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Monday, 23 August 1999
Page: 8773


Mrs CROSIO (1:13 PM) —I move:

That this House:

(1) notes the high number of self-funded retirees in Australia who are struggling financially at the present time;

(2) recognises that the Howard Government's GST will create greater financial hardship for thousands of self-funded retirees because it taxes the essentials of life, will make people receiving low fixed incomes from superannuation or other measures pay the same rate of tax as people on higher incomes and offers inadequate financial compensation; and

(3) investigates other means of offering financial assistance and incentive to struggling self-funded retirees distinct from a Goods and Services Tax.

One of the truisms about this job is that each of us in this house, on either side of politics, encounters constituents with problems that are the same, whatever parts of Australia we represent. For example, we have constituents with problems regarding immigration or associated with social security payments. Each of us encounters constituents with these problems, almost on a daily basis. Another prob lem area that I know we all come across regards the financial plight of many self-funded retirees. Time and time again, self-funded retirees have contacted my office, seeking my assistance and raising their concerns because of the serious financial difficulties that they are experiencing.

We all know that, even in these so-called economic boom times, many self-funded retirees are struggling to make ends meet. It is not a new problem. It is not a problem that gets headlines, but it is a very serious problem that successive governments have wrestled with—that we as members of parliament have all wrestled with—and that I believe has never been adequately addressed. It is my belief that it is also about to get a whole lot worse with the introduction of the Howard government's GST.

I know that the speaker on the government side will invariably disagree with me and will talk about what the coalition government has done to supposedly help our self-funded retirees and how its taxation reforms are the Holy Grail for this section of the Australian population. I know that is his prerogative, but I do hope—probably in vain—that the member might display a little more open thinking than that and address this problem in its full context. I am the first to admit that self-funded retirees did not begin struggling financially under the current government. I am not saying that the previous Labor administration had all the answers to solving this problem; quite obviously it did not.

However, looking at the government's plans for the new tax system, not only is this problem set to continue but it will only be exacerbated by these badly prepared and ill-conceived reforms. We need to come up with a taxation solution for self-funded retirees that is tailor-made to their requirements, their problems, their needs and their future. We need to offer self-funded retirees a taxation solution that recognises the outstanding contribution that they have made to our society throughout their working lives, that recognises their never having called on the government for financial assistance and that recognises that they have paid their fair share of taxes over the years while still managing to save for their future.

Unfortunately, it needs to be said that the GST and the inadequate compensation that is being offered to them in the government's tax package does none of these things and will not improve the lot of self-funded retirees—not by a long shot. The fundamental problem facing many self-funded retirees—and ironically even more so with the low interest rate climate currently in Australia—is the difficulty they have in stretching their savings to maintain the quality and standard of life that they enjoyed when they were in the work force.

As it is at the moment, many self-funded retirees are eating into their hard-earned savings in order to keep their noses above water. This is not only a deplorable state of affairs for them and for our communities but also bad news for the country. Australia has a shocking recent track record when it comes to the level of household savings maintained by its population. We need people saving more, not less. Subsequently, governments need to create an environment for self-funded retirees where saving money is easier and not where it is impossible.

Unfortunately, the GST will make the savings of self-funded retirees disappear even more quickly. To watch this ominous tax grow larger and larger on the horizon every day must be absolutely terrifying for self-funded retirees around Australia. Despite the Prime Minister's repeated assertions about the GST not leaving any Australians worse off, many self-funded retirees will quite obviously be left hurting by the tax package, despite the levels of compensation the government has offered them to make up for the effects of the new tax system.

The maximum level of $3,000 worth of compensation will not protect most self-funded retirees anywhere near enough from the very real pain the GST will bring to them. Take single self-funded retirees who are earning private incomes of $10,000 a year, for example. Under the government's tax package they will lose $1.37 a week. A self-funded retiree couple on $20,000 a year loses 84c a week. For self-funded retirees struggling to make ends meet these are important figures, and they are very distressed by them.

The advent of the GST will immediately devalue the savings of self-funded retirees because, as we all know, savings—especially for this section of our society—are future consumption. With a GST the price of the necessities of life will go up. Most self-funded retirees use their hard-earned savings on buying just that—the necessities of life.

Self-funded retirees will not be out there buying all of those computers, TVs, videos and capital goods that the government likes to talk about dropping in price when the GST kicks in. These people are at the latter stages of their lives. They have already set themselves up in their homes for their retirement. Their furniture, cars and all of their other consumer goods have already been purchased. The purchases they will be making will be far more mundane. They will be buying bus and train tickets. They will be buying food. They will be paying utility bills. They will be perhaps purchasing a few of the little luxuries that they have worked so hard in their lives to enjoy—that is, a ticket to the movies or maybe a round of golf—and who would deny them that?

But these goods and services are not currently taxed under the wholesale sales tax system, and this is something that the Howard government's GST reforms completely ignore—or at least appear to ignore, judging by the amount of compensation that has been offered to self-funded retirees. With this in mind, the government's blanket argument that the GST will increase prices by only 1.9 per cent is absolutely false. For self-funded retirees the story is more likely to be in the area of seven to eight per cent for many of the goods and services that they use and purchase day in and day out.

The stinging unfairness about the Howard government's GST is that it changes the tax goalposts for self-funded retirees after they have worked all their lives to reach and enjoy a certain standard of living in their retirement. Mr Raymond Bricknell, National President of the Australian Investors Association, made a similar point at the Senate hearings into the new tax system. I quote what Mr Bricknell said at that Senate inquiry:

I think it is unfair. Where is the case for suddenly taxing those people again? It really is irrelevant whether they retired before or after the nominated pensionable age, because the reality is that a person who gets to retire at 55 or 60 years has not got to that stage by having an easy life. They work extraordinarily hard and extraordinarily long hours. I have never met anybody who has been able to retire at 55 who has not really earned that retirement.

He went on to say:

Now, having earned the right to retire earlier, they have effectively said, `We'll compress our working lives into a shorter period and retire earlier, and then hopefully get some rewards for that. You know, the time that we didn't have with our children, et cetera, we might have with our grandchildren,' and then they expect a certain standard of living because they make the decision to retire at a certain level of savings.

Once they have retired with that level of savings and left their businesses, sold their businesses, left their employment—whatever—there is no way in the world they can go and top it up again if someone comes along and says, `We're going to take seven or eight per cent off the top of your savings.'

So, if the government is going to introduce a taxation system that really does have the effect of taking seven or eight per cent off the top of the savings of people in that category—

to which I have referred—

then it ought to compensate them to the full amount so that they can just stay where they are now. No-one is asking for a better deal; just leave them where they are now.

Mr Bricknell has hit the nail on the head with these observations. Self-funded retirees are not asking for a better deal than any other Australian with regard to the taxation system. They are not asking for preferential treatment; they are asking for fair treatment, but the Howard government's GST will not treat them fairly. It will leave their finances unequivocally battered and bruised. As I said, I think we need to go back to the drawing board and design a taxation system that fits the needs of self-funded retirees and gives them equity with regard to their financial situation.

Indeed, as the third point in my motion indicates, for those self-funded retirees who are doing it tough financially, I would argue it is time we investigated other ways and means of offering financial incentives and assistance to them at this time in their lives, and that does not include lumbering them with a goods and services tax. To quote Mr Bricknell again:

Why should people have their entire standard of living that they have worked and saved for all their lives reduced simply because a GST is introduced after they retire, or just before they retire. What have they done to deserve retrospective retribution?

Indeed, it is time that we collectively put our heads together and truly offered self-funded retirees, especially those within our communities who are struggling financially, a fair go.


Mr DEPUTY SPEAKER (Mr Nehl) —Is the motion seconded?


Mr Price —I second the motion and reserve my right to speak.