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Monday, 13 October 2008
Page: 5751


Senator ADAMS (2:12 PM) —My question is to the Minister representing the Prime Minister, Senator Evans. Will the government adjust the deeming provisions relating to pensioners in light of the global economic situation?


Senator CHRIS EVANS (Leader of the Government in the Senate) —I thank Senator Adams for the question, which is an important question and I know of concern to pensioners. As the Senate and Senator Adams would understand, the application of deeming rates provides a fair way of calculating returns from financial assets for pensioners. Under the rules I think initiated by the former Howard government, financial investments are assumed to earn a certain amount of income regardless of the income they actually earn. Financial investments include bank, building society and credit union accounts; managed investments; shares and securities; loans; and other investments. Current deeming rates are four per cent for the first $41,000 of a single pensioner’s financial investment and the first $68,200 of a pensioner couple’s investment, and six per cent for financial investments above those amounts. They were increased in March from 3.5 per cent and 5.5 per cent to reflect increased returns available to investors in readily accessible investments such as bank accounts. The Minister for Families, Housing, Community Services and Indigenous Affairs and the Minister for Education and Minister for Employment and Workplace Relations, the Deputy Prime Minister, are responsible for setting the deeming rates. They are currently monitoring the current deeming rate in the light of the Reserve Bank decision and other recent financial activity.

The government’s immediate priority is to ensure that falls in financial asset values are reflected in the Centrelink system as quickly as possible. Today, Centrelink has been asked to undertake a system-wide update of customer records as soon as possible. This means that the new value of shares and other financial products will be automatically factored in to determine an individual’s pension rate. In the meantime, a pensioner can ask Centrelink to update their asset values at any time. I am sure that if there are further queries on this Senator Ludwig will be able to assist in terms of Centrelink’s activities. The system-wide update will occur as soon as possible. Centrelink will receive investment information that captures recent share market events in coming weeks. This update will help ensure that pension entitlements are calculated on the most up-to-date asset values available, meaning that pensioners whose asset values have dropped may receive more in their fortnightly pension payment.

We are committed to retaining deeming rules as a simple way of evaluating the financial income of pensioners. Although the share market is volatile, interest rate products are generally steady or increasing in value and pensioners are likely to continue to have access to a range of financial products that pay returns equal to or better than the deeming rates of four and six per cent for some time.

We are very much looking to be responsive to the situation. Centrelink is undertaking a system-wide update but any pensioner can ask Centrelink to update their asset values at any time. We think this should allow us to ensure that the deeming rates remain current and provide fairness to all pensioners.


Senator ADAMS —Mr President, I ask a supplementary question. What is the government’s estimate of the extra number of Australians that will be forced to rely on the pension as a result of the global economic situation?


Senator CHRIS EVANS (Minister for Immigration and Citizenship) —Clearly, that is not a question one could answer with any certainty at this time. The impact of the financial crisis is not determined. We are in a very turbulent period. A projection one would have made two weeks ago would no longer be relevant. What is the case is that this government is absolutely focused on trying to provide the strongest possible protection we can to Australian pensioners and families from the global financial crisis. We have sought to reassure people that our economy is in good shape and that our institutions are in good shape. We have taken a range of measures—including the measure announced on the weekend to guarantee deposits—which seek to provide the sort of protection that all Australians will benefit from. We remain committed to those sorts of measures. (Time expired)