Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

I continue my speech from yesterday in the second reading debate on the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009. Retirees can subsequently lose their pension or receive a lesser pension. On this topic of the change in taper rates, I quote some figures from Dr Hickman from SA Superannuants.  These figures were brought to the Senate Community Affairs Legislation Committee inquiry into this bill by the Australian Council of Public Sector Retiree Organisations. Dr Hickman’s figures show that after the change in the taper rate a pensioner would be $673 a year worse off after four years and that this would rise to a maximum of $3,854 after 10 years. This modelling was done by an economist from the Australian Council of Public Sector Retiree Organisations and it suggests that the guarantee given by the government that grandfathering will ensure that no pensioner will be worse off because of the change to the taper rate is not in fact true.

I would also like to bring to the Senate’s attention yet another example of the problems that develop when legislation is hastily inquired into and hastily looked and the problems involved in what Ms Claire Martin referred to as ‘less equitable and more complex legislation’. The National Council on Intellectual Disability has today also published some work suggesting that people on disability support pensions will be worse off. The National Council on Intellectual Disability asks why people with disability in receipt of a disability report support pension who choose to work and earn income are treated differently from people in receipt of the age pension who choose to work and earn income. Yet again we have an example of multiple tiers developing. The NCID says:

There now exists a double comparative disadvantage. Young people in receipt of the Disability Support Pensioner do not have access to the Work Bonus and also do not have access to the Senior Australian Tax Offset.

They point out that the changes to the income test taper reduce the incentive to work, and this is a policy contrary to the government’s alleged interest in social inclusion and in reforms to employment services. They point out:

• The base pension increase is quickly chewed up by the new taper for those who will enter the workforce as new workers.
• The effective marginal tax rate … means that a worker only receives a net benefit of approximately 34 cents for every dollar earned.

We are talking here about people on disability support pensions. They go on to say that treating the contribution to work of young people with disabilities as less than that of aged workers sends a very strong message devaluing people with disabilities.

The NCID have used the average weekly wage of $345 because this is the average received by people with intellectual disabilities working in open employment who are assisted by Commonwealth services. Using that figure, they point out that a person with a disability in receipt of the pension earning $345 a week in comparison with an age pensioner earning the same is at a significant disadvantage at both levels. They earn $56.13 less in net income if they are currently working, using the current taper test, or nearly double that for new workers currently in receipt of the disability support pension. They are $83.73 a week worse off in net income.

The coalition have said that we will not oppose this legislation. However, we will be monitoring its working very closely. We have the government’s guarantee that no-one will be worse off because of the taper rate, that the grandfathering clause will work and will mean that people do not have money ripped out of their pensions when they most need it. But, given that age pensioners are nearly $4,000 a year worse off after 10 years, and given these figures that have been released today by the National Council on Intellectual Disability showing that workers can be $83 a week worse off if they are recipients of the disability support pension, the guarantee is not in any way, shape or form watertight. This is certainly something that I will be monitoring very closely. We in the coalition will ensure that the government keeps its promise.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

The Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009 implements key elements of the government’s secure and sustainable pension reform package announced in the May budget. They are the most significant reforms in the 100-year history of Australia’s pension system, they are reforms that deliver a fair go for pensioners and they are reforms of which this government is very proud. I am pleased to be dealing with this legislation on behalf of the government.

The retirement income system in Australia is effectively composed of a government guaranteed defined benefit age pension and, on top of that, a range of superannuation, compulsory and voluntary. In the context of total retirement income for Australians, obviously superannuation is very important. However, the age pension has been long neglected because the reality is, particularly for those older Australians either in retirement or approaching retirement, the majority have very little superannuation or no superannuation, because they simply were not in the workforce for long enough or they retired before superannuation became compulsory—another major and important retirement income reform, initiated in 1987 by the former Hawke-Keating government.

The secure and sustainable pension reform package improves the adequacy of the pension system. It makes its operations simpler and more responsive to the needs of pensioners and secures its long-term sustainability. It prepares Australia to meet future challenges, including the ageing of the population. In addition to providing significant increases in payments, the reforms will make the pension system simpler and more flexible.

At the centre of these reforms is a much-needed increase in pension payments. From 20 September 2009 single pensioners will receive an increase of $32.49 per week, comprising a $30 per week increase in the maximum base pension rate and a $2.49 per week increase in the new and increased pension supplement. Let me repeat that: single pensioners will receive an increase of $32.49 per week. Pensioner couples will receive an increase of $10.14 per week combined, delivered through the new pension supplement. That is an increase of $10.14 per week for pensioner couples.

These are the most significant reforms in the 100-year history of Australia’s pension system. Australia’s 3.3 million age pensioners, disability pensioners, carers, wife and widow B pensioners, bereavement allowance recipients, special needs pensioners and veteran income support recipients will benefit from these increases.

The single pension will increase as a proportion of the pension paid to couples combined from 60 per cent to 66.33 per cent. This ratio will also apply to the new pension supplement and the seniors supplement. The pension will continue to be benchmarked against wages using the so-called MTAWE, which was the last major reform of the pension base in Australia. I think it was 1983 when the Hawke Labor government introduced the automatic indexation of pensions to MTAWE. That was the last major reform, but this reform is the most significant in the 100 years since the age pension was introduced, in terms of the base rate of the age pension.

The pension will continue to be benchmarked to wages, and the benchmark for the single rate of pension will increase from 25 per cent to 27.7 per cent of male total average weekly earnings, which is an increase of 10 per cent. Following these reforms, the new total weekly pension plus supplement will be an estimated $336.68 for singles and $507.50 for couples combined, which amounts to $17,507.36 a year for singles and $26,390 for couples combined. The actual figures to apply from 20 September will depend on indexation and on final inflation and wages parameters that are not yet available.

The range of supplementary payments and allowances currently paid to pensioners will be simplified and made more flexible through the introduction of a new pension supplement. The value of current allowances will be maintained and increased in the new pension supplement. The new seniors supplement will be introduced to benefit eligible self-funded retirees who hold a Commonwealth seniors health card. A new pensioner and beneficiary cost of living index will be introduced from 20 September 2009 to better reflect the costs that pensioners’ households face and will be used along with the consumer price index and the new wages benchmark to determine annual increases in the base pension.

Pension advance payments will be more flexible and we will bring greater consistency to the portability rules for overseas study among income support payment recipients. To better target the pension, the income test withdrawal rate will be increased from 40c to 50c for each dollar of private income over the free area. This is one of the tough decisions needed to make the pension system more sustainable and to target the biggest pension increases to those who need them most.

Transitional arrangements will be put in place to protect existing pensioners who would otherwise have faced a payment reduction because of these changes. The transitional rules will maintain existing payments in real terms and give an increase of $10.14 a week. Pensioners will be able to access the transitional rules for as long as necessary and will be moved to the new system once it delivers them a better outcome.

To help pensioners keep more of the money they earn, a new work bonus is being introduced as part of the new income test arrangements which will help pensioners maintain some part-time work while they receive a pension. This bill will close the Pension Bonus Scheme to new entrants following a recommendation of the Harmer review. I note that the shadow minister admitted in his remarks that the scheme, which was introduced by the former Liberal government, had not achieved what it was supposed to. Now is the time to close it and replace it with a more effective incentive.

Other minor amendments are made to the pension system, including exempting certain payments being made by the Western Australian government from the pension income test. The bill also contains measures that change indexation arrangements for family payments to make family assistance more sustainable. This brings indexation arrangements for family tax benefit part A minimum rates for children under 16 into line with other indexation across the family tax benefit system.

This bill takes the tough decision to raise the pension age. The age pension was first paid in 1909, and next month marks the centenary of—

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

What happened to this urgency you were talking about?

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Sorry?

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

You were talking about getting these bills through this afternoon.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I think I actually have a duty and an obligation here, because decisions are sometimes made in court based on second reading speeches—

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

This isn’t your second reading speech.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

and responses to proposed committee amendments. At least I am on the speakers list! Since the first pension was paid in 1909, the pension age for men has been set at 65. The pension age for women is currently increasing—another tough decision taken by a former Labor government—and will reach 65 in 2013. As part of these reforms and to improve the long-term sustainability of the pension system, the qualifying age for age pension will increase for both men and women from 65 to 67 years.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

Senator Williams interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Have you got something to say as well?

John Williams (NSW, National Party) Share this | Link to this | Hansard source

We’ve heard all this before.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I am anxious to conclude. The increase in the qualifying age for age pension will begin to be phased in from 1 July 2017 and will be fully implemented on 1 July 2023. Phasing in the change over this period will allow affected individuals time to plan for their retirement. The change to the age pension age will allow the government to respond to the long-term cost of our demographic changes.

This Labor government is serious about addressing these demographic changes. We are determined to make our pension system both adequate and sustainable over the long term. That is why we had the pension review that was initiated in May last year, receiving almost 2,000 written submissions. The review was supported by a reference group made up of a range of experts and industry organisations. The reference group canvassed all the issues surrounding pension reform.

The need for action has been reinforced by a recently released report by the OECD, Pensions at a glance, which shows that the poverty rate for older Australians is double the OECD average. The report’s analysis is based on pension figures from 2006, during the time of the previous government. Australia has the fourth highest poverty rate for people aged over 65 in the OECD. Only Ireland, Korea and Mexico have higher rates of old age poverty. Along with Ireland and Switzerland, Australia’s old age poverty rates are double those of the rest of the population, and poverty rates for singles are worse than for couples. The reforms to the pension system contained in this bill will improve its adequacy, make the system simpler and more responsive to pensioners’ needs and secure the sustainability of the pension system as the Australian population ages.

These reforms to Australia’s pension system are essential and they are overdue. In the early months of this Rudd Labor government, we heard extensively from the former Liberal-National government and, indeed, from the crossbenchers, about the need to increase the base pension. I accepted the argument being put from the crossbenches—the Greens and Family First and Senator Xenophon. They had raised that issue consistently over a long period of time. But, upon moving into opposition, the Liberal-National coalition, after almost 12 years of doing nothing about the age pension, finally decided it was time to increase the age pension after they had done nothing about it for almost 12 years.

Then we have the rank hypocrisy from the opposition, who attack the government for debt—given the outcome of the global financial economic crisis—and who were demanding an increase in the age pension, having done nothing about it for 12 years. The cost over the forward estimates I think is between $11 billion and $12 billion approximately. But, of course, they did not indicate any way where savings could be made, either direct monetary or savings via the recognition of the demographic changes and the age at which the age pension should be accessed. It is sheer hypocrisy from the Liberal-National coalition: do nothing for almost 12 years, go into opposition and demand an increase in the age pension—having done nothing about it for 12 years—without even bothering to indicate how it would be paid for. It is absolute hypocrisy from those opposite.

We are, indeed, very proud of these changes. The increase in the age pension in this country is long, long overdue. The changes will improve long-term security and certainty and ensure that over time the pension system is both adequate and sustainable. The reforms included tackle the reality of the ageing population and the challenge this represents.

I know concern has been expressed about the increase in the pension age. The longer you leave reforms in this area, the more difficult reform will become.

Nigel Scullion (NT, Country Liberal Party, Deputy Leader of the Nationals) Share this | Link to this | Hansard source

2017!

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Yes, 2017. I notice that Liberal shadow minister Abbott was critical of us for not phasing in the pension access age of 67 faster than we had otherwise indicated. I think you have to be just a bit careful about phasing in increases to the pension access age. People have got to have some reasonable notice. I think Mr Abbott, the Liberal shadow minister, is being a bit harsh about criticising the Labor government for not doing it fast enough, particularly as the former government had done nothing in 12 years anyway.

I do not often use my family in these circumstances—

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

Usually not a good idea, ever.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Senator Macdonald! I want to quote you the demographics. My daughter, Mia, is nine years old. She was born in the year 2000. You hate to talk about your family in the context of people who work in retirement incomes, but I talked to an actuary about life expectancy. He said, ‘Well, if your daughter lives to five’, which fortunately she has, ‘her average life expectancy will be 93.’ So my daughter, having been born in the year 2000, on average will now live to the year 2093. And the odds are she will probably live to see the year 2101. It is simply unsustainable, sadly and unfortunately, for my daughter not to work either in retirement or in education for 45 years of her 100-year life, if she lives 100 years. It is simply not sustainable for any society to have individuals either studying up to, say, their early twenties and then going into retirement at the age of 65. It is simply not possible to have individuals not participating in society in some form of economic involvement.

The longer you leave these reforms, the worse it gets. Frankly, some of the European countries have got themselves into a mess. Some have tackled the issue of the pension access age; some have not. But if you look at the long-term debt projections—and I will give some credit to the Liberal-National coalition, because they, like us, are supporting this legislation and they, like us, have at a range of times closed the unsustainable defined benefit funds that exist in this country.

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

You have filibustered for 15 minutes now, Nick.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

These are all important issues, Senator Macdonald, and this is a very substantial—

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

They are all in the second reading speech.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

No, they are not. The comments I have made in the last seven minutes are not in the second reading speech, Senator Macdonald.

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | Link to this | Hansard source

Senator Ian Macdonald interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Again, you are wrong, Senator Macdonald, and because you do not listen and you interject and speak when you are not on the speaker’s list you just fail to listen and understand.

This is a very, very important issue. I do not think reforms of this magnitude should go unremarked on by the government in closing the debate. The reforms deliver a fair go for Australia’s pensioners and I commend the bill to the Senate. I thank all those senators who have contributed, and I thank the Liberal-National coalition for supporting the package and the bill.

Question put:

That the amendment (Senator Siewert’s) be agreed to.