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Tuesday, 12 March 2002
Page: 1060


Mr SWAN (9:27 PM) —I am delighted that I can speak on the Family and Community Services Legislation Amendment (Further Simplification of International Payments) Bill 2002, which deals with international social security payments. International social security payments are often a forgotten part of our social security safety net. Changes to international social security payments deserve no less scrutiny than other areas of social security law. While most people think the international arrangements may never affect them, they may find themselves in a situation where they have to go overseas for an extended period. For many it is not a lifestyle choice but the need to be close to family, particularly in circumstances where illness strikes.

As Australia is such a multicultural country, many have ties to family overseas. Equally, it may be that children may move overseas upon securing a good job. Many settle down and ultimately elderly parents can find their children and grandchildren are a long way away from what was once home. I make this point because there are elements of this bill that we are debating today that will diminish the ability of many people to reside overseas with family members, to be close to their loved ones whether in sickness or in health. In short, there are some mean, penny-pinching elements in this bill. It is just another case of the coalition being true to form.

There are many elements of this around at the moment. Today, for example, Senator Vanstone announced some changes to the indexation of pensions. She has done this in an environment where she has failed to deny reports in newspapers that she will categorically rule out budget cuts to pensions and other social security benefits. This can mean only one thing: the coalition are currently considering—again—deep cuts to social security to help pay for Casino Costello's $4.8 billion gambling losses on the money markets. What is particularly at threat here is the future of indexation. Are the coalition going to go down that old track where they suspend indexation? The coalition have a track record of saving money by fiddling with pension increases. For example, the current Prime Minister, Mr Howard, in 1979 abolished indexation of pensions for a year when inflation was running at something like nine per cent. Is the 25 per cent wages benchmark going to be broken? The coalition have never really given a solid commitment to the wages benchmark and so on. The fact is that, with this bill, as with the general approach of the government, they are always intent on crude cost cutting and they are never going to do this in a way which is fair to those they deal with.

To give a brief overview, this bill gives effect to the 2001-02 budget measures that seek to further tighten the portability of pensions for Australian citizens living overseas and debt recovery arrangements for Australian pensioners who receive lump sum payments from overseas. Part 1 of the bill makes the changes in relation to portability that seek to increase the qualifying period of Australian working life residence, otherwise known as AWLR, that entitles Australian pensioners living overseas to their full rate of pension. I would like to indicate now that Labor will be opposing this measure.

In part 2 of the bill, changes are also made that will permit Australians deferring retirement by participating in the Pension Bonus Scheme to have the period accrued in the scheme included in their AWLR. Labor will be supporting this measure. Part 3 of the bill makes changes to debt recovery. Labor will also be supporting these changes. So Labor will be supporting two of the three measures in this bill, but we will not be supporting the one that is going to have a dramatic impact upon some Australian pensioners.

Turning in detail to the changes in respect of Australian working life residence, it is hard to see the government's rationale in its proposed changes apart from further cost cutting. The bill seeks to tighten portability arrangements with regard to the AWLR provisions, which will result in some Australian pensioners who decide to live overseas long term receiving a lower level of Australian pension than is currently the case under existing provisions. By way of background, the standard portability arrangements provide for the recipient's normal rate of pension to be paid for a period of 26 weeks whilst overseas. After this period, a `proportional rate' is calculated that reflects their working life residence. Currently, in order to receive their full entitlement after the 26-week period, pensioners must have accrued at least 25 years—that is, 300 months—AWLR.

In particular, the bill amends provisions in the Social Security Act 1991 to effectively increase the Australian working life residence in order to receive a full pension whilst long term overseas from 25 to 30 years. So, compared with the current arrangements, pensioners will have to have accrued an additional five years of working life residence. Additionally, since the changes are achieved by increasing the denominator used to calculate the residence factor, the change will also see proportionally lower pensions for those who have not yet attained the current 25 years working life residence.

It should be noted that the changes would only affect those pensioners who leave Australia after the commencement date of the bill, anticipated to be 1 April 2002, or those who return to Australia for more than 26 weeks before returning to reside overseas. The changes will also not affect pensioners who leave for countries with which we currently have social security agreements—although this change will open the door for the government to increase working life residences when current agreements expire and are renegotiated.

It is important that we examine closely the reasons cited by the government for these changes. The government seeks to increase the AWLR requirement for full entitlement to 30 years—that is, 360 months—and claims that it is to bring Australia more closely into line with the benchmark in other countries of 40 years. The coalition also argues that our current rules are too generous. I say that that is nonsense. Pensioners take note: the Howard government is concerned that the current rules for entitlements are `too generous'. We have heard this before and, of course, we saw it with clawback, in that vicious attempt to take away GST compensation of two per cent over a year ago. This, of course, explains the Howard government's record in whittling away the pension entitlements of older Australians over the last six years; it believes that pensioners are always being treated too generously. What an extraordinary rationale. The Howard government wants to lower entitlements available to older Australians to the levels of such entitlements overseas—and I am sure that there are many residents in the electorate of the member for Parramatta who will be affected by this mean, penny-pinching measure.

But the claim itself is baseless and simplistic: it is like comparing apples with oranges, since many other countries possess contributory pension modelling where longer working life residences do reflect a person's own contribution to their pension. We do not have such a system here in Australia, as we have adopted a basic, means tested, social safety net. By community standards here in Australia, 25 years is a sufficient working life residence to entitle a citizen to a full pension if they choose to subsequently reside overseas.

Labor is particularly concerned about the impact of this measure on some of our larger communities that have a heritage overseas. This includes former UK citizens and also the Greek community. These are substantial groups, and they are not currently covered by any social security agreements. As I noted before, we believe that these changes also open the door for the government to enshrine the 30-year residence in existing social security agreements with other countries when they are up for renegotiation. While the government may put its hand on its heart and say that 25 years will be the standard for agreement countries, we simply do not believe it, nor should pensioners. I may have some more specific remarks about this element of the bill when we move our amendment during the consideration in detail stage.

I would also like to briefly make some remarks about part 2 of the bill, which we see as a beneficial measure, albeit marginally so. As I noted earlier, we will be supporting these changes. This measure allows people participating in the Pension Bonus Scheme to use bonus years for the calculation of their AWLR. Fair enough, we believe, but since the take-up of the Pension Bonus Scheme is so small—or should I say minuscule—it will be of marginal benefit. While we touch on the Pension Bonus Scheme, it is worth saying that, while it was a well-intentioned measure, it has really failed to do what the government sought it to do. Registration is restrictive, the government failed to properly advertise the scheme when it was first introduced, and it appears that it is not cost effective. Perhaps at another time we could talk in more detail about the failings of this scheme and about other matters affecting retirement incomes.

Moving on, part 3 of the bill amends provisions in the Social Security Act 1991 to allow a debt incurred because of receipt by a person of a comparable foreign payment to be legally recoverable. The bill also brings into line the treatment of debts incurred by people who receive lump sum payments of a foreign pension. Where a person receives lump sum arrears of a comparable foreign payment from a country with which Australia has an international social security agreement, the overpayment of the Australian pension for the period covered by the lump sum is recovered. In contrast, where the same type of lump sum payment is received from other non-agreement countries, no debt is currently incurred. The new debt recovery provisions will bring the treatment of the two into line. It is a reasonable step to ensure that like financial benefits made available to a person are treated similarly. Accordingly, this measure has our support.

While I have covered some of the core elements of the bill, there are a couple of international social security issues that I think are relevant to this debate. As I noted earlier, the proposed changes will affect UK residents, since we no longer have an agreement with what is arguably a country with which we have our closest ties. The Howard government terminated Australia's social security agreement with the United Kingdom on 1 March 2001. The government announced its intention to terminate the agreement on 30 February 2000, in an attempt to force the UK government to act over some of the conditions of the agreement—specifically, the non-indexation of UK pensions paid in Australia. The Howard government's crude tactic failed, and we no longer have between Australia and the UK any current social security agreement that covers new arrivals. This low point in our relations is especially disappointing, given the long history between our two countries.

Non-indexation has of course been an ongoing issue for governments of both persuasions in this country—both coalition and Labor. The minister kindly arranged a briefing with my office on the particulars of this bill as well as progress on a new UK agreement. As a result, we understand that some discussions took place, albeit informally, at the Commonwealth Heads of Government Meeting in Coolum. While this is a start, we are concerned that the Howard government has not made sufficiently rigorous efforts to negotiate a new agreement. We would encourage the government to use every possible avenue and leverage to strike a new agreement. It is not satisfactory that we continue to have no agreement with the UK.

As a result of the termination of the agreement, new arrivals from the UK of pension age will now need to accrue 10 years residence in Australia to qualify for an Australian age pension, and former Australian residents can no longer claim a non-means tested UK retirement pension using their Australian residence. While the termination will not directly affect those who arrived under the previous agreement, it will impact heavily on those who wish to bring loved ones from the UK to Australia. With no access to an Australian age pension for up to 10 years for new arrivals, the burden will fall on those family members already in Australia. Perhaps the minister in the Senate or the minister in this House could outline what steps the government now intends to take to restore the agreement.

Also, on a related international social security matter, I would like the ministers to account for their handling of the issue of the treatment of Chilean mercy payments. The Chilean community is seeking an amendment to section 8(8) of the Social Security Act so that payments are not treated as ordinary income or foreign pensions. The payment is for victims of the Pinochet regime—victims of torture, expulsion and exile. On the information we have to hand, the proposal is similar to the treatment of payments to Holocaust survivors.

Labor has been making representations to the minister regularly. My office has made numerous calls to the minister's office to gain updates on the painfully slow progress of this matter. The member for Gellibrand, Ms Nicola Roxon, wrote on 5 March 2001, and also wrote to the community directly with a letter on 7 December 2000. It beggars belief that the Chilean legislation would take so long to translate to establish the case of the Chilean community. We urge the minister to consider this issue as soon as possible. Perhaps she could detail to the Senate—or perhaps the minister in this House could detail it to the House—where exactly they are up to on this issue.