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Thursday, 20 September 2001
Page: 27514

Senator SHERRY (1:07 PM) —The Superannuation Legislation Amendment (Indexation) Bill 2001 amends the Superannuation Act 1922 and the Superannuation Act 1976 to provide for the twice yearly indexation of pensions paid under these acts. The amendments proposed by the bill give effect to an announcement made in the last budget. The critical change in this legislation is that the government has decided to introduce twice yearly indexation of Commonwealth superannuation pensions under the Commonwealth Superannuation Scheme, commonly known as the CSS, and the Public Sector Superannuation Scheme, commonly known as the PSS. This indexation will occur twice yearly on 1 July and 1 January for movements in the consumer price index for the previous half year. This will reduce the delay between the inflationary effects faced by superannuation pensioners and income adjustments. The change will commence from 1 January next year. At the present time the indexation arrangement is yearly.

The Senate Select Committee on Superannuation and Financial Services, of which I am deputy chair, has considered this issue together with the issue of the rate at which the indexation occurs. I will come to that issue a little later. The Senate committee handed down a report in April 2001 titled A reasonable and secure retirement. The committee held a number of public hearings at the request of not just Commonwealth public superannuants but state public superannuants. It is important to point out that the problems we were dealing with and reviewing, as identified by former public servants, have an impact on Commonwealth public servants and state public servants. There is a variation of approach between the two jurisdictions. In the report on page 50, table 7 outlines the pension indexation arrangements for Commonwealth and the main state superannuation schemes. Until this bill is passed and takes effect, the Commonwealth frequency of indexation is annual. The Commonwealth military scheme is annual. Indexation is annual for Queensland, South Australia and New South Wales. Frequency of indexation is biannual for Tasmania, Victoria and Western Australia.

The government announced in the budget that former or retired public servants who were members of the CSS and PSS will receive an important change in their indexation arrangements from annual to biannual. However, what surprised me and the Labor opposition was the exclusion of two categories of former Commonwealth public employees. One was the exclusion of former military personnel and the other was the exclusion of former Papua New Guinea government superannuants. In the former case, there are some 57,000 military superannuants. In the case of former PNG superannuants, I think the number is a few hundred. It was certainly surprising to the Labor opposition that, for some reason never really explained by the government, the retired military personnel and former PNG public servants were to be discriminated against and excluded from this change to indexation provisions. It has never been explained why this exclusion was to apply. Former PNG public servants and retired military personnel were formerly employed by the Commonwealth. To this day I do not believe we have received a satisfactory explanation.

Understandably, of course, former military personnel—some 57,000 of them—and people who are currently serving in the military were concerned about the discrimination that was proposed with this change to indexation arrangements. I received some representations from military personnel, both current and retired, about this matter. It was the view of the Labor Party that, as the government had accepted the principle that the indexation arrangements should be changed from yearly to biannual, that principle should apply also to the former military personnel and former PNG public servants. I think late afternoon on Monday or Tuesday of this week the government belatedly recognised the discrimination against military personnel and announced that the twice yearly indexation would be extended to 57,000 recipients of military superannuation pensions.

I would like to acknowledge the work of the shadow minister for defence science and personnel, Mr Laurie Ferguson. He was very active in the campaign to ensure that military superannuants were not discriminated against in the way that the government proposed. The government backed down on what was a shocking announcement in respect of military personnel. Mr Ferguson, on two separate occasions, had called for the minister, Mr Scott, in the other place to reverse this discrimination against retired military personnel and, finally, the minister accepted that advice. This issue reflects very poorly on the way in which the Liberal-National Party handled the superannuation indexation arrangements of military personnel.

I would also like to place on record the efforts of the Regular Defence Force Welfare Association. I acknowledge their persistent lobbying since this was announced in the budget and the contribution they have made to the government backdown on the indexation of the pension arrangements of military service personnel. I referred earlier to the report of the Select Committee on Superannuation and Financial Services. Government, Democrat and Labor members of that committee unanimously recommended that this change should occur to the arrangements for all public servants. The government's inclusion of that recommendation in its budget during May must be the quickest response to a committee recommendation that I have seen in recent times. There are a lot of other recommendations that they have spent years with, and some we have never had a response to.

I should also point out that our recommendation went to ensuring that state governments changed annual indexation to biannual indexation. As I read out earlier, there are three state governments that have annual indexation. Those are Queensland, South Australia and New South Wales. I think it is very important that we have a consistent principle applying to former public servants. Whether they were in the armed forces or were former police officers or ambulance officers or were in the general public service, we should have a consistent approach to their indexation arrangements around the country. In winding up, I would call on the Queensland, South Australian and New South Wales governments to ensure that the arrangements relating to frequency of indexation are changed for their former public servants. It would be absurd to have different arrangements in some states from those in other states in the Commonwealth. I would go further: regardless of whether they are Labor or Liberal states—one of them is a Liberal state and there are not too many of those left nowadays—but in the case of South Australia—

Senator Ludwig —Not for long.

Senator SHERRY —Not for long, that is right. But whoever is in government we should ensure consistency of superannuation arrangements in respect of indexation around the country. I would go further and argue that the Commonwealth should legislate to ensure that we have a consistent approach, because I do not see how the continuation of inconsistent indexation arrangements can be tolerated.

Another issue has been raised by former public servants at state and Commonwealth level, and that is the base at which their pensions are indexed. At the present time, according to the survey I have pointed to, it is the CPI. Commonwealth and state public servants were seeking a change to the base of the indexation arrangements, either to some sort of wage indexation movement or to average male ordinary time earnings, which apply to current pension arrangements.

The committee did consider this, because it is an important issue and I understand the concern of retired public servants on this. I will not go into all the detail, but we asked the finance department for an estimated cost, if this change were to be made—this is in respect to Commonwealth responsibilities only—and the finance department told us that the cost would be approximately $700 million per annum. Therefore, regrettably, the majority of the committee—government and Labor—could not make that recommendation, based on the requests received. In the representations made since the committee's report was handed down, there has been some reasonable prima facie material presented to me at least to suggest that there is a question mark over the way in which the finance department arrived at the figure it gave to our committee. I do intend to seek further information about the finance department's estimates of the costs. I will have to check with my office whether that has gone into the department but, if I have not yet formally put it on notice, that request for further information will be going to the department, and hopefully we will receive a response very quickly.

In conclusion, the Labor opposition is, obviously, supporting this legislation. We are pleased to see that the government, after causing some months of worry for military personnel, has belatedly come to the view that it cannot discriminate against military personnel and has by way of amendment included in this legislation the 57,000 current recipients of military superannuation pensions. Obviously, this will impact on a growing number of military personnel as they retire. It is unfortunate that they have been worried and concerned about their exclusion from the announced provision, and belatedly that has been accepted. With the passing of the legislation here today, there will be a welcome change to the indexation arrangements for public servants more generally, and military and PNG pension indexation arrangements.