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Monday, 7 September 2009
Page: 5781

Senator JOHNSTON (7:30 PM) —From the outset I want to say that the opposition supports both of these important measures. I deal firstly with the Veterans’ Affairs Legislation Amendment (Budget Measures) Bill 2009, which I will refer to as ‘the budget measures bill’, and will then move on to the Veterans’ Affairs and Other Legislation Amendment (Pension Reform) Bill 2009. This latter bill I will refer to as the ‘pension reform bill’.

The budget measures bill is a relatively simple piece of legislation. It enables veterans and their dependents living overseas to have payments made directly to allow them to avoid transfer and bank fees, which accumulate over time and cost the recipient a sizeable proportion of their entitlement. It should be noted in passing that, of the five biggest companies in Australia, four are banks. We do not need to be helping them any more than we do.

The second provision deals with the Defence Service Homes Insurance Scheme: 7,500 defence personnel will benefit from these arrangements and changes, with a net saving to government over four years of approximately $1 million.

The last principal measure contained in the bill is the removal of what is now an anomalous dependents pension, a scheme which saw its last new recipient in 1985. The last increase for the dependent children was in 1952. Partners received an increase in 1964 and there was a small increase in 2000 to accommodate the GST. This pension has become redundant. It is going to be resolved with a one-off payment to the beneficiaries equivalent to three years, or 78 fortnights, worth of pension. I see that as an equitable resolution and a tidying up of what was a pension which was, in some circumstances, paying around $8.42 per fortnight—$2 to partners and widows, $2.86 per fortnight for children—and with minimum payments as little as 84c per fortnight and 29c for children. Resolving those nickels and dimes, if I can be so presumptuous, is, I think, an important aspect of this bill and is good governance.

I now move on to the pension reform bill. This is a very complex bill. It contains a number of very deep formulas and pension index changes and adaptations. I think time will tell about their success. We see the single maximum service pension basic rate increased by $1,560 per year—approximately $30 per week. These measures would commence on 20 September 2009 were the legislation to be passed and I anticipate that it will be.

The specific increases are $32.50 per week for single service pensioners and a combined $10.15 per week, rounded up, 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.

There is a new index being applied to the service pension. It is indexed twice a year and the bill has a new index which it is proposed be known as the pensioner and beneficiary living cost index—the PBLCI. The maximum basic rate of service pension will be increased in line with the pensioner and beneficiary living cost index. The PBLCI will be used to adjust the maximum basic pension rate when movement of the PBLCI is greater than the movement of the CPI for the relevant indexation period.

I understand that the rationale for the new PBLCI is the desire to have an index that more closely resembles the cost of living expenses experienced by pensioners. That is, I think, a very important, equitable and useful ambition. I just hope the reality of it—the basket of goods and the influences on the index—bears out what we would all want to see and that is that pensioners are insulated from spikes in the cost of living which impact particularly upon them.

There are further changes to the benchmark for couples. 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—the 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. People with vast and considerable experience have told us, in our consultations, that that is a meaningful change and an acceptable one.

One of the things that I want to pause to acknowledge is a very interesting matter that has been included, quite rightly, in this bill at proposed sections 198R and 198S. There is an increase of one per cent, commencing on 1 July 2011, and an increase of 1.8 per cent, on 1 July 2012, as compensation to these pensioners for the CPRS. A note as to each of those proposed sections sets out an anticipated inflation rate of 0.4 per cent in the first year and 0.8 per cent in the second year, so over two years that is a total of 1.2 per cent. This is an interesting figure and a seriously important indicator of a CPRS cost to pensioners. That should not be forgotten and should be very distinctly noted, and I seek to do that in drawing attention to those provisions within the second bill and, as I have said, it is a complex bill.

There are a number of other measures. The taper rate is a very important measure. As set out in the bill, the legislation is being amended to increase the income test taper rate from 40c to 50c per dollar of income over the ordinary income-free area and to remove the additional income-test-free area for dependent children from the calculation of the amount of a person’s ordinary income-free area. Transitional arrangements will apply for existing pensioners affected by the new income test changes to ensure current payment rates are maintained in real terms and those pensioners also benefit from a pension increase.

There are very substantial costs to the budget from these provisions: $2.7 billion in 2009-10, $3.6 billion in 2010-11, $3.8 billion in 2011-2012 and $4 billion in 2012-2013. Notwithstanding that, these pensioners are amongst our most deserving. If you can have a variation between pensioners being deserving, those who are veterans have committed a substantial part of their lives in the service of their country being prepared to commit those lives in the ultimate sacrifice were they called upon to do so. I am very pleased to be able to say the opposition supports both these bills.