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Wednesday, 19 August 2009
Page: 8293

Mrs MARKUS (10:50 AM) —I rise to speak on the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Bill 2009. This bill will deliver a pension increase that will be welcomed by veterans who receive the service pension, as well as war widows and recipients of income support supplement. This bill will increase the single maximum basic rate of the service pension by $1,560 per year, or $30 a week, from 20 September—in just over four weeks time. The bill will ensure that the Rudd Labor government deliver on their promise to pensioners—a promise that was forced on them after their failure to recognise pensioners in last year’s budget.

Since becoming shadow minister for veterans’ affairs in September last year, I have been criss-crossing the country and meeting with stakeholders in the veteran community. I have listened to the concerns, both wide and diverse, of members of the veteran community, and many of the issues of concern to the veteran community have been reflected around the country. The pension increase is a win for the veterans. As shadow minister, I critically evaluate and, of course, monitor government initiatives and policy to ensure that everything that is done will not only reinforce, strengthen and add value to the nation’s commitment to our veterans but also not undermine their entitlements. In the short time available, I have done my best to scrutinise this bill, to look beyond the simple headline ‘$30 a week extra’ and to look at the finer detail and make sure, to the best of my ability, that there are no hidden traps for veterans.

This is a complex bill with 12 schedules of amendments—the majority of which are to the Veterans’ Entitlement Act 1986 but there are also minor amendments to the Social Security Act 1991 and the Aged Care Act 1997. The increase in the single maximum basic rate of the service pension will deliver, to quote the second reading speech of the Minister for Veterans’ Affairs:

… increases of $32.50 per week for single service pensioners and $10.10 per week combined for couples on the maximum rate.

War widows and widowers will benefit from an increase of $30 per week.

Income support supplement recipients will also receive an increase in the supplement and the ceiling rate will be increased.

I would like to note that I have very recently been advised that due to rounding the figure for couples is now $10.15. I support this measure as it responds to an issue of concern to the veteran community and the change will benefit veterans and dependants.

The service pension is indexed twice a year, and I note within the bill that a new indexation is proposed—to be known as the pensioner and beneficiary living cost index, the PBLCI. The maximum basic rate of service pension will be indexed to the pensioner and beneficiary living cost index. The PBLCI will be used to adjust the maximum basic pension rate where movement of the PBLCI is greater than movement in the CPI for the relevant indexation period. I understand that the rationale for the new PBLCI is the desire to have an index that closely resembles the cost-of-living expenses experienced by pensioners. The Australian Bureau of Statistics is developing the PBLCI. The index is yet to be made available. I have no idea of the inclusions in the ‘basket of goods’ so am unable to comment on its benefits or otherwise. I can only assume that it will deliver what is hoped for.

There are changes in this bill to the couples benchmark. From 20 March 2010 a new combined couple benchmark for pension rates will be 41.76 per cent of the annualised male total average weekly earnings, MTAWE, figure. The maximum basic rate of service pension that can be paid to a person who is a member of a couple will be half the maximum combined couple rate of pension. The single pension will be benchmarked at 66.33 per cent of the combined couple benchmark, effectively 27.7 per cent of MTAWE.

A change that simplifies a payment to veterans is always welcomed. Schedule 4 consolidates a number of smaller payments and allowances into one pension supplement. The explanatory memorandum also says that an increase to pension payments of an estimated $10.10 per week—which, as I noted earlier, is now $10.15—for couples combined and $2.50 per week for singles is to be provided. From 20 September 2009, the pharmaceutical allowance and telephone allowance will be replaced by a veterans supplement under the Veterans’ Entitlements Act 1986 and MRCA supplement under the Military Rehabilitation and Compensation Act 2004. The veterans and MRCA supplements will be payable to eligible persons not in receipt of service pension, income support supplement or an income support payment under the Social Security Act 1991. It will be very important to communicate carefully to the veteran community this combining of a number of well-established individual allowances into one payment. I understand that plans are in hand, and I encourage and will look closely at that communication as it progresses.

I also support the decision to retain the current pension age arrangements for veterans. The male veteran age will remain at 60 years. Pension age for female veterans and partners does not appear to be impacted by this bill. The introduction of a new work bonus in schedule 7 will provide an incentive for those veterans and dependants who wish to take up or continue to work. The new work bonus will allow for a certain amount of employment income earned, derived or received in a pension period by a person who is of qualifying age on a service pension or income support supplement to be disregarded for the purposes of the income test. For each fortnight the amount disregarded is 50 per cent of $500 where the person earns more than $500 in the pension period or 50 per cent of the person’s total employment income for a period, where the person earns less than $500. The work bonus will enable pensioners who have reached qualifying age and who undertake some paid work to supplement their pension.

The proposed change to the income test taper will, I believe, be unpopular. The income test taper rate will increase from 40c to 50c per dollar of income over the ordinary income-free area. This will remove the additional income test free area for dependent children from the calculation of the amount of a person’s ordinary income-free area. The income test taper will have an impact on the amount new claimants can earn from additional income. This is, in my view, a disincentive and contradicts the sections of the bill, such as the previous measure, the new work bonus. However, I understand that the reason for the change is the need to ensure that the pension system is sustainable and targeted to those most in need.

There is one entitlement that is not addressed in this bill that I would like to discuss, and that is the indexation of TPI pensions. The indexation of TPI pensions has been raised regularly with me over many months—in fact, ever since the pension reform was first announced in the budget. I wish to put on the record the importance of the indexation of their pension to TPI recipients. The significance of maintaining the relativity of the TPI pension cannot be ignored. The coalition committed to and began the process of indexing the TPI pension to CPI and MTAWE. There was an expectation that this would be retained. Expectations have been dashed. While the minister may claim that the majority of TPI recipients will benefit from the changes that this bill will deliver, what about the minority—those who may miss out? Is the minister saying that the minority are not important?

The principle expressed that the benchmark should be maintained goes to the issue of trust. In a recent policy implementation update the minister promotes the importance of restoring the value of compensation and entitlements. The first achievement listed with a tick is ‘to provide fair indexation for all veterans’ compensation pensions’. The footnote does acknowledge that the implementation of these commitments follows legislation and regulations passed by the Howard government.

I wish to place on record the importance of maintaining the relativity of the TPI pension benchmark to reduce the risk of erosion back to past pension rates. The bill includes a provision for the future. An amendment provides increases and future adjustments of indexation for pensions to compensate for the expected increases in the cost of living arising from the introduction of a Carbon Pollution Reduction Scheme. This amendment provides for increases to pension payments of one per cent in July 2011 and 1.8 per cent in July 2012. When I asked how this was derived, I was informed that this was Treasury modelling. Not being able to cite the modelling, I am unable to comment on the adequacy of this amount. Labor know that veterans are going to be impacted by the Carbon Pollution Reduction Scheme and are planning compensation, but will this be sufficient and are veterans going to struggle to pay for their food and electricity bills?

I also have concerns about the limit on the number of advanced payments in one year having been relaxed. Veterans will no longer be limited to one advance in any 12-month period. Given that those people on fixed incomes will be able to apply for multiple advances, I am concerned that this will create unnecessary and avoidable pressure on already financially vulnerable people who will have to pay more than one debt. An accrual of multiple debts will have to be paid back in the same period that is available now for those who have applied and received only one advance. I know that advances are important, particularly in times of unexpected financial stress, but multiple advances have to be repaid in the same time frame as if there were only one advance. Is this adding unnecessary stress in times of uncertain cost of living increases? I caution that this change should be carefully communicated and monitored.

In closing, I recognise that any increase in veterans’ entitlement will be of benefit, and the coalition will not be opposing this bill.