekers who undertake horticultural seasonal work, such as fruit picking.

The measure responds to concerns about the ability of the Australian horticulture industry to attract sufficient numbers of seasonal workers by introducing three incentives aimed at increasing the number of jobseekers who undertake horticultural seasonal work.

The incentives will commence as a trial from 1 July 2017 for two years and will be capped at 7,600 participants. There are three incentives:

Newstart and youth allowance (other) recipients who have been receiving those payments continuously for at least three months will have access to a seasonal horticultural work income exemption under which they will be able to earn up to $5,000 each year without it being assessed under the social security income test. Qualification rules will be relaxed for this group so that they continue to qualify for Newstart and youth allowance (other) while undertaking eligible horticultural seasonal work. The amendments in this bill mainly relate to this incentive;

Newstart and youth allowance (other) recipients who have been receiving those payments continuously for at least three months would be eligible for a seasonal work living away and travel allowance of up to $300 each year, if they undertake horticultural seasonal work more than 120 kilometres from their home. This would not be assessed as income for income support purposes;

Employment providers, including jobactive, transition to work and disability employment services, would receive a provider seasonal work incentive payment of $100 a week for up to six weeks a year for each eligible jobseeker that they place with eligible farmers.

Ceasing the payment of the pension supplement after six weeks overseas

This bill will stop the payment of the pension supplement after six weeks overseas, as was announced in the 2016-17 Mid-Year Economic and Fiscal Outlook. The measure being introduced will stop the payment of the basic amount of the pension supplement outside of Australia after six weeks temporary absence from Australia or immediately if the recipient has permanently departed Australia.

As part of the pension reform package in September 2009, the pension supplement combined into a single payment the value of telephone allowance, utilities allowance, pharmaceutical allowance and the goods and services tax supplement.

Currently, the pension supplement does not cease but is reduced to the basic amount after six weeks temporary absence from Australia, or immediately for permanent departures.

Recipients of the basic amount of the pension supplement currently overseas permanently will no longer receive the pension supplement after the commencement date. Recipients who are currently overseas temporarily will be subject to the six-week rule from date of departure.

The basic amount of the pension supplement was designed to assist with the cost of living in Australia. There is no economic reason to continue to compensate recipients for the impact of the GST while they are overseas, for anytime longer than a short-term absence.

Income stream—automated reviews

This bill will also amend section 195 of the Social Security (Administration) Act 1999 to allow the Department of Human Services to automate the collection of information to support income stream review processes for income support recipients with income streams.

From 1 January 2018, there will be a staged introduction of a six-monthly electronic data collection process for income stream information from the income stream providers directly.

An income stream is a product that pays a regular income over a number of years. It can either be purchased with accumulated superannuation monies—for example, an account-based income stream or a lifetime annuity—or derived from a superannuation interest such as a defined benefit income stream.

The proposed system will replace the Department of Human Services' current administrative arrangements, whereby the department uses a dual system to collect information. This is inefficient and costly, and the proposed measure will reduce regulatory burdens for recipients and the industry and improve payment accuracy thereby reducing future recipient debts.

Conclusion

By way of conclusion, this bill provides a cohesive, singular statement on the government's intention to provide effective and sustainable supports for hardworking Australians and jobseekers.

The bill delivers on a core commitment of this government to deliver a more affordable, more flexible and more accessible child-care system.

Most of the measures in this bill have been before the parliament several times, and are being introduced to the Senate today as an example of this government's commitment to improve the efficiency of our payments system and bring the budget back to balance. The majority of these measures formed part of the government's election costings which were supported by the Australian people. In the best interests of Australians' finances and future generations of taxpayers, I would encourage the parliament to support these proposals to encourage workforce participation and ensure the long-term sustainability of our welfare system. I commend the bill to the Senate.