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Thursday, 7 October 1976


Mr NEWMAN (Bass) (Minister for Environment, Housing and Community Development) - I move:

That the Bill be now read a second time.

This Bill makes provision for a number of social security programs which give effect to the Government's desire to assist people to overcome hardship and insecurity in ways which ensure that they retain the maximum scope for independence and achievement. The Government's long term objective is to encourage the development of an Australia in which people can have maximum freedom and independence so they can achieve their own goals in life in ways they themselves desire. The Bill makes provision for the following:

Increases in the standard and married rates of pension and benefits;

The incorporation in legislation of the automatic adjustment of standard and married rates of pensions and benefits each 6 months;

The introduction of an income test for pensions replacing the existing test on both income and assets;

An increase in the rate of the handicapped child's allowance;

Validation of existing procedures for payment of unemployment and sickness benefits in fortnightly instalments.

The total cost of the proposals contained in this Bill is $145m in 1976-77 and $222m in a full year. The total number of pensioners and beneficiaries who will directly benefit from these provisions is more than 1 850 000. The total payment by way of pensions and benefits that will be made this financial year is estimated to be $5, 178m which is a 32 per cent increase over payments in the 1975-76 financial year. This demonstrates the Government's determination to ensure that those in real need are assisted.

Pension and Benefit Increases

The Government has given a commitment to protect social security pensions from erosion by inflation through automatically adjusting pension levels each 6 months according to the movements in the consumer price index. In keeping with this commitment the standard and married rates of pensions and benefits will be increased by the percentage increase in the consumer price index for the March 1976 and June 1976 quarters. The standard rate of pension for aged persons, invalids, widows and supporting mothers, will accordingly be increased by $2.25 a week to $43.50 a week. The married rate of pension will be increased by $2.00 a week to $36.25 a week, that is from $68.50 to $72.50 a week for a couple.

These new rates will be payable from 11 November 1976. This will mean that the 2 pension increases announced for 1976 by the Government total $4.75 per week for the single rate and $8 per week for the combined married rate. In the case of age pensions this will require additional expenditure of $277m in a full year, bringing the total to approximately $2,485m at the end of the 1 976 year in respect of 1 .2 million age pensions.

Unemployment and sickness benefits will be increased similarly except for unmarried persons under 18 years of age who will continue to receive $36.00 a week. The rate of unemployment and sickness benefits payable to unmarried persons aged 1 8 years or more will be increased by $2.25 a week to $43.50 a week. The rate payable to married persons will be increased by $2 a week to $36.25 a week. The rate of additional benefit payable in respect of a dependent spouse will be increased by $2 a week to $36.25 a week. These new rates for unemployment and sickness benefit will operate in respect of payments due on or after 1 November 1976.

The proposed increases will also apply to 5400 handicapped persons receiving sheltered employment allowances in more than 120 sheltered workshops in Australia. The Government has given a commitment to ensure that the value of pensions will be preserved in order to provide security to people in receipt of them. To do this we have promised and put into effect an increase in the rates every 6 months in accordance with movements in the consumer price index. We believe that it is important to legislate to make this 6-monthly increase automatic. For the first time since 1944 this Government is providing by legislation for automatic increases in social service pensions and benefits. This means that these 6-monthly increases will be paid without the need for further legislation.

In May of each year the standard and married rates of pensions and benefits will be increased by the percentage increase in the consumer price index for the immediately preceding September and December quarters. In November the rates will be increased by the movement in the consumer price index for the preceding March and June quarters. The automatic adjustment provisions will not apply to unemployment and sickness benefits payable to persons under 18 years of age or to payments such as mother's and guardian's allowance, additional pension and benefit for children and supplementary assistance and allowance. The Bill contains a provision which ensures that pensions will not be reduced as a result of the application of automatic adjustments.

New Income Test to Determine Pension Entitlements

The Government gave an undertaking that it would move toward replacing means tests with an income test with a view to not penalising those who have saved. The Government saw this as an opportunity to eliminate much administrative complexity. We are now taking steps to achieve this aim which we are confident will be of great assistance to persons reliant on pensions. Honourable members will recall the comments made by Professor Ronald Henderson in his first main report on poverty where he considered that the existing means test which determines eligibility includes 'a treatment of assets which is a relic of far less generous days', and he recommended that the treatment of asset incomes for pension purposes should be no different from the treatment of other incomes.

In keeping with the Government's determination to see that the recommendations of each of the poverty reports are carefully studied and assessed and implemented wherever possible, the Government has adopted Professor Henderson 's suggestion. Under the existing eligibility test for pensions, which applies to all pensioners under 70 years of age except blind pensioners, it is obvious that the 'means as assessed' system of combining income and assets or property into a single figure for means test purposes involves anomalies and the Liberal-National Country Parties social welfare policy provides for this to be altered to an 'income only' eligibility test.

At present, for the purpose of determining the rate of pension payable the total value of assets is brought into account by adding a notional 10 per cent of the estimated value of assets to any other income, other than income from property, which a pensioner may have. This has meant that before becoming eligible for a pension many people may have run down their assets, except for their house and car, which are exempt. One anomaly arising from these arrangements has been that a person who has invested funds in a valuable home received a full pension, whereas another person with the same funds invested in non- exempt assets might receive little or no pension, despite possibly having to pay for his accommodation. To remove the anomalies from the present arrangements the Bill replaces the existing means test with a test on income only, including income from assets. The new income test will come into effect on 25 November 1 976.

This measure will mean a simpler and more easily understood test of eligibility for pensions. It will also be of assistance to people whose asset holdings are too high to permit payment of a maximum rate pension, or even a reduced rate pension under the existing means test, but produce little by way of income and therefore may entitle the person to additional pension when the new income-only test is applied. Pensioners who will benefit from this change will include those receiving a part pension only who are currently earning less than 10 per cent on assets such as shares and debentures. In addition, some people disqualified from eligibility for pension under the existing means test may now be eligible as a result of the new test. Let me give one example for the information of honourable members. I will take the case of a single pensioner with assets of $20,800 providing a return of 8 per cent per year and with no other financial resources. Under the existing means test the maximum rate of pension is reduced by $500 a year or approximately $9.50 a week, giving a pension payable of approximately $34 a week. Under the proposed income test the pension will be reduced by $312 a year or $6 a week, giving a pension payable of approximately $37.50 a week. This means an increase of $3.50 a week in pension.

This progressive change, when considered in conjunction with the increases in pension rates to take effect from 11 November 1976 will mean that a single age or invalid pensioner without a child will, regardless of his assets, retain some pension eligibility until his income, apart from pension, reaches $ 107 a week or $5,564 a year. A married pensioner couple without a child would not have their eligibility extinguished until their combined income, apart from their pension, reached $179.50 a week, or $9,334 a year. The result of the 2 pension increases that the government has announced for 1976 means that the limit has increased from $5,070 to $5,564 for a single pensioner, and from $8,502 to $9,334 for a married pensioner couple. The Government has given special consideration to the situation of pensioners who are currently earning more than 10 per cent on their assets. A savings provision is included in the Bill to ensure that such pensioners do not have their existing pensions reduced as a result of the change from the present means as assessed system to the new income only test. Pensioners in this situation will still receive the full increase to be paid on 1 1 November 1976. After the 1 1 November adjustment, where the pension being paid exceeds the pension entitlement calculated under the new income test, the 1 1 November rate will continue to be paid but future 6-monthly increases in pension will not be passed on to the pensioner until the excess entitlement has been absorbed.

For example, let us take a married pensioner couple with earnings of $40 a week and assets of $30,000 providing a return of 14 per cent per year. Under the existing means test the maximum rate of pension is reduced by $801.50 a year or approximately $15.40 a week, giving a pension payable of approximately $20.85 a week. Under the proposed income test, pension will be reduced by $1,121.50 a year or approximately $21.60 a week, giving a pension of approximately $14.65 a week. This is a decrease in pension of $6.20 a week. The savings provision will enable pension to continue to be payable at $20.85 a week until such time as future 6-monthly increases absorb the difference of $6.20 or until the pensioner becomes eligible for a free of means test pension at age 70. Naturally the figures in the examples I am quoting apply so long as there is no change in the pensioner's financial circumstances which may in itself lead to a change in pension entitlement.

This procedure will also be adopted in the case of people in receipt of superannuation who have been specially assisted by a provision which has enabled them to capitalise their superannuation pensions. At present, if it is more favourable to the pensioner, the annual rate of superannuation is given a capital value and treated as property rather than income in the assessment of pension entitlement. People who have been receiving this concession will be paid their 1 1 November 1976 pension increase in accordance with the present method of calculation. Thereafter, as for pensioners with actual current income in excess of 10 per cent of the value of their assets, their pensions will not be increased until future 6 monthly adjustments have absorbed the excess between the 1 1 November 1976 pension and the pension entitlement as calculated under the new income test system.

The new income test will also apply in determining eligibility for pensioner fringe benefits provided by the Commonwealth Government, including a pensioner health benefits card. A single person, without child, will qualify for fringe benefits provided his income, other than pension, is less than $33 a week. A married couple, without child, will qualify provided their combined income apart from pension, is less than $57.50 a week. Savings provisions will ensure that no pensioner loses an existing entitlement to fringe benefits solely as a result of the change to the income test. The Government feels that the introduction of the income test is a positive step towards eliminating administrative complexity and will greatly facilitate public understanding in a difficult area.

Handicapped Child's Allowance

The handicapped child's allowance is to be increased from $10 to $15 a week. The handicapped child 's allowance is particularly designed to help the parents or guardians of severely handicapped children under the age of 16 years who need constant care and attention and who provide this care in the family home rather than place the child in an institution. Payments of this allowance are made at 4-weekly intervals and the first payment at the new rate will be made on 30 November 1976 with effect from 2 November. This allowance is currently being paid to the parents or guardians of over 19 000 severely handicapped children who care for the children at home.

As announced on 17 August new medical guidelines have been worked out in consultation with the Department of Health. One aspect covered by the new guidelines is the position of infant children. Up to now the view has been taken that in some instances a severely handicapped infant required no greater degree of constant care and attention than a conventional infant and therefore it was not possible to grant handicapped child's allowance. The new guidelines will provide that where an infant child is diagnosed as having a physical or mental disability, by reason of which he is likely to qualify as a severely handicapped child within the terms of the legislation, eligibility will be conceded.

Fortnightly Payments of Unemployment and Sickness Benefits

Honourable members will be aware that it has been the practice for some considerable time to pay unemployment and sickness benefits at weekly intervals. The large increase in numbers of beneficiaries during 1975 had made it a very difficult task to avoid errors and delays in maintaining a weekly processing cycle. With the concurrence of the Treasurer (Mr Lynch) a fortnightly payment cycle was introduced from

March 1976 as an experiment. This proved successful and approval has now been given to its permanent adoption. This Bill validates that procedure.

In the past, payment of unemployment and sickness benefits has been related to a 6-day benefit week. A further amendment provides for payment to be related to a 5-day benefit week. The daily rate of benefit shall be one-fifth in lieu of one-sixth of the weekly rate. This practice which was introduced in conjunction with the fortnightly payment cycle experiment brings payment into line with the 5 -day working week.

Expenditure

The estimated additional cost of increasing pensions and benefits in November is $135m in 1976-77 and $206m in a full year, bringing the total cost to $4, 120m in 1976-77 and $4,326m in a full year. The increase in the handicapped child 's allowance from $ 1 0 a week to $ 1 5 a week is estimated to cost $3.4m in 1976-77 and $5.2m in a full year, bringing total expenditure to $14.1m in 1976-77 and $15.9m in a full year. The change from the present means test to a straight income-only test is estimated to cost an additional $7m in 1976-77 because of the additional pensions that will be payable as as result. As. mentioned earlier transitional arrangements will ensure no existing pensioner will suffer a reduction in pension as a result of the change. The Government is confident that the introduction of these measures will be of great assistance to pensioners and I commend the Bill to the House.

Debate (on motion by Mr Scholes) adjourned.







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