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Thursday, 12 March 2009
Page: 2498

Mr BRENDAN O’CONNOR (Minister for Employment Participation) (12:43 PM) —I move:

That this bill be now read a second time.

The amendments proposed by this bill will help people who lose their job, and others applying for income support who have limited assets, to access income support more readily by lifting the liquid assets waiting period thresholds. The proposed changes will affect people applying for Newstart allowance, youth allowance, Austudy and sickness allowance.

In determining whether and when a person can start to receive income support payments, Centrelink consider the liquid assets that person has available to them. Liquid assets are generally sources of money available to a person at relatively short notice. They include cash on hand, shares and debentures and term deposits. It does not include superannuation or termination payments that have been or are going to be rolled over into superannuation.

Currently single people cannot receive income support payments until they have less than $2,500 in liquid assets. Single people must wait a week for every $500 they have over $2,500 up to a maximum of 13 weeks.

Couples, or people with dependants, are not eligible to receive income support until they have less than $5,000 in liquid assets. They must wait a week for every $1,000 they have over $5,000 up to a maximum of 13 weeks.

These thresholds are a consequence of a savings measure taken by the previous government in the 1996-97 budget to further restrict access to income support payments. This savings measure, which took effect from September 1997, halved the liquid assets waiting period thresholds from $5,000 to $2,500 for singles and from $10,000 to $5,000 for couples and people with dependants. These thresholds have not been changed in over a decade.

At the time the previous government made these savings measures, they were roundly criticised by welfare and church organisations and peak representative bodies, as well as by the then Labor opposition. The measures were seen by many as harsh, regressive, unnecessary and without genuine foundation in policy. The previous government ignored the concerns raised about this issue throughout their years in office.

This bill effectively reverses the decision of the previous government taken in the 1996-97 budget. It will restore the pre-1997 threshold amounts so that single people with liquid assets of less than $5,000 and couples or people with children with liquid assets of less than $10,000 will not have to serve a liquid assets waiting period. These thresholds will apply for a two-year period from 1 April 2009 to 31 March 2011. A review will take place in a year to consider the effectiveness of the thresholds proposed by this bill. The review will include consultations, which is in stark contrast with the approach taken by the previous government in 1996-97 when it decided to reduce the thresholds.

When the previous government made their regressive changes, we told them it was unfair. It remains particularly unfair in the current economic circumstances to make people, many of them unemployed for the first time, jeopardise their ability to meet their ongoing financial commitments.

The government’s decision to reverse the position of the previous government by doubling the liquid assets waiting period thresholds is an appropriate response to the extraordinary nature of the current economic circumstances resulting from the global financial crisis.

In keeping with the government’s commitment to fairness, the bill also excludes the surrender value of life insurance policies from the definition of liquid assets.

The surrender value of a life insurance policy is the amount an insurance company will pay an insured person if they cancel the policy voluntarily—that is, before they die. It is, in effect, the person’s equity in that insurance policy.

Presently, people who hold life insurance policies that have a surrender value are expected to cash in their policy in order to support themselves before being able to access income support. Cashing in the surrender value of a life insurance policy disadvantages the policy owner as the surrender value is generally well below the amount paid in premiums. The person’s family or other estate beneficiaries may be further disadvantaged in the future by no longer having life insurance cover in the event of the person’s death. In effect, this penalises people who have taken responsibility for their family’s future.

It is unreasonable to expect a person to realise the surrender value of their life insurance policy in order to support themselves while they serve a liquid assets waiting period or before being able to access the severe financial hardship provisions that enable access to income support.

The proposed amendments will exclude life insurance policy surrender values in calculating any applicable liquid assets waiting period or determining severe financial hardship for the purposes of eligibility for income support. This amendment will ensure that people applying for income support are not disadvantaged by having to cash out their life insurance policies before they can access income support.

Australians who apply for income support will still rely on their own resources before seeking assistance. The measures in this bill balance this with fair and reasonable access to income support for people facing the difficult circumstances of unemployment during the current global financial crisis.

Debate (on motion by Mr Hartsuyker) adjourned.