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Wednesday, 17 June 2009
Page: 6280


Mr ADAMS (11:30 AM) —It is a pleasure to follow my colleague from Braddon. I congratulate him on his speech and on representing the pensioners of his electorate. It is marvellous that it is this side of the House, the government side, that is supporting this Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009 and people from the other side have dropped off from speaking on it. My colleague pointed out that for 12 long years people in the pensioners area were promised things like little bonuses here and there, but really there was nothing of substance done to increase the pension. It has taken a Labor government to do that in a real way, and in a lot of depth, with some reforms that will continue for a long time and be substantial for many people that have reached the time in their life when they need to retire and access a pension from government.

This legislation is a part of that reform package which will certainly improve the accuracy of the pension scheme, make its operations simpler and more responsive to pensioner needs, and secure long-term sustainability. This comes as a result of Harmer review, which developed 30 findings across five major areas. They were: the adequacy of the rate of the pension; the amount paid; indexation arrangements for pensions, and we have increased that in this bill; the design and the delivery of the pension payments, how they are delivered et cetera; the concessions and the services that support the pension system; and the targeting and long-term sustainability of the pension scheme, the generational changes, the changes that we need to look at as a nation. We know the other side squibbed that back in their time in government. There is a need to prepare Australia to meet future challenges. That includes our ageing population. We know that many other parts of the world are looking at this as well and having to come to grips with this. I will touch on a bit of that later.

Currently we have in Australia 3.3 million age pensioners, disability pensioners, carers, wife pensioners and veteran income support recipients. In the electorate of Lyons in that great state of Tasmania I have 19,112 people on pensions. They are broken up according to age partnered rates, age unpartnered rates, carers, non-partnered carers, people with disabilities and people with disabilities who are not partnered. There is a whole range of different groupings.

The pension reforms in this bill implement reforms in the social security and aged-care area. A further bill will be introduced later, I understand, with pensioner reform measures for veterans and their dependants. So we look forward to that bill coming in as well. These reforms are really necessary to try and tackle the reality of our ageing population and the challenges that this presents, but we need to try and maintain the system’s enduring strengths. It has been around a long time.

It is interesting to note that the age pension was first paid in 1909. This year marks its centenary. So it is quite an anniversary to have this bill in the parliament this year. The Department of Social Security noted in the Australian yearbook in 1988 that at the turn of the century there was no social security system in Australia. Charitable relief was provided to needy persons by voluntary organisations, in some cases with the assistance of government grants. These were the people of Dickensian times, of poorhouses and charity workers who often hindered rather than helped social disadvantage. You had to be the right sort of needy person or reach a certain standard or whatever to receive some help. People made judgments about other people in a social way about whether they were entitled to some help. I guess that is what drove some reforms in that area. The main areas of need which attracted charitable assistance were the sick, poor, neglected children, old people who were destitute and women who had become deserted or had fallen pregnant. The unemployed were assisted by grants of wages or rations in return for relief work provided by government.

The Commonwealth of Australia was formed on 1 January 1901, with the Federation of our six states under a written Constitution—which was basically written by a Tasmanian—which, among other things, authorised the new Commonwealth parliament to legislate in respect of age and invalid pensions. In the event, the Commonwealth did not exercise this power until June 1908, when legislation providing for the introduction of means tested, flat rate, age and invalid pensions was passed.

The new pensions, which were financed from general revenue, came into operation in July 1909 and in December 1910 respectively. This superseded state age pension schemes which had been introduced in New South Wales and Victoria in 1900 and in Queensland in 1908. It also superseded the invalid pension scheme introduced in New South Wales in 1908.

The new pension was paid to men at the age of 65 and it was paid to women at the age of 60—but not until December 1910. The age pension was also subject to a residential qualification of 25 years, which was reduced to 20 years shortly after its introduction. A residential qualification of five years applied to the invalid pension. The pension age has been set at 65 for the last 100 years. For 100 years we have had a retirement age of 65. Now, 100 years later, we are looking at it in possibly another way.

When the age pension was introduced, a man was expected to spend an average of 11 years in retirement. By 2017 it is projected that the average number of years in retirement for a 65-year-old man will have increased to 19.5 years. By 2017 a woman of the same age is expected to spend 23½ years in retirement. This is a changing situation which we need to give consideration to as we look at policy in this area.

To ensure that our pension scheme can maintain strong sustainability into the future, we need to increase the age pension. The government has picked the year 2017 as the start of this new pension age eligibility, and it will increase by six months every two years after that until it reaches 67 years of age by 2023. The changes will not affect current age pensioners. Only new entrants to the pension scheme from 1 July 2017 will be affected. This will allow those who will be seniors by that time to plan for the future. It helps us look at many things that have to be looked at in coming up to that.

Nowadays it is the largest Commonwealth program and we spend something like $28 billion per annum on the age pension. There have been some changes to the income test rules to better target pension increases to ensure the long-term sustainability of the pension scheme. From 20 September the new package will deliver a total increase of $32.49 a week for singles on the full rate and $10.14 a week for couples combined.

The increase will be delivered via a $30 increase in the base singles pension and the addition of $2.49 per week in a new pension supplement. This includes the value of the following payments: the GST supplement, the pharmaceutical allowance, the combined telephone and internet allowance and the utilities allowance. For couples the extra is a part of the pension supplement.

I have to talk about how there seems to be the view that it might be hard on couples. The Harmer pension review found that the pensioners most in need of additional assistance were single pensioners. They had similar costs to those faced by couples but they only had one income to pay the bills and meet their needs. The report found that the pension rates do not fully recognise the costs faced by single pensioners living alone and the approach of paying ad hoc bonuses did not provide the financial security that it should. From September 2009, single pensioners will receive two-thirds of the rate for couples. Bringing it up to that level is a very good achievement.

On the same date there will be a cost of living index rise which will also help the base rate. These new index arrangements will be introduced to better reflect the cost of living increases for pensioners. As part of the government’s reform package a new pensioner and beneficiary living cost index will be calculated by the Australian Bureau of Statistics. The new index will measure increases in the living costs faced by pensioners and beneficiary households, which can be different from those faced by other households. It is a very interesting piece of work that is now being put into these reforms. This index will be more responsive to change experienced by the recipient householders, where the out-of-pocket living costs have moved faster than the rate of changes measured by the consumer price index in the living costs of all households.

Pension rates will also continue to be benchmarked to the male total average weekly earnings from 20 March 2010. A new pension benchmark for the maximum combined couple rate of the pension will be introduced. It will be 41.76 per cent of the annualised amount of the male total average weekly earnings rate. The single rate will be set at 66.33 per cent of the maximum rate payable to the combined couple, an increase of 2.7 per cent on the current benchmark. For those who choose to undertake paid work to supplement their pension, a new work bonus will be introduced to help age pensioners keep more of the money they earn from work. That is another really good reform by this government. The work bonus will provide concessional treatment of employment income under the income test for pensioners over the age pension age. Incomes will be assessed fortnightly for those pensioners, then half of the employment income, up to a maximum of $500 per fortnight, will be disregarded in the income test. So only $250 will be taken into account and therefore the pensioner will be $125 better off per fortnight. There are a number of other critical changes and some of these will be the subject of other bills. But these major changes will take us into the future. We still need to ensure that those who want to work can do so and that those who have put aside for their self-funded retirement can survive on their income, possibly with some assistance from government. Of course, as we look at an ageing population, there will be other needs as well.

There are a large number of pensioners and people on lower incomes in the electorate of Lyons, by the very nature of the constituency, being rural and relatively short of services, like other regional areas of Australia. I heard the member for Lyne talking about regional Australia earlier. He focused on some of the problems that we face in some of our constituencies with regard to services and the feeling of being left out. Being ‘left’ in the country is one of our problems. In my constituency people have been left as they age because they cannot really afford to sell up. They cannot get a return from their house in a country town that would allow them to move to a bigger regional centre where maybe their children have moved to. So you end up with a shrinking population base and therefore shrinking service delivery from health and other services. This is an issue that always needs some consideration.

There is little public transport in my electorate. Many pensioners have to rely on an assortment of community cars to get them to the city for medical appointments. They more often make up the public hospital waiting lists for surgery or dentistry because they cannot afford private health insurance or they gave it up when they finished their employment. Though many of the pensioners in my electorate keep a good garden, there is still a difficulty in buying meat and fish, as it is expensive when you go to the smaller retail sector.

There is also the problem of isolation. As I said, once the children move away, people are often left in their own areas, with a lack of available transport and an inability to drive themselves. Many families have moved away as well. When the time comes to go to the local nursing home, there are some disappointments because there seems to be pressure on many of the smaller nursing homes, which are apparently not viable according to Treasury models. Modelling on regional difficulties done by Treasury and other departments says that unless a facility is at a certain size then it is not economically viable. This is a problem for the nursing home sector and of course for people of pension age. Many of these issues were echoed in the Harmer report findings.

I would like to congratulate the minister and my government for what they have done here. The minister has achieved these changes. I am very pleased to support this legislation and the work that has been done following the Harmer inquiry. This is a great piece of legislation. It will certainly assist many pensioners. It lays down a lot of opportunity for the future. I support the bill. (Time expired)


The DEPUTY SPEAKER (Hon. Peter Slipper)—I do not have the honourable member for Lyne on the list, but it is the opposition side of the chamber’s call, so I call the honourable member for Lyne. I apologise to the member for Werriwa. He will get the call next.