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

I call Senator Wong.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Thank you very much, Madam Acting Deputy President. I rise—

The Acting Deputy President:

Senator Parry on a point of order?

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I am sorry to interrupt the speaker. We did have an agreed speakers list, and that has not been announced to the chamber.

The Acting Deputy President:

Thank you for pointing that out, Senator Parry. There have been informal arrangements made for speakers, I understand, and I would ask the clerks to set the clocks according to those arrangements.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I rise to speak on the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010 put forward by Senator Ronaldson on behalf of the coalition. I want to make a few points about this legislation and about the fiscal circumstances. There are certainly many programs, many amendments, many requests for further government expenditure, which are worthy. In government, generally the choices are not between a worthy cause or a worthy program and a program which is not worthy; generally the choices are to prioritise between many different programs, all of which have their own merit. This is a bill which has responded to the calls from some members of the Australian community, some superannuants, about the amount they are receiving in their retirement. I have no doubt their views have a sound basis. I have no doubt their views are very strongly held. But the key issue in government is to seek to make decisions between different programs, to seek to make decisions to prioritise expenditure and to always recognise that there is a finite amount of government expenditure, which needs to be well managed to meet a whole range of meritorious programs. It is reasonable for people in retirement who have served in our armed forces to expect a reasonable level of support. It is also reasonable for the Australian community to expect continued funding for health, for Medicare, for our school systems, for infrastructure, for our age pension system—and so the list goes on.

But this debate is not about the merits or otherwise of what Senator Ronaldson is putting up. This fundamentally is a debate about fiscal responsibility.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Oh rubbish; what a silly comment!

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I can understand why Senator Ronaldson wants to interject, because he does not want people to be reminded that, in 11 years in government, they never put this up. When you had to pay for it, you never put it up. The hypocrisy of the opposition! Over a decade in government they never chose to make these changes when they had to find the money for it all, and now, in opposition, they want to use private senators’ time to impose a cost on the federal budget that they cannot fund. So let us be clear: to anybody who has a concern about this debate, I accept your right to advocate for an increase—but let us remember, this opposition, when in government, when they had to find the money, never found the money. And now they are trying to use their position in opposition, where they don’t have to find the money, to come into this chamber and seek to impose a $1.7 billion fiscal cost on the federal budget.

David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

Oh rubbish!

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I will take that interjection from Senator Johnston. He said, ‘Oh rubbish!’. These are not figures we have made up; these are figures of the Australian Government Actuary. So you can quibble with Finance’s figures, you can quibble with the Australian Government Actuary, but the reality is you are exposed in this debate. I note the shadow minister, Mr Robert, has just walked in to see. He claimed in the Financial Review, ‘This is not the way you do costings; you look at future debt’. Well, through you, Madam Acting Deputy President: Senator Ronaldson, maybe you could explain to your shadow minister that this is the form of budget costing that Mr Costello introduced. The reality here is that we have an opposition happy to play politics, happy to push for something that they never funded in government, that they have not funded properly this time. The opposition want to impose a $1.7 billion fiscal cost over four years on the federal budget. It is extraordinary.

But the big question is this: where is Mr Robb, who says, ‘I’m the great keeper of the accounts; I’m the shadow finance minister—in fact, I should be the shadow Treasurer, I’m so good at keeping the accounts; I’m so good at doing our costings’. Where is Mr Robb? Mr Robb is the shadow finance minister who presided over a $10.6 billion black hole in your election costings.

David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

Rubbish. You left us with $96 billion. You never got your figures right.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

You can say ‘rubbish’, Senator Johnston. I will take that interjection again, because I will say to the Australian people that if anybody is interested in this debate we have the Department of the Treasury, the Department of Finance and Deregulation—

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Madam Acting Deputy President, I rise on a point of order concerning relevance. Perhaps in the remaining four minutes and 34 seconds the minister could refer to the bill once. It would be a useful contribution.

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

That is not a point of order. Senator Wong has the call.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

They are very sensitive about this, aren’t they? What they do not like is this: they have a $10.6 billion black hole from the election, where they did not cost their election policies properly. They claim that is not true, but who do you believe: the Australian Treasury, the Department of Finance and Deregulation or Mr Robb and Mr Hockey? I leave people to make their own judgment on that.

Secondly, on this issue, as I was saying: where is Mr Robb, the great shadow finance minister who has been lecturing the government about fiscal responsibility and who likes to talk about structural deficits? Well, you are adding to it now. You want to talk about a structural deficit: $1.7 billion over four years, and increasing the Commonwealth’s unfunded liability by $6.2 billion. The question is: why is Mr Robb letting this happen? Where is Mr Robb when it comes to senators in this place using private senators’ time to impose unfunded costs on the federal budget? This is a gross act of fiscal irresponsibility. That is in addition of course to the position the government has previously put and holds on this bill in relation to where these sorts of money bills should originate. These are matters for the House of Representatives and for the executive government, as you would have asserted and complied with when you were in government. I say this to my counterpart, Mr Robb: you set yourself up as the guardian of fiscal responsibility. Mr Robb loves to beat his chest and he loves to pontificate about responsible spending. As he said recently: ‘Spending, spending, spending—more commitments, bigger structural deficits off into the future using all the mining industry’s money. What a disgrace.’ Well, he is right. And he could be describing his own party’s position, because that is the approach that you are taking today in this chamber.

The Australian Government Actuary has made clear the impacts of this decision. We know that this bill will increase expenditure over time; it rises significantly over time. Annual expenditure growth as a result of the changes you are proposing might be less than only $100 million, for example, in 2014-15, but in 2029-30 it grows to over half a billion dollars. You cannot fund that, you know you cannot and you have no intention of ever doing so. The evidence for that is what you did in government, when you never put this forward because you knew you would never fund it. You cannot fund it now, you will not fund it now, you did not fund it in government and all you are doing is seeking to play a bit of politics with this issue.

This is an important piece of legislation, because if this bill gets up, if senators on that side vote for it, it will confirm that the Liberal and National parties are completely fiscally reckless. It will show that despite the talk of fiscal responsibility they never back it up. And it will show that Mr Robb has no influence in the opposition party room. If he had some spine as shadow finance minister he would not allow this to come forward, because it is not the act of a fiscally responsible party and certainly not the act of a fiscally responsible party of government. It is extraordinary that for all the criticisms the opposition has made of the Australian Greens on this issue—and we do not agree with the revenue proposition they have put forward—when the Greens have actually taken a more fiscally responsible position. How embarrassing for the coalition. The Liberal Party is supposedly the party of fiscal responsibility, but the Australian Greens have been more fiscally responsible than the opposition. I have one question: where is Mr Robb when his party comes into this chamber and seeks to put a $1.7 billion fiscal impost over four years on the fiscal balance?

David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

Getting a lecture on honesty, morality and fiscal prudence from this crowd is like getting a lecture on those subjects from an embezzler who has been caught with his fingers jammed in the till. This is absolutely outrageous. These people have wasted billions of dollars and this minister has the temerity to come in here and pretend she is an economic conservative. We have heard it all before. What did they tell the veteran community before the 2007 election? They said, ‘We will change your indexation. We will fix it up for you.’

The opposition in this place wants this bill passed today. In their 2007 policy document Labor said:

There is perhaps no greater duty that we as a nation and as a parliament have than to honour, remember and express our gratitude to those Australians who have served in the defence of our nation.

They went on to say in the policy document:

A Rudd Labor government will provide a fresh approach to veterans’ affairs and a fresh leadership team which is dedicated to working in partnership with the ex-service community on the issues that concern them. Labor will work hard to achieve six goals for veterans …

No. 1 was:

Restore the value of compensation and prevent further erosion due to unfair indexation …

No. 5 was:

A key concern with the veteran community is the impact of rising costs of living and the erosion of their entitlements over time due to unfair indexation arrangements under the Howard government.

No. 5 went on to state that Labor would change indexation:

… to help combat this, Labor is committed to indexing all disability pensions and the domestic component of the war widows pension to movements in the Consumer Price Index or the Male Total Average Weekly Earnings (MTAWE), whichever is the greater.

Further to this, in two press releases on 6 and 7 May 2007, the then Rudd opposition left no doubt as to their intention and promises. Alan Griffin, the then shadow minister, said:

A Rudd Labor Government will restore the value of the Special Rate Disability Pension ... Intermediate Rate and the Extreme Disability Adjustment Pensions by indexing the whole of these pensions to movements in Male Total Average Weekly Earnings ... or the Consumer Price Index ... whichever is the greater.

In a separate press release he went on the say:

A Federal Labor government will restore the value of the Special Rate Disability Pension ... Intermediate Rate and the Extreme Disability Adjustment Pensions by indexing the whole of these pensions to movements in ... (MTAWE) or the Consumer Price Index ... whichever is the greater.

These promises to the veteran community were exactly like ‘there will be no carbon tax’. This is the currency of this government. I note that the minister is not here to listen to this. The government says and does promise to people who are vulnerable in our community that they will be looked after if it gets their vote. And what does it do? As soon as that vote goes through the ballot box, it rips that vote off.

Nick Champion, the Labor member for Wakefield, identified this in his letter to Lindsay Tanner:

Understandably, there is a huge disappointment in both the findings and the government response announced on the same day.

That is referring to the Matthews review.

It had been widely expected that the recommendations would have supported a change to the method of indexation of these pensions to that of which is high, MTAWE or CPI, consistent with the pension, following the earlier Senate and other inquiries. Significantly, many people genuinely believe that prior to the 2007 election the ALP had committed to determining a fairer method of indexation, and a review would provide the direction. So the immediate acceptance of the recommendation of no change in government response is being seen as a reversal of the pre-election position espoused by the ALP in the campaign material.

Oh dear: their own telling them that you cannot break your promise. But the currency of this government is to say anything in the teeth of a campaign—’There will be no carbon tax under the government I lead’—and as soon as the ballot papers are in: ‘Look, everybody knew that when I said that I didn’t mean that.’ You have got to be kidding me.

These veterans have seen hundreds of dollars paid out in $900 cheques across the community—pink batts, school halls. And what have they got out of it? Not a cracker. They were lied to. The member for Eden-Monaro, Dr Kelly, the then member for Fraser, Mr McMullan, Senator Lundy of this place and Annette Ellis, the then member for Canberra, all wrote in similar terms to Lindsay Tanner, saying, ‘But we promised!’

This minister wants to try to tell us all that this is a matter that the Senate cannot pursue because of constitutional difficulties. The two houses have had differing interpretations of section 53 of the Australian Constitution, but the Senate’s position, as documented in Odgers’ Australian Senate Practice 12th edition, p277, in the context of a discussion of the usefulness of such terms as ‘supply’ and ‘money bills’, is as follows:

Appropriation bills and tax bills are the only useful categories of bills because they are the only categories which are given special treatment by the Constitution. All other bills are treated alike and the Houses have equal powers in relation to them. The two useful categories of bills are distinguished by their defining characteristics. Money bills, which should properly be called appropriation bills, are those bills which contain clauses which state that money, of specified or indefinite amount, is appropriated for the purposes of the bills. A bill which does not have such a clause is not an appropriation bill. A tax bill is a bill which contains a clause which provides that tax is imposed upon a specified subject, either by setting a new tax or raising the level of an existing tax. A bill which does not contain such a clause is not a tax bill.

The fact is that this private senator’s bill is not an appropriations bill and should go forward.

It is very, very simple to find $175 million through the forward estimates of the last budget. A saving of that amount can be achieved by reducing the growth of the Australian Public Service full-time equivalents in the Department of Defence by 33 per cent. What I mean by that is that this will see the number of staff in the Department of Defence, including the DMO, grow in size by 8.3 per cent instead of 12.6 per cent. There is the saving. What I have just demonstrated is exactly how mealy mouthed, penny pinching and utterly deceptive this government is with veterans. What do people who have put their life on the line for their country get out of this government? They get hollow, empty promises.

We will be moving such an amendment. I trust that the Greens will support this bill, because it is a very good bill. We want it passed today to get some justice for veterans. We never promised them something and then broke that promise. These guys promised the sun and the moon and callously ripped the rug out from under these veterans, gave them two fingers and said, ‘Thanks for your vote.’

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

Are you intending to move the amendment now?

David Johnston (WA, Liberal Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

Yes. I move the amendment on sheet 7058:

At the end of the motion, add:

and the Senate calls on the Government to reassess the growth in the civilian bureaucracy within the Department of Defence (including the Defence Materiel Organisation) over the forward estimates, to achieve the necessary financial offsets to fund the measures in this bill.

David Feeney (Victoria, Australian Labor Party, Parliamentary Secretary for Defence) Share this | Link to this | Hansard source

I rise to speak on the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010, which Senator Ronaldson, the shadow minister for veterans’ affairs, introduced in the Senate as a private senator’s bill last November. I suppose I have to give Senator Ronaldson credit for cheek in bringing this bill before the Senate. The proposition that Senator Ronaldson is putting to the Senate is essentially this: that this government is at fault for failing to enact a policy which his own party failed to enact for 11 years in office, and which Senator Ronaldson opposed as recently as the 2007 election. Senator Ronaldson did not say a single word in the Senate about this issue when he was in government, when he was in a position to do something about it—not a single word.

Just in case senators opposite have forgotten what the lobbyists on this issue thought of the Howard government’s performance, let me quote a letter sent by Mr John Hevey, of a group called the Aussie Digger Forum, to the then Minister for Veterans’ Affairs, Mr Bruce Billson MP, just before the 2007 election:

Bruce, it is long past the pale, that you avoid the true issues in this manner. It is long past the pale that the Coalition Government refuse to acknowledge the injustices that have been perpetrated by the Coalition on the issue of Military Superannuation over the past eleven years, it is long past the pale that the Veteran Community and in particular Military Superannuates have been flagging with the Coalition this very issue for the past eleven years, and now on the eve of a federal election you tell us through a “spokesperson” that the report into this matter will not now be forthcoming until 2008 - the same report that has been in your possession since July.

So there we have the great record of the Howard Government on this issue. Of course, Mr Billson may well have had good reasons to refuse to give the veterans’ lobby what it wanted. No doubt Senator Minchin, then finance minister, told Mr Billson that he could not have the money because it would be fiscally irresponsible to accede to these demands. Whatever, the issue here is not whether Mr Billson was right or wrong. The issue here is the hypocrisy of Senator Ronaldson and the opposition more generally, for demanding in such strident tones that we do something that they themselves refused to do for 11 years while in office.

At the time of the 2007 election, the veterans’ lobby group asked both parties to commit to changing the policy. Neither side was willing to change its policy. Let me remind the Senate again that Senator Ronaldson was a member of the Howard government. Again, I do not recall Senator Ronaldson breaking ranks with his party on this question. He went to the 2007 election on a policy which was the opposite of the one he is now espousing.

Senator Ronaldson’s bill would single out a subcategory of Commonwealth pension recipients for preferential treatment. To try to minimise the cost of this, the opposition has limited the scope of its amendment to retirees over 55. This has the divisive effect of leaving the more than 15,000 ADF retirees currently aged under 55 on the current scheme. Senator Ronaldson is thus in the strange position of arguing that the current arrangements are terribly unjust to ADF retirees but then proposing to leave the current arrangements in place for a large number of retirees.

This is not simply a divisive proposal; it is also a financially irresponsible one. In his second reading speech in November, Senator Ronaldson costed his proposals at $98 million over the forward estimates. In fact, as the Australian Government Actuary has advised, the real cost by 2014-15 would be $175 million. By 2019-20, the cost would be $205 million per annum. The Minister for Finance and Deregulation, who always tries to be helpful, has written to Senator Ronaldson and the Leader of the Opposition outlining the full costs of the schemes, but that does not seem to have made any difference to Senator Ronaldson.

This is typical of the attitude which the opposition have taken to public spending. They denounce the government for ‘reckless spending’, while at the same time promoting their own poorly costed, poorly designed schemes for more and more public spending in their endless search for cheap popularity with various lobby groups who would like, naturally enough, more money spent on their particular cause. The opposition do not care about the budget bottom line. All they care about is transitory electoral advantage with sections of the community who would like more public spending.

The opposition have demonstrated their fiscal recklessness by twice blocking a $5 billion savings measure put forward by this government. This includes means-testing of the private health insurance rebate, which would cost the budget some $2.1 billion over the next four years, and the closure of the Chronic Disease Dental Scheme, an Abbott-designed scheme that has had significant cost blow-outs and which will cost the budget $3.1 billion over the next four years. That is an additional $5 billion in spending over the next four years as a result of the opposition’s recklessness. They are also in the process of trying to block a further $2 billion in savings to the budget over four years by voting against reforms to the Pharmaceutical Benefits Scheme. The opposition have demonstrated time and time again that they are not committed to bringing the budget back to surplus.

This bill is, frankly, nothing but a stunt. Senator Ronaldson knows that there is no chance that this bill will become law. In fact, I suspect he is probably relieved to reach that conclusion, because of course the opposition have absolutely no idea where they would find the money to pay for this measure if it were somehow to pass. This is bad policy and financially irresponsible. To give the other side some credit, they know it. They are advancing this proposition in the complete knowledge that it has not a leg to stand on. The record of their 11 years in office is proof of that.

This bill is also quite possibly unconstitutional. Advice from the Attorney-General, which has previously been tabled in the Senate, makes it clear:

A proposed law that would appropriate revenue or moneys cannot originate as a private member’s bill. A bill for such a law cannot, in any event, originate in the Senate.

This shows that the opposition are not serious about this bill. It is nothing more than a populist stunt that aims to create the illusion of action, perhaps also the illusion of deep thought. But, of course, it is an illusion, because this is an issue which the coalition did absolutely nothing about during their 11 years in government. The opposition do not care whether this is good policy or bad, whether it is financially responsible or irresponsible or even whether it is constitutional or unconstitutional. All they care about is a headline in the Australian and a cheer from the gallery. But I am confident that the ex-service community, the defence community and indeed the wider Australian people will see this bill for the exercise in cheap, opportunist politics that it is. Unfortunately it is a stunt that is consistent with the tawdry methodology of those opposite.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

At the outset I should say that this bill from the opposition, the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010, is consistent with the Australian Greens policy at the last election. Therefore we take seriously the role we have in considering this legislation and its potential passage through the Senate and the parliament. It does raise the questions of financing that have been put before the Senate by Minister Evans and by Senator Feeney. That has put onto the opposition an onus—which the Greens have maintained is necessary with legislation that costs taxpayers—to find a means of funding such a bill. That said, the opposition has today come forward with a potential funding mechanism. The opposition’s document begins:

The purpose of this document is to outline a savings offset of $175 million squared to fund the coalition’s military indexation election commitment. This will be achieved by reducing the growth of APS fulltime equivalents in the Department of Defence including DMO by 33 per cent. This will still see the number of staff in the Department of Defence including DMO grow in size by 8.3 per cent by financial year 2013-14 compared to a budgeted 12. 6 per cent.

Then the figures are as outlined by Senator Ronaldson.

A serious proposition has come before the Senate. In these circumstances what do we do about it? I foreshadow the amendment I have had circulated that the Greens believe that the better option is for the funding to come through a reconfiguration of the mining resource rent tax. The amendment reads:

At the end of the motion, add:

but:

(a)

the Senate is of the opinion that these reforms should be funded through a reconfigured mining resource rent tax, as recommended by the Treasury, that would generate sufficient additional revenue to cover the costs; and

(b)

a message be sent to the House of Representatives informing it of this resolution and requesting its concurrence in the resolution.

The Treasury figures that we are most recently acquainted with do indicate that, if a proper superprofits tax were placed on the burgeoning iron ore and coal sectors of the mining industry in Australia, an extra $100 billion would come into the public purse over the next 10 years. That is an average of $10 billion per annum. We believe that is a fair tax. It is still going to leave the industry very profitable but it is going to make sure that money from the once-only exploitation of the nation’s resources is available to fund the liabilities that government has for the future—whether they be in education, housing, transport or defence. We do not dismiss lightly the need for that tax to be levied and I note that the opposition does not want to raise one cent of tax. It would forgo $145 billion over the next 10 years, $14.5 billion per annum.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

Senator Back interjecting—

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I notice interjections. It is recommended by Treasury, rejected by the opposition, but supported by the Greens. As far as the responsibility of it goes, that speaks for itself. So I foreshadow that amendment and we will be supporting that as the primary option.

I come back again to the challenge to the opposition and to all of us—if we have private members’ legislation—to flag a reasonable means of funding the costs incurred. On the face of it the opposition has done that. It has now before the Senate—and therefore before the parliament—an alternative means of covering the cost of the new indexation which has been Greens policy, as well as the policy of the opposition since it left government, for military pensions.

What reasonably should be done here—because it is a large sum of money and it is also a large appropriation—is for that spending option by the opposition to be tested by a Senate committee. I am in support of a Senate committee looking at that. If the matter goes to a committee, this would involve the Greens supporting the second reading of the legislation. If it goes to committee we will do that. But I need to make it clear that our support for the further passage of the legislation will depend upon but not be confined to the recommendations of the committee. It is a big issue. There is a lot of money at stake here. We need to assess it in a sober and qualified fashion and that is something that a Senate committee should do.

I note also the proposal by Senator Xenophon, flagged in his circulated amendment, for the matter to go to a Senate committee. I foreshadow that his proposal be amended as on my circulated amendment on sheet 7059:

... after “sheet 7027”, insert “and proposed mechanisms for funding the bill”.

Clearly, this is to keep up with the pace of the innovation that is going on in the Senate, so that the committee would look at the funding mechanism put forward by the opposition as well as by the Greens, although I suppose it is unlikely that both would pass in the vote coming down the line.

In the short time left to me I will go to the constitutional issues, because they have been flagged briefly by previous speakers. We are in new territory. We now have a functioning private members’ time, which I think is a fantastic and long-overdue innovation in this parliament. We are following other parliaments which went this way long ago. What it means, effectively, is that the nous, the innovation and the representation of the community is extended beyond the government ranks to include everybody in the parliament. You get a better result for the people of Australia coming out of that. But with that, of course, comes the responsibility—we cannot take over Treasury benches and have no intention of doing that—to be looking at how government can be helped to adjust to private members’ legislation coming through the parliament. Some of that legislation will be ethical or legal—maybe even international treaty mechanisms, to name a few—and may not have a significant cost; others will have significant cost. I, on behalf of the Greens, and other parties are looking at how we can establish some set of baseline rules to guide the parliament in the absence of standing orders or, indeed, constitutional direction on this matter. It is a big responsibility on our shoulders. This legislation is pre-empting that agreement as to how such legislation should be promulgated in the interests of the Australian people. I assure you, Madam Acting Deputy President, it is something the Australian Greens are putting a lot of mind to and hope to come up with good dividends for the parliament and the people in the coming months.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

My contribution will be brief. I am very grateful to Senator Parry for giving his time to me. I will not need all the time allocated to Senator Parry because I intend to make a more comprehensive contribution to thisbill once this matter goes to a committee, if that is the will of the Senate. I seek leave to move a second-reading amendment to add ‘and the bill, together with the amendments circulated by’—

The Acting Deputy President:

Senator Xenophon, we have an amendment before the chamber already. You can foreshadow your amendment and speak to it, but not move it formally.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I take it that I move it at the end of the secondary stage? I apologise Madam Acting Deputy President, I am still learning. I should know these things, but I am still learning.

The Acting Deputy President:

We all are!

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I foreshadow an amendment to add ‘and the bill, together with the amendments circulated by Senator Ronaldson on sheet 7027, be referred to the Finance and Public Administration Legislation Committee for inquiry and report by 10 May 2011’. This is something that I have foreshadowed with my colleagues in the opposition. I understand that they will be opposing it, and I respect their right to do so, but I think that, for such an important piece of legislation which has significant fiscal impacts, the responsible thing to do is to refer this bill to the Finance and Public Administration Committee for appropriate inquiry, so that all aspects of the bill, including the fiscal impacts, can be explored—but I can say that I am very sympathetic to the matters raised in the bill. I want to see a practical, sensible way forward for the matters raised in this bill to be dealt with, but I think the best way to do that is to have this matter go before a committee—that is what we do in the Senate. I think that the question of scrutiny—a teasing out of the provisions of the bill and any unintended consequences—ought to go to a committee. Therefore, I will move this at the end of the second reading stage, and I urge my colleagues in the government and on the cross benches to support such a measure. In the absence of such a measure I cannot in good conscience support this bill without that process being dealt with. It is a process that can be dealt with quite expeditiously in the next six weeks. I would have preferred this to have been done some weeks ago. Notwithstanding that, now is the time to deal with this bill with the respect and the process it deserves.

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

It is with pleasure that I rise to speak in this debate. It is with great honour that I stand here to support the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010. The issue of fair indexation for military superannuation is something that Family First has been campaigning on for some time now. In November 2009 I rose here to speak on the issue, and later also raised this issue with the former Minister for Veterans Affairs, Mr Griffin. Last year, I began a petition calling on the government to fix the unfair indexation of military superannuation on my web site. In just a matter of days it attracted thousands of signatures, highlighting how many people feel strongly about this matter. It is an issue I have followed closely, because it is something that I care about deeply.

Last year, I travelled to Afghanistan to see our diggers in action first hand, and witnessed the tough conditions they are forced to endure on a daily basis. Service in the Australian defence forces is no ordinary job. It is unique service which deserves special recognition. It is unique because when you sign up to the Australian defence forces you give the state, or the nation, the authority to send you overseas in a role where your life is at risk 24/7. We send our soldiers into dangerous areas that will put them in harm’s way. We ask our soldiers to follow through with their orders, even when they know that this may mean they might never see their family or friends again. It is an incredible situation to put oneself in, and it takes incredible people to do this. Given these circumstances and the uniqueness of their role, we as a society have an obligation to give them our full support and respect.

Unfortunately, when it comes to retirement and death benefits, both the former Liberal government and the current Labor government have not, I believe, honoured this obligation in the way we should. The current indexation arrangements for their retirement and death benefits are inadequate and put our military pensioners further behind community income standards. This bill seeks to rectify this inequality through a fairer indexation regime. At the moment, the Defence Force and superannuation pensions are only indexed to CPI, which is not always the best index. Even the Australian Bureau of Statistics has said:

The CPI is not a purchasing power or cost-of living measure.

CPI is just a measure of changes in the price of a basket of goods and services and should not be used as the only measure to index military pensions of our former servicemen and servicewomen. This is an outdated way to index pension payments because at the moment the true value of those military pensions is falling compared to the rising incomes of the general population. Even the government has admitted that CPI is not an appropriate measure for indexing the pension and has reformed other government pensions which were previously indexed to the CPI. These include the age pension, the wife pension, the disability support pension, the widows pension, the parenting payment, the carer payment, the services pension, the partner service pension, the income support pension and the war widows pension.

In the 2008 budget the government recognised that many seniors were concerned that their cost of living may rise faster than the consumer price index and to address this concern the government announced:

… the Government will guarantee that the Age Pension will increase in line with the higher of the consumer price index, increases in male total average weekly earnings or the living cost index for age pensioner households. These arrangements will ensure that the Age Pension keeps pace with increases in prices and improvements in community living standards.

So clearly the government has recognised this issue about indexation. I believe that our veterans should have their superannuation treated in a similar way. The military pension payments must be linked to the average wage, similarly to the way it is done for others, so that they do not slip below a certain percentage of any increase in the average wage.

This method of indexation makes a lot more sense and it is ridiculous that the government has not been prepared to budge on this issue. The current indexation arrangements have meant that military superannuation pensions are 35 per cent lower than they would have been if they had been linked to wage based indexation, such as the male total average weekly earnings, 20 years ago. This gap of 35 per cent works out to be an enormous amount of money and it would make a real difference to veterans. By not changing it, we not only seriously erode the standard of living for people relying on the payments but also send a terrible message that this is the way the government treats people who have given their all for Australia. This bill is about giving a fair go to those Australians who have put their lives on the line.

Now here is a key question: why should politicians have their superannuation payments indexed more generously than our veterans? I will say that again. Why should politicians have their superannuation payments indexed more generously than our veterans? Why should Federal Court judges have their pension payments indexed to increases in judicial salaries but military personnel have their payments linked only to CPI? Why should veterans be worse off compared to others? How does this possibly make sense? Clearly the sensible thing is for military superannuation pensions to keep pace with community income standards.

I understand from talking to others in the Senate that clearly the numbers are not going to be there to support this bill and I do not want to see this bill go down. There is a proposal for this bill to be sent to a committee, which may gain further support. I will reluctantly support an inquiry into this bill, hoping that we can then get the numbers to support this bill once the inquiry has finished and the committee has reported back to the Senate.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

I rise to speak in support of the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010 and to welcome very warmly the fact that this bill has come before the parliament. An opportunity is created by it being before the parliament to remedy an omission in the support that we as Australians give to those people who have served us, in war and in peace, in uniform. The question of fairness for those who have served Australia in a variety of ways has been an issue before this parliament for a number of years. As a member of this place, I have been disturbed by the fact that we use different tests and different criteria for deciding what level of financial support people deserve, having spent a number of years in service to this community.

I note that we generally honour Australians who are in need of financial support in their retirement with an age pension and that this pension is indexed according to a number of tests. The intention is that the pension improves each year, or each time it is indexed, according to a measure which increases the pension by at least the amount by which the consumer price index has increased. I note that will use a different test with respect to those people who have served the Australian community in a more direct way, in a sense, through service to the Australian government, either as public servants or as people who serve in uniform. It is difficult to discern a logical basis for that distinction. It is difficult to explain to people who have taken particular steps to serve the Australian community in certain ways, often for long periods of time, why the effective rate at which their financial support increases is lower than it is for people who have not served the community in that same way.

This bill before the Senate today takes an important step towards addressing that general level of inequity. It addresses those people who belong to the DFRDB Scheme and provides for an improved level of indexation, reflecting not only increases in the consumer price index but also increases in the pensioner and beneficiary living cost index and the male total average weekly earnings. It increases their pensions by whichever is the highest of those three on a biannual basis. It is an extremely important development, one that honours properly those people who have served Australia in that particular way of donning a uniform, but it also acknowledges that there is a task ahead of us as a nation to redress a number of problems with respect to the justice we provide to those people, to whom we owe a special obligation.

There are many signposts which have pointed us in this direction, many things which have suggested very strongly that action of this kind needs to be taken. I do not wish to exclude anything of significance in this debate but to mention particularly the work of several Senate select committees on superannuation, chaired by our now retired friend from Tasmania Senator John Watson, who worked on this for a very long period of time as a senator in this place, and at least partially with this bill the work that he was doing has been addressed.

I do not propose to speak much longer except to make the point that it is extremely important that this parliament understand how dependent Australians are in retirement when they are recipients of government benefits and that constitutes the entirety or a very substantial part of their income in retirement. It is extremely important for us to make sure that we do not let them down and see a decline in their standard of living when they are entitled to expect much more. This bill goes an important way towards dealing with that. I commend it to the Senate.

Annette Hurley (SA, Australian Labor Party) Share this | Link to this | Hansard source

I, in common with many Australians, have family and friends who have given military service to this country and know the sacrifices that not only those individual personnel make but their families make. Military life can be quite difficult on families as military personnel get moved around the country and overseas, and their partners and children have to keep up with that. It often means that military personnel do not buy a house or settle down in one particular area until they retire. That has financial implications. So I have great sympathy with the notion that military personnel should be more than adequately compensated for the service that they give to their branch of the armed forces and to the country generally.

I understand that this is a very contentious issue, and I understand the attitude of the Labor Party when talking to military personnel in making an undertaking to examine this very carefully and look at any ways that their superannuation could be supported. There is no doubt in my mind that on this kind of pension, where you only get the CPI increase, over a relatively long period of time the value of that pension could get eroded to some extent. So it is an issue that deserves serious consideration and to be looked at carefully.

The Matthews report did indeed do that. It looked very seriously at it. It was a substantial review into the indexation of all Commonwealth pensions. Trevor Matthews, the author of the review said that:

Superannuation pensions are a retirement income related to prior employment. These pensions are not based on need, just as the salaries on which they are based are not linked to need. Those receiving superannuation pensions who are over pensionable age are able to supplement their retirement income with the age or service pension, if they meet the relevant qualifying and eligibility tests.

The opposition argues that the CPI indexation is not sufficient. However, this does not support Mr Matthews’s findings, and the advice to the government from Mercer Australia and the Australian Government Actuary is that it is irresponsible to propose Senator Johnston’s amendment on a fiscal level. That is what I want to explore a bit. There is willingness on both sides to address this issue, but the fact of the matter is that we have to operate within our budget and within the bounds of fiscal responsibility. In this and the previous parliament we have seen the opposition propose to make drastic cuts and deferrals on a range of programs while having this bill, the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010, and another sitting in parliament proposing additional spending. The thing is, as we on this side of the parliament keep pointing out, you cannot have it both ways. You cannot constantly knock back bills proposing spending cuts or program cuts by this government and then put up additional spending measures. It is completely nonsensical.

This was not the only bill introduced. Senator Nash also proposed the Social Security Amendment (Income Support for Regional Students) Bill 2010, which contained another $317 million over four years. There have been a couple of propositions by the opposition on how these bills of theirs might be funded, but it has been comprehensively shown by government ministers and independent advice, such as from the Australian Government Actuary, that these are entirely incompetent propositions from the opposition and that the proposals that they have put forward for funding their measures or for substituting for cuts have been wrong either in actual numbers or in policy.

One of the measures proposed was the deferral of water buybacks for the Murray-Darling River system. I have not heard South Australian opposition members stand up and oppose this, but I presume they do; I hope they did in their party room. That deferral of buybacks from the Murray-Darling River system would have postponed once again an urgent issue. This is the kind of proposal we have seen from the opposition to fund their program. It is hardly surprising given that the Liberal-National opposition went to the election last time with a budget black hole of $10.6 billion. Labor, fortunately, was able to form government, because it seems that the Labor Party is the only one committed to responsible economic management.

I know that the Liberal-National Party continue to see themselves as responsible economic managers living off a surplus generated by the Howard-Costello government but, in the absence of former Prime Minister John Howard and former Treasurer Peter Costello, they have shown themselves as being a very irresponsible economic party. It is interesting to see what happened. Either they had a very good leadership and a very poor remainder or being in opposition has such a poor effect on their collective economic judgment that we have seen the sorts of propositions put forward by the opposition.

The opposition’s proposal to reduce growth in civilian numbers in the Department of Defence, including the DMO, over the forward estimates is such a vague, fuzzy and uncosted proposal that even the people who are proposing this change would see it as almost unachievable. The fact of the matter is that the Department of Defence is increasingly reliant on civilians to perform a variety of support functions, but those support functions are not non-essential functions; they are key functions very critical to the operation of the Department of Defence.

There is no shortage of sympathy on this side of the house for what superannuants are saying. The government has certainly looked seriously at it and is proposing ways to address efficiencies in the management of the superannuation system and in the way that there are returns to current superannuation so that there is a reasonable level of superannuation for these military personnel. The establishment of the independent review of pension indexation arrangements and the report that looked into the issues of changing the current consumer price index methodology led to recommendations that pensions from the Australian government civilian and military superannuation schemes should be continued to be indexed against the effects of inflationary price increases, which is very important, but that the same measure of indexation should continue. So again I emphasise that government members are sympathetic, but we must do everything within the context of budget restrictions. It would be no good for superannuants to have a budget that collapses and an economy that is failing.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I am pleased to rise to speak to the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010. I will keep my comments very short today because I do want to see the second reading amendment dealt with. I would say two things. The first thing is: how can this chamber not finalise this matter today and give some certainty to those 30,000 people who are being screwed by a system that makes them a different person from an age pensioner and that makes them a different person from a service pensioner? How can that be fair? Having had one false start in relation to this bill, how can we walk out of here today and not have this matter finalised? This is about fairness. It is about equity.

I am afraid the Minister for Finance and Deregulation, Minister Wong, did not say one single thing about this bill today. She did not talk about the implications of this bill. The Parliamentary Secretary for Defence, Senator Feeney, will stand condemned by his own constituency for spitting in the eye of these superannuants. He has today spat in the eye of his own constituency. I will excuse Senator Wong to a certain extent; she is finance minister. Senator Feeney came in here today and spat in the eye of his constituency. When we walk out of here today, as we will, not having finalised this matter, it will be a great shame for this chamber. We know that the Australian Greens support this indexation bill, we know that Senator Fielding supports this indexation bill and I suspect that Senator Xenophon is more inclined to support the equity in this bill, yet we are walking out of here today without a decision.

The decision is an easy one. Let us give these people the same rights that age pensioners have. Let us give these people the same rights that service pensioners have. It is not rocket science; it is simple. There will be a lot of people listening today who will say, ‘Why is this not being dealt with?’ We have provided offsets. The coalition provided offsets before the last election. That has been reinforced today. I will talk about this because I know what the numbers are and I know that we will not get this dealt with today. It is a disgrace.

11:44:28

Minister Wong quotes the Government Actuary. Minister Wong, it might be a surprise to you that I actually had this information before you sent it to me and I also had some information sent to Minister Snowdon where the same thing was identified. The Actuary made it quite clear, and I will quote these figures, Senator Wong, because you refused to do so in your answer the other day and indeed in your letter to me. I will read it and I hope that Senator Brown, Senator Xenophon and Senator Fielding are listening to this and look at what the Actuary said. The Actuary said: ‘Fiscal balance figures are used for accrual accounting purposes. They are also mandatory for cabinet submissions. However, great care should be exercised when using fiscal balance figures for decision-making purposes, particularly in the area of unfunded superannuation arrangements. It is important to note there is no direct relationship between the fiscal balance results and the total cost of the benefit improvement other than in the first year of the projection.’ So the $1.7 billion figure has been blown out of the water.

If I go over the page, Mr Burt, the Actuary, said—

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Why don’t you talk to Peter Costello and see what he thinks about it. You introduced this.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I can see that Senator Wong knows that she has been caught out in relation to this $1.7 billion figure. I will repeat another comment from the Actuary: ‘The expenditure is shown in nominal dollars and it has not been discounted to give a present value.’ Minister Wong, why did you not actually refer to and expand on what the Actuary told you in the document that I received. If you look at the information given by Defence to Minister Snowdon, you will see that the figures being quoted, Defence’s own figures, are indeed different to yours.

I plead with the chamber to get these matters dealt with today to give these people some fairness and to give them the same opportunities that aged-care pensioners have and service pensioners have in relation to indexation. I congratulate the shadow minister for defence science, technology and personnel, Stuart Robert, for the enormous amount of work that he has put into this. He is owed a great debt of gratitude. It is now up to the chamber to legislate this private member’s bill and to give these people the opportunity and the indexation they deserve.

Question agreed to.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move:

At the end of the motion, add:

but:

(a)

the Senate is of the opinion that these reforms should be funded through a reconfigured mining resource rent tax, as recommended by the Treasury, that would generate sufficient additional revenue to cover the costs; and

(b)

a message be sent to the House of Representatives informing it of this resolution and requesting its concurrence in the resolution.

Question put.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I move the amendment standing in my name on sheet 7030 revised:

At the end of the motion, add:

and the bill, together with the amendments circulated by Senator Ronaldson on sheet 7027, be referred to the Finance and Public Administration Legislation Committee for inquiry and report by 10 May 2011.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move the amendment, as circulated on sheet 7059, to Senator Xenophon’s amendment:

After “sheet 7027,”, insert “and proposed mechanisms for funding the bill,”.

John Hogg (President) Share this | Link to this | Hansard source

The question is that Senator Brown’s amendment be agreed to.

Question agreed to.

Question put:

That the amendment (Senator Xenophon’s), as amended, be agreed to.