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Wednesday, 30 May 1984
Page: 2161

Senator MESSNER(4.07) —I rise to address myself to the estimates of the Department of Social Security. Over recent years, and particularly in the last 12 months, there has been very considerable debate and concern within the community about the rising level of welfare payments. This has led to certain actions on the part of the Government to do things which in its opinion are aimed at trying to stem the greatly increasing cost of social security in this country. In the last 12 or 15 months we have seen the introduction of a new tax on lump sum superannuation payments and we have seen the reintroduction of the incomes test in respect of pensioners aged over 70 years. Of course, in last year's Budget we saw the introduction of the infamous assets test, which has yet to be resolved but which will apply not only to age pensioners but also to widows, invalids and people such as those working in sheltered workshops who are in receipt of handicapped person's benefits.

The point has been consistently made that the cost of social security will be an unbearable burden on the community. I think that one of the great benefits of the recent report of Professor Gruen and his panel which I tabled in the Senate yesterday and to which the Government has not yet responded is that the analyses undertaken by members of the Gruen Assets Test Review Panel have put to rest a lot of the arguments and myths in this area. Indeed, I think it is highly significant that they have adopted positions which the Opposition has been putting forward publicly in the last 12 months. Of course, they substantially support the Opposition's position on the various moves that the Government has been undertaking in this whole area in the last 12 months.

First of all, let me try, by using the Gruen panel's report, to put into perspective the question of the future burden that the aging in the community will be on the social security budget. I draw the Senate's attention to paragraph 2.13 on page 9 of the report which, in part, states:

However, it may be relevant to point out that the aging of the Australian population has been a relatively minor factor in the growth of Commonwealth income support expenditures. Over the last 14 years (i.e. from 1968-69 to 1982- 83) the average growth rate of Commonwealth income support expenditures (in constant dollar terms) was 10 per cent per annum; over this period the aged population grew by around 2.8 per cent per annum. In other words less than 30 per cent of the growth of real Commonwealth income support expenditure could be directly attributed to the aging of the population.

I know that that fact, while being highly relevant, is historical and therefore does not take account of future trends.

The ACTING DEPUTY PRESIDENT (Senator Townley) —Order! I hope the honourable senator will be connecting these remarks to the Bills being debated. At the moment it seems that the honourable senator is discussing the Committee's report rather than the Bills.

Senator MESSNER —Mr Acting Deputy President, I am addressing myself to the expenditure of the Department of Social Security which is claimed by the Government to be rising. It has undertaken measures which are aimed at trying to reduce the impact of that increase. I am referring to the Gruen Committee's recommendations and the report in that context. I hope you will allow me to continue along that line. I think the point is made quite clearly that, over the last several years, the increased amount of expenditure in the Department of Social Security's budget does not stem from the problem of the rising numbers of the aged persons. Indeed, we have seen rather more expenditure being attributed to increases in payments to unemployment beneficiaries. The other factor which is highly relevant is the increase in the rate of inflation that has been afflicting our economy over the past 10 years or so.

It might be salutary to remind ourselves that, of the increase of some $2,700m in the Budget expenditure in the current financial year, roughly $1,000m is directly attributable to the cost of indexing benefits to pensioners and other social welfare beneficiaries. Another $1,000m is attributable to the increased number of unemployment recipients. The point is obvious. Clearly, the fastest growing part of the increase in social security expenditure does not stem from the aged, but stems from the two most difficult and intractable problems in this community and in this economy; largely, the questions of the number of unemployed and the rate of inflation. About 70 per cent of the total increase in expenditure is attributable to those two factors. The point has to be drawn then that the cure for increased welfare expenditure, the burden that that will create for the future and the solution for that lies very greatly in our finding solutions to the problems of unemployment and inflation. In other words, we need to attack the two key problems which we have been facing for the last 10 years. They are the basic causes of rising welfare expenditure, not the mythical so- called rise in the number of aged which the Government sees fit to blame and in relation to which it has taken such draconian action in the last 12 months.

Turning now to the question of population and the anticipated level of increase over the next few years, the Gruen Committee provided us with information covering the years 1984 to 2001. The figures show that, compared with the rate of growth for the total population of 1.13 per cent per annum, the aged portion of that population, that is, those women over 60 and those men over 65, will rise by 1.84 per cent. The difference there is a mere 0.71 per cent per annum. I remind honourable senators that this will occur over the next 20 years. It is claimed that that will be a period of great concern to us all.

Quoting again from the Gruen Committee report where this matter is discussed, the conclusion is drawn as follows:

In this perspective a 0.71 per cent relative increase per annum is not particularly alarming and, supposing that long term productivity growth rates average at least 1 per cent per annum, sustainable with an unchanged tax burden.

I think, whatever else the Gruen report has done in the course of its very detailed information, it has done the country a service by drawing our attention to the fact. In the face of all the arguments that the Government has been putting and in the face of the somewhat hysterical approach by some of the newspapers and segments of the Press about dealing with the problems of the aged in the future, that myth has been put to rest by Professor Gruen's panel.

Another element, as evidenced by those population figures, is the demographic changes that we need to consider as regards the aged as a proportion of the total population and, in particular, relating that as a ratio to the numbers of working people in the community who will need to be paying the taxes in order to pay those increased benefits. The Gruen report has quoted from the Department of Social Security's 'Population Projections and Social Security' dated November 1981. Under the title 'The Impact of Population Changes on Social Expenditure: Projections from 1980-81 to 2021', it states:

. . . suggests that, while the proportion of the aged will rise, the proportion of youth will decline. This means that although per capita government expenditure on the two groups is different, the overall effect on public expenditure of the increase in the aged is much reduced. At the same time, the number of people of workforce age will increase by 55 per cent (by 2021). The Social Welfare Policy Secretariat has thus concluded that the average cumulative increase in expenditure would be only 0.24 per cent each year. This work, although by no means conclusive, strongly suggests that the demographic changes of the next 30-40 years will not produce the overall expenditure changes that are apparent when one factor, such as ageing, is considered in isolation.

I think that is a highly relevant quotation from that document. It draws together the strings of the argument put in the newspapers and by the Government about the huge impact upon future expenditures of the cost of securing the future of the aged. This is very consistent with the argument that the Opposition has been putting in public in recent times because, as has been all too common, the figures that have been extrapolated from time to time about the growth in the number of old people in the community have been misrepresented in terms of what is also happening at the other end of the age spectrum. The falling number of younger people as a proportion of the whole population will result in significant savings in the total budgets of governments. Therefore, we should not single out the aging as the scapegoat for all our criticisms of welfare expenditure as the Government has seen fit to do over the last 12 months in the course of its attack on the aged through the introduction of the three measures which I mentioned earlier.

One very significant point that must be remembered too in regard to the whole question of welfare for the aged is the relative difference between the period ahead for people who are approaching retiring age now and the problems faced by people who lived through retirement over the last 40 years. I draw the attention of the Senate to the very severe impact of the Great Depression of the 1930s, and of course of the two world wars, on the financial situation of families and of retiring people. In the last 20 years or so we have been fortunate not to have had the impact of those kinds of major cataclysms in our society that produced major groups of poverty stricken people in earlier times. As a result, because people have been able to live in relatively more affluent times, they have had the opportunity to accumulate more assets and thus have put themselves in a stronger position to look after their own retirement. That again shows the difference between the approach of the Opposition compared with that of the Government in this area. Right from day one of the Government's accession to power and its attack upon the elderly as a result, we have been making the point that Liberal government policies encourage people to look after themselves in their retirement, and we will aim to provide tax and social security incentives for people to do so. I remind the Senate that that remains a very strong part of Liberal Party policy.

Another aspect of this problem in the area I have just mentioned is the rising utilisation of occupational superannuation, that is, the way in which employers provide private insurance and superannuation cover for employees through private schemes. In addition, with the growing number of people in the public sector in the last 15 years or so, and particularly under this present Government, an increasing number of people will become subject to public sector superannuation arrangements. While it is true that still only 50 per cent of the work force is covered by occupational superannuation schemes, it is fair to say that that has substantially increased from a figure of around 25 per cent about 10 or 12 years ago. In other words, the trend is very strongly towards occupational superannuation schemes. We on this side of the Senate believe that we should encourage more and more Australians to join occupational superannuation schemes sponsored by employers in order to secure their retirement.

I do not wish to go on for very much longer, but I want to draw the Senate's attention to one other aspect of occupational superannuation. I refer to the issue of lump sum superannuation payments. It is interesting that the Government has seen fit to attack lump sum superannuation payments by the introduction of a punitive tax, the legislation for which I understand will be introduced into the House of Representatives today. There can be no misunderstanding on the part of the Government about the degree of concern in the community at this measure, which is aimed at reducing the capacity of people to look after themselves in retirement. Of course, it leads to the obvious conclusion that more and more people will become dependent upon the Government for their age pension.

The Gruen report has some useful information for us on this matter. Page 12 of the report shows that, while the number of people receiving lump sums in 1978 and 1979 was around 268,000 and in 1982 the number was only about 270,000, there having been some fluctuations in between, the total amounts received were respectively $1.1 billion and $3.1 billion. In other words, people receiving benefits from lump sum superannuation schemes have received relatively higher amounts over the last several years. That means that those people are therefore more able to look after themselves in their retirement and, as a result, will not become a burden on the social security budget to the extent that the Government claims might happen in the future.

All these factors taken together demonstrate that the Government's path in looking after the aged and the provision of retirement income security is way off track. It has missed the point entirely in examining the question since it came to power. With some confused idea about what is and is not equitable in terms of the taxation system, it has sought to introduce new measures which have been most damaging to the people of Australia. Those matters are yet to receive attention in the Parliament. The two important matters are; firstly, the assets test on pensions, which I reiterate does not apply only to the aged but also to widows, invalids and other people and, secondly, taxation on lump sum superannuation payments.

I do not have time now to go into that argument and probably you, Mr Acting Deputy President, would stop me from developing an argument about that, as you drew my attention to other remarks earlier. For that reason, I will conclude by pointing out that the Gruen document has been an extremely valuable contribution to the whole debate about the rising cost of social security for the aged. It points up quite clearly that the problems do not lie so much with securing retirement income for the aged but with looking after other very much more serious problems in the economy, such as inflation and unemployment.