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Thursday, 19 June 2003
Page: 17008

Mr FARMER (11:36 AM) —The Superannuation (Government Co-contribution for Low Income Earners) Bill 2003 and the Superannuation (Government Co-contribution for Low Income Earners) (Consequential Amendments) Bill 2003 will help low-income families in this country in later life. They legislate for major changes and improvements to the superannuation policy of this government that will help low-income earners by encouraging them to save to build an asset base for their future. The bills also implement part of the government's policy statement, A Better Superannuation System.

During the 2001 election campaign, the government released A Better Superannuation System containing 13 proposed reforms to superannuation. Included in this was a promise to replace the low-income superannuation rebate with a more generous government co-contribution for low-income earners. In the 2002-03 budget the government committed to implementing some of these changes, including the changes before the House today. These bills will provide for contributions to be made by the government towards the superannuation of low-income earners.

The Howard government has always made every effort to ensure the elderly people of Australia can retire comfortably after their years of hard work. These bills are about encouraging those who would not normally contribute to their superannuation to do so. They are about giving those on low incomes a leg-up to help them save for their future. But they are not based on a handout or a free ride. They are based on the principles of self-reliance and of a shared responsibility.

These bills replace an existing superannuation rebate for low-income earners with a more generous and flexible system. Under the current system, those on low incomes are entitled to a maximum rebate of $100, which is 10 per cent of any contributions they make up to a value of $1,000. This maximum rebate applies to those on or below $27,000 and tapers off in the case of those on incomes between $27,000 and $31,000. As part of the government's commitment, we are offering further incentives to those on low incomes to offer them a better retirement in later life.

We are building on the principle of encouraging all Australians to save for their future, no matter what they earn. These bills will replace the old rebate of $100. Instead, the government will match dollar for dollar the contribution made by the employee, up to a maximum of $1,000. If, for example, a person earning $20,000 per year contributed $1,000 from their gross wage, the government would match that $1,000 contribution. This contribution will taper off for those on incomes between $20,000 and $32,500. Here the $1,000 maximum is reduced by 8c for each dollar over $20,000.

There are two options for the administration of these bills on the table. Firstly, low-income earners can automatically get a co-contribution from the government paid into their superannuation fund or retirement savings account without any hassle. This electronic payment method will mean there will be minimal changes needed for the superannuation funds and for the government when this scheme is introduced. Under the rebate system that currently exists, it is possible that a person who does not fill in a part of the form or is unaware of it may not get any rebate that year. However, this option will still be available under the new scheme for those who wish to do this.

This new scheme will be assessed on an individual's income, not on the joint income of the household. This will have a significant impact in my electorate of Macarthur, where there are 78,150 workers between the ages of 15 and 54, according to the 2001 census, and, of those, 36,609 workers earn under $20,000 per annum. This means almost 40 per cent of my electorate could benefit from the scheme on a dollar for dollar basis. That is why I am so keen to support this measure, which I know will be well received by and very beneficial to the people of my area.

On top of this, around 8.5 per cent of the people in Macarthur will be eligible for the government co-contribution of 50c for every dollar that they contribute. Take one of the 36,000 people in my electorate earning $20,000 or less per year as an example of how effective this scheme can be. If that person were to make a personal undeducted superannuation contribution of $19.25 or five per cent of their gross weekly pay, they would be contributing $1,000 a year to their own long-term future. Under this scheme, the government would match that to the tune of $1,000 each year as well. Take this amount over an average working life of 35 years, and add an average return of four per cent above the inflation rate and you have a contribution by the government of $36,575 to that person's savings. This is on top of the $36,575 they would have contributed themselves. It means they would have over $70,000, in today's terms, to use in their retirement or to pass on to the next generation. That is $70,000 in wealth that could be turned into $70,000 worth of assets in their retirement or passed on to future generations. These are savings that they would have been unlikely ever to have without this scheme, and it has all come from putting aside less than $20 from their pre-tax wage each week.

I listen to the people of the western suburbs of Sydney, and they tell me that small-income earners of this country need the support of this government. They need to have access to the wealth of this country and, unless action is taken, many people will never own a home or have any major assets. We need to break this cycle. I share these sentiments. As somebody who grew up in a housing commission home in western Sydney, I watched my parents struggle to save and acquire any major assets. I know what it is like to see a generation of a family that has almost no material wealth to show—no home and no car.

I also know from personal experience what it is like to try and survive on an apprentice's wage and to save for the future. I soon learned the hard reality of balancing a budget when I left school and took up my first job as an apprentice motor mechanic at the age of 15. While I struggled and managed to put aside something for my future, many around me were unable to. It is these people that this scheme will be most attractive to. It will plant the savings seed in them and encourage them to make the effort to get ahead in later life.

Schemes like this would have been perfect for my own family and would have ensured they had some assets with which to retire and to pass on to the family or for them to just enjoy the security in their later years. It is the great Australian dream to own your own home. Families feel they have really achieved something if they have done that. The reason why they feel so satisfied when they own their own home is that they have a sense of security—just to own an asset, just to have something behind them. I am not pretending to say that the amount saved by this scheme will pay for our security, but certainly it is a big help.

The government co-contribution scheme will give the low-income earners of Campbelltown and Camden—indeed, those in all of the Macarthur region and in all similar areas throughout Australia—the incentive and encouragement that they need. I am sure that every member in this House would agree that it is a great incentive and will encourage low-income earners to save money, especially when this money can be used towards their children's future or to simply give them security in later retirement.

I look forward to bipartisan support from the members opposite. This government feels that it is only just and proper that the low-income earners in this country, after working hard for their whole lives, can have something to show for their hard work, be it for their own future or for their children's future. That is why I strongly commend these bills to the House. It is a sensible and practical approach that will help thousands of low-income families, like those in my electorate of Macarthur, to create a nest egg for their future. It is the type of program that is much needed in this country.

It is often said that this government is not hearing what people on the ground are saying. It is often said that it is not in touch with low-income earners, with people out there on Struggle Street, who are trying hard to secure a future for themselves and are trying to break the poverty cycle for future generations. These bills show that the government is in touch with people in those communities and it is sensibly trying to do something about that. It is working hard towards trying to provide not only a nest egg but, as I mentioned earlier, some real security for people in their later lives so that they can feel comfortable in their retirement and be able to move on from those points to help support their children and their children's children in later years.

This is an important amount of money—it is a serious amount of money for people in my area. As I mentioned earlier, 40 per cent of the people in the Macarthur area earn the amount of money needed to qualify for this program—around $20,000 per year. It is very important that these people are supported, and the government is showing this. By simply contributing a small amount of their pre-tax wage, people can make a real difference to their later lives in retirement. I commend these bills to the House.