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Thursday, 13 October 1983
Page: 1712

Mr FREE(11.13) —In speaking this morning to the estimates of the Department of Social Security, I want to make some comments about the Government 's assets test proposal. In particular, I want to contrast the reality of that proposal with the rhetoric of the Opposition on this matter. The Australian Labor Party came to power committed to raising the value of the basic pension to 25 per cent of average weekly earnings and to achieve this objective, to improve the lot of those pensioners living below the poverty line, clearly the greatest assistance must go to those people in greatest need. The Government's approach, its philosophy, was made clear in the joint statement of the Minister for Social Security (Senator Grimes) and the Minister for Veterans' Affairs (Senator Gietzelt) on 24 August. They stated:

It is unacceptable that retired people with large estates and hundreds of thousands of dollars should be able to arrange their assets so that they can receive full pension and fringe benefits.

I will deal briefly with the main features and facts of the assets test. It is important that people should be aware of the facts because there has been a lot of disinformation. The Opposition, particularly since Budget night, has been running a fear campaign about the assets test. The Leader of the Opposition (Mr Peacock), the alternative Prime Minister of this country, has been busy for the last seven weeks trying to frighten old people about the assets test. He has talked of the elderly 'reeling' under the means test. He has claimed that the Government wants to 'squeeze every last ounce' out of pensioners. He has said he will not allow this Government to 'grind down the elderly'. He is just like his predecessor; he is happiest when he is trying to scare old people. We all remember the former leader of the Liberal Party when he was in trouble in February. His immediate resort was the blunt instrument, the scare campaign. We all remember when the former leader of the Liberal Party talked about people's savings. He said: 'It would be safer if you put them under your bed than in the banks'. We all know what happened to that scare campaign. The former leader of the Liberal Party reaped a bitter harvest on 5 March. Unfortunately, his successor appears to be a slow learner.

I will spell out the major features of the assets test. First, who will it affect? The most important point that should be appreciated is that of the two million pensioners in Australia, one and a half million will not be affected. Of the remainder, 170,000 will be better off. The rest, the 330,000 people with considerable assets which are not presently earning income, will be asked to put those assets to work. The need for an assets test is obvious in the context of the Government's pre-election promise to raise the level of the basic pension to 25 per cent of average weekly earnings. Average weekly earnings are currently about $350 a week. Twenty-five per cent of that figure is $87.50. The single rate of pension is currently $82.35; in other words about $5 below 25 per cent of average weekly earnings. Put simply, the Government's aim is to increase pensions by about $5 a week; that is a real increase of $5 over and above the regular six-monthly consumer price index increases.

Clearly, if that is the Government's desire, one must examine where the Government will find the money. The answer lies in the assets test, by requiring retired people who have deprived themselves of income, often by depositing large sums in cheque accounts in order to obtain full pensions, to rearrange their affairs. I point out in passing that over the years this practice has really amounted to a huge interest free loan by pensioners to the banks and financial institutions. Nobody really knows how much is involved. But some time ago the National Times estimated that $500m was involved-a huge interest free loan to the banks. There is no doubt that the present income test, a creation of the former Government, encouraged the belief that somehow or other a dollar from the Government was more valuable than a dollar from one's own investments. Many pensioners went ahead and deprived themselves of income, frequently receiving less by way of pension than they could have received by way of investing that money. The main beneficiaries of that system introduced by the former Government certainly are not the pensioners; they are the banks and financial institutions. While the banks and financial institutions have not had to pay interest on that money, they have certainly had the use of that money for many years-in fact, for seven years-and they have been able to lend it out and earn a great deal, at least $50m a year, by doing so.

The details of the operation of the assets test are gradually being communicated. The assets that are not counted include a home, its contents, personal effects, car, boat, caravan and cash amounts-cash at hand-of $1,500 for single people and $2,500 for a married couple. The assets that will be counted include cash in excess of those amounts that I have mentioned, which will be deemed to be earning 10 per cent. Of course, the money would be able to earn more. Safe investments are available at the moment that will return 13 1/2 per cent and 14 per cent. But the important point is that only 10 per cent will be deemed to be earned. For example, an amount of $50,000 invested at 14 per cent would leave a pensioner almost $40 a week better off because that money will be deemed to be earning only 10 per cent.

The application of the assets test will mean that a single person will be entitled to a full pension if he has assets of up to $17,100 and a part pension if he has assets of up to $106,400. He will retain fringe benefits with assets of up to $31,140. A married couple will be able to claim the full pension with assets of up to $28,500, a part pension with assets of up to $177,428 and will retain fringe benefits with assets of up to $51,380. Quite clearly, under the new system some pensioners will need financial counselling and advice. I am quite confident that the Department of Social Security and the Department of Veterans' Affairs will play a very constructive role in that area.

It is also encouraging to see that the financial institutions-the ones that have had the use of this money for so many years-recognise that they have a part to play as well. I shall quote from a brochure issued by the NSW Building Society Ltd. No doubt other financial institutions will do the same thing. This useful and informative brochure, which is entitled What retired people should know about the asset means test, has some very good things to say about the assets test. Its first page, which is headed 'Good News!', states:

Despite the post-budget hysteria, there is no need to panic about the government's new asset means test.

The new regulations are neither sinister nor unreasonable. In fact, in many ways, the government has been quite generous!

The aim of the asset means test is to clamp down on those people who are exploiting the existing system. Although all pensioners will be required to provide full details of income and assets, only a small percentage will actually be worse off.

Some pensioners will even do better under the new scheme! Exact details have not yet been finalised, but the government is currently consulting with pensioners' organisations . . .

You should maintain your current investment arrangements until a detailed announcement is made by the government.

In the meantime, relax! The new regulations will not apply until November, 1984 .

This document is not put out by the Government or by the Labor Party; it is put out by the NSW Building Society. I should like to read the whole brochure but it is rather long. The last page which is headed 'Feeling Better?' states:

Now that your are a little better informed, we hope you're a lot less worried about the asset means test.

I commend this brochure to members of the House.

Mr Shipton —Are any members of the Labor Party on the Board of that Society?

Mr FREE —No. In fact they are all Liberals. I understand it is a battle between two rival factions of the Liberal Party in New South Wales, or it certainly used to be. I commend this brochure to members of the Opposition in particular because they obviously need to be better informed about the assets test. I recommend that every member of the Opposition pick up two copies of this brochure. They should send one copy to their leader because he needs help in this matter. Liberal members should read the brochure very carefully; for members of the National Party there is a very nice picture on the front.