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Tuesday, 16 June 2009
Page: 6151


Ms LIVERMORE (7:14 PM) —I rise to speak on the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009. As I rise to speak on the bill, I can only think that for many pensioners this legislation must feel like it has been a long time in coming, but here it is before the House and I am very proud to be part of a government that has delivered on this important measure. The government has been committed to pension reform and, importantly, to ensuring a fair and equitable pension system for all our pensioners since we took office in 2007. We have known since well before then how greatly that pension reform has been needed. I remember that it was the Labor Party, while in opposition, that initiated the Senate inquiry into people living in poverty in Australia. We all took the message from that that this was something that needed to be addressed for those people who rely on income support payments to survive. Since then we have seen the groundswell of community support behind the push for this particular measure and this legislation.

We said from the outset that we were committed to getting it right. That is why we commissioned the Harmer review into pensions and that is why we are acting on this legislation today which builds on many of the recommendations of the Harmer review. As we have been saying to pensioners since last year’s budget, this is not something that we were able to do overnight. It is an enormous task to reform Australia’s pension system, but I believe that through that process we have ensured that we are getting it right. As I say, these reforms are underpinned by that very comprehensive Harmer review, a review that included many, many consultation sessions right around the country—and I am pleased to say there was one in Rockhampton, in my electorate, as well—to listen firsthand to the views, the concerns and the experiences of those living on the pension.

These measures introduce long-term security and certainty and also ensure that over time the pension system remains both adequate and sustainable. Of course, that has been the whole essence of what we have tried to do through the Harmer review process and with these reforms—to take the time to get this right and to make sure that it can be sustained in the long term. In this legislation we are introducing the first step of a program that will tackle the challenge of an ageing population and the increased life expectancy among Australians. Laying these foundations now is critical to ensuring an adequate and sustainable standard of living for aged people, carers and people with disabilities, both now and into the future.

As we learned so compellingly through the Harmer review, and particularly that consultation process, so many of our population who are 65 and over rely on these income payments and rely on the pension to survive. They told the Harmer review and they have told members of parliament that they have worked hard all their lives, they have earned their retirement and they deserve to spend those years in retirement with dignity and some security. That is why this bill is so important and that is why I want to speak in this debate and support the bill.

We are making changes to the pension that could have been made in the last 12 years. They are things that the former government could have taken on board, could have tackled and could have put in place to relieve some of the pressures on pensioners as the cost of living rose, certainly throughout the final years of the Howard government. But, of course, they did not do that. The current opposition, the then government, were good at talking and commissioning reports, but they failed where it matters—when it came to following through with actual reform. Instead, the best that the former government could do was to take this very scattergun approach of bonuses. While of course the money was welcomed by pensioners, by the recipients of those bonuses, that approach ran the risk of turning the question of payments to pensioners into a political football. Even the title ‘bonus’ really underlines the ad hoc nature of the bonuses, and they certainly did not amount to any kind of reform of the system.

Let’s not forget that all of this inactivity and the failure to take on this challenge came at a time when the country was experiencing tremendous growth through the resources boom. Today our government is not facing the economic lucky streak of the Howard government, yet I am proud to say that we are nonetheless tackling pension reform and giving our seniors and carers and those on disability pensions the extra support that they deserve.

This year, 2009, marks the centenary of the age pension. To put that into perspective, the year 1909 was the year that we first had passengers travelling by tram down William Street in my home city of Rockhampton. In 1909 Don Bradman was just one year old and a long way from striking fear into the hearts of English bowlers. So that is how long it has been since there was broadscale and forward-looking reform of this magnitude when it comes to the pension. When the pension first began, the maximum rate was about 10 shillings. The estimates are that there were about 34,000 eligible recipients back then, in 1909, at a time when the average life expectancy was 20 years lower than it is today. The life expectancy then was actually lower than the pension age that was set.

Today we are getting older and living longer, and of course that is good news, but it also presents challenges. The government spends about $28 billion per annum on the age pension, supporting about 3.3 million age pensioners, and then there are also disability pensioners, carers, wife pensioners and veteran income support recipients. In the Capricornia electorate alone there are about 19,700 people receiving some form of pension. This includes 7,175 on the age partnered rate and 6,234 on the unpartnered rate. On top of that, there are carers and disability support pension recipients. That just gives an idea of the scale of what we are talking about. It is a large and important sector of our community, and that is why it is so vital to get the pension reform right.

As was announced on budget night, under this legislation single pensioners will receive an increase of $32.49 per week, which comprises a $30 per week increase in the maximum basic pension rate and a $2.49 per week increase in the pension supplement. Couple pensioners will receive an increase for a couple combined which wholly constitutes a $10.14 per week increase in the pension supplement. These increases are on top of the regular indexation, which will be due in September.

This reform has also been about bridging the gap between single and couple pensioners, something that came out loud and clear from the Harmer review. Single pensioners of course do not have the same economies of scale as couples, as the third finding of the Harmer review states. This is especially the case for those who do not own their own home. I refer specifically to the report, where it states:

The Review finds that there is strong evidence that many pensioners in private rental housing face particularly high costs and have poor outcomes. Rent Assistance and social housing have complementary roles to play in addressing the financial security of these pensioners.

I am pleased to say that a very large part of the second stimulus package announced by the government this year included a very significant increase in spending on public and social housing. We expect that that will go a long way towards reducing some of the pressures on pensioners in the private rental market. Of course, that is on top of the National Rental Affordability Scheme, which is also aimed at reducing the costs of housing for people on pensions and low incomes. I am pleased to say that there are already eight social housing projects that have been announced in my electorate, and each of those projects involves multiple units of accommodation. I am looking forward to seeing some of the really acute pressures of the cost of housing and the availability of affordable housing in Rockhampton and the Capricorn coast being relieved when those units become available. So we have increased the pension for both couples and singles, which also helps to bridge the gap between them that was identified so strongly through the Harmer review.

We are bundling the old system of various utility allowances into a simpler to understand pension supplement which will be paid fortnightly. The Harmer review found that one-off lump sum payments were not an effective way of addressing shortcomings in the pension in the long term. We adopted the findings of the review to simplify the bonus payment system and to eliminate uncertainty. We are combining the GST supplement, pharmaceutical allowance, utilities allowance and telephone allowance. This includes an increase, on top of those existing allowances, of $2.49 for singles and $10.14 for couples combined, as I said. The supplement will be indexed in March and September each year in line with the CPI. So, for a single pensioner, the supplement will be around two-thirds of the supplement for a couple combined, which goes back to my earlier remarks about the additional challenges facing single pensioners. All up, we estimate the pension supplement will be worth $1,462 per year for singles and $2,199 for couples. The supplement will be paid fortnightly, but we have not forgotten the importance of choice and flexibility for people when it comes to their finances. From July next year, pensioners can choose to receive about half of the supplement in quarterly instalments. This will be helpful to those who like to get their payments in larger instalments to meet the costs of big bills such as electricity and car registration.

Ensuring a sustainable pension system for the future also means we are tightening the income test. This will ensure sustainability in the long term and that increases are targeted to the people who are most in need. From 20 September, the income test taper rate will increase from 40c to 50c for each dollar of income over the income test free area. Under the new rules, where a pensioner has ordinary income over the income test free area, their rate of pension will decrease by 50c for each dollar of income above the free area. For couples, their combined pension will decrease by 50c for each dollar of combined income over the income test free area. Pensions paid to each partner will decrease by 25c for each dollar of income for the couple combined over the income test free area. We are putting in place transitional arrangements to protect existing pensioners who would otherwise face a payment reduction because of changes to the income test.

As we know, some pensioners choose to work to supplement their pension. With this in mind, the government is introducing measures to ensure that there is proper concessional treatment of the income derived from this work. Under the new rules, employment income will be assessed fortnightly for pensioners, and only half of employment income, up to a maximum of $500 per fortnight, will be assessed in the income test. So, if someone is earning $500 a fortnight, they stand to be up to $125 better off thanks to this bonus.

Further amendments in the bill are made to close the Pension Bonus Scheme. The Harmer review found that it was not meeting its objective of encouraging workforce participation. It will be closed to new entrants from 20 September this year, although existing members of the scheme will remain eligible.

One of the major aspects of this legislation and of the reforms that were announced on budget night is that the qualifying age for the age pension will progressively increase, at a rate of six months every two years, beginning in 2017 and reaching 67 in 2023. It is a move that is born out of necessity. We are facing a demographic change in this country, as our life expectancy increases. People are also tending to retire earlier. It is a challenge happening in many parts of the world. Indeed, countries such as the US, Germany and Norway are already facing similar challenges and are on the path to increasing their pension age as well.

The projections indicate that in Australia, by 2047, the ratio of people of working age to those over 65 will have halved. Today we have about five people of working age for every person over 65; in 2047, we will have 2.4 people for every person over 65. We are facing a scenario where there will be 7.2 million people over 65 in 2047, or about a quarter of the population, compared to about 13 per cent today. This cannot be ignored, hence our moves to increase the pension age.

The people this will affect—those born after 1 July 1952—will have had far more time in the workforce accruing superannuation than previous generations had. Of course we do not expect people to be slogging it out in tough manual jobs into their old age. We as a government are working towards a future where we have established a framework for older citizens where they can tackle other roles and occupations. After all, we are talking about people who will have at least 40 years of experience under their belts. They have valuable knowledge that can be shared with their younger peers. The government is committed to developing a workplace culture which values older people, flexible training and retraining, and new options for career pathway planning.

In this legislation we have also decided to share the pension increase that is coming into place between aged-care providers and those pensioners who are living in aged-care facilities. This ensures that pensioners in homes can benefit from the pension increase while at the same time it recognises that care providers also need additional funds to contribute to costs such as nursing care, food and cleaning. We are also protecting the independent retirees who are already in the system. We do not want to burden them with a sudden increase in costs, so self-funded retirees in aged care on 19 September will have their existing fee levels protected until they leave. People who enter care after this date will have any cost increase phased in over four years. The arrangements for self-funded retirees will also apply to part-rate pensioners who do not benefit from the pension increase.

These reforms have come with tough decisions, but they are informed decisions, thanks to the Harmer review. This broad-sweeping review took very seriously its role of talking and listening to pensioners. It visited every capital city as well as regional centres, such as Rockhampton in my electorate, and accepted almost 2,000 written submissions.

This legislation will help Australians enjoy a proper and dignified retirement while also positioning us to deal with the demographic changes that we know are coming in the decades ahead. We are bringing fairness to the pension and doing our bit to help recipients as they deal with the ongoing costs of living. We are simplifying the pension system and untangling the complications surrounding the previous supplement system. We are also making sure the pension is fairly targeted and we are able to assist those who need it the most. Finally, we will increase the pension age, starting in 2017, in six-month increments until it reaches the age of 67. These are challenging reforms but I believe they are the right reforms.