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Tuesday, 24 February 1987
Page: 493

Senator COOK —My question, which is to the Minister for Finance, is about John Howard's favourite expenditure promise, the abolition of the assets test. The savings to expenditure of the assets test were first costed by the Government as $140m in 1985-86 values. In addition to changes in this figure due to the indexation of pensions, are there any demographic factors which would increase the cost to expenditure if the assets test were abolished?

Senator WALSH —When the assets test was introduced the original estimate of the savings to government expenditure was, I think, $140m, as Senator Cook said. That figure has since been revised upwards and I believe is in need of very substantial further upward revision. I say that for this reason: For many years prior to 1983 age and service pensioners, as a percentage of the total population in that age group, remained fairly constant at about 84.5 per cent. In the period since that figure has fallen to 78.5 per cent. So if the number of people in receipt of pensions, as a proportion of the total number of people in that age group, had remained constant, some 123,000 additional pensions would now be paid and the cost of that would be of the order of $580m.

It is correct that that $580m figure should not be taken as being absolutely correct because, as well as the introduction of an assets test an over 70s pension income test was introduced, to operate some time after the 1983 Budget. There is some interaction between the two policy changes. However, that is a distinction which over time would disappear because, as new entrants came into the pensioner age cohort, it could be expected, in the absence of an assets test, that they would arrange their affairs so that their assets yielded capital gains rather than income. Although the figure of $580m cannot be taken as completely accurate-I believe a figure closer to $500m would be a more realistic estimate of the cost of abolishing the assets test than the present estimate revised upwards from 1983-this is a matter that I shall be taking up through the Government. But, of course, it is very clear that the abolition of the assets test, as promised by the watered down snake oil salesman on the non-Labor side of politics-we have the genuine snake oil salesmen such as the Queensland Premier, and the peddlers of the watered down version of his snake oil such as the present Leader of the Opposition-would entail a very substantial increase to Commonwealth outlays, after a short period, probably of the order of $500m a year. This is just yet another example of the yawning credibility gap between the rhetoric of the Opposition Leader and the policies that he has actually spelt out.