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Thursday, 21 March 1985
Page: 594

Senator GIETZELT (Minister for Veterans' Affairs)(5.07) —This debate on the Social Security and Repatriation (Abolition of Assets Test) Bill 1985 is the culmination of a long debate. It is 18 months since the Government introduced in the 1983 Budget its proposal to impose an assets test. We have seen attempts by the Opposition, by Senator Messner in particular, to create not only opposition to the Government's proposals, but also a great deal of confusion and concern unnecessarily in the Australian community. The Opposition senators who spoke and asked questions on this matter in the intervening period sought to suggest that the Government was introducing legislation that was discriminatory, which suggestion was repeated by the previous speaker; that the Government was introducing legislation which would cost more than it was worth and which would employ a great bevy of public servants; and that the Government would raise no funds at all. Senator Grimes and I were subjected to searching questions and debate about the sums of money which the Government would collect in its attempt to have a redistribution of wealth and to establish a system under which, by the standards of the Opposition parties, people should be able to provide for their own existence and subsistence. Everything that has happened since those accusations were made has justified the Government's position. We have seen unprincipled, unmitigated and hypocritical attempts by the Opposition to misconstrue and thereby to confuse the very sections of the community that it believes ought to be protected.

It is amazing that in the operation of assets test legislation the projections of the Government have been more than adequately reached. The early results have completely vindicated the Government's approach. We said that we would be concerned with those sections of the Australian community in the welfare area-and I stress that the welfare area means the two and a half million Australians who rely almost entirely on government benefits for their existence and their living standards-and our position has been vindicated and our projections have been reached. The savings have been made, they are substantial, and are very close to the estimates that were made.

It will be remembered that the Prime Minister (Mr Hawke) suggested that something like 2.2 per cent of the Australian people in receipt of government benefits in the form of welfare payments would be affected. That was an estimate which was subsequently reached-it was something around 2.4 per cent. That was a remarkable achievement, in view of the limited information on pensioner asset holdings that was available during the planning stage of the assets test. We said at the time that only a small minority of pensioners would be affected. I said that only a small proportion of service pensioners would be affected by the test and that the great majority would be completely unaffected in the ultimate, that is, when the savings were recorded and made. I said that the great majority of beneficiaries would receive their benefits as scarce welfare funds were redirected to the genuinely needy. In respect of my Department I said-and I was subjected to numerous questions on this-that something like 15,000 people could be affected by the assets test. As it turned out, 13,387 had their service pensions affected; 6,494 were cancelled and 6,893 were reduced. As we predicted, this has shown that more than 90 per cent of those in receipt of pensions are unaffected. That has been borne out by the facts. It was a great relief when the average pensioner found that he did not even have to return the first form that was sent out. I was derided by Opposition senators when I said that something like $30m would be saved by the Department of Veterans' Affairs. However, today's estimate shows that $29.5m has already been saved in the first operation of the scheme. We believe that in addition to that, because of wealthy pensioners-those with considerable assets-there will be a saving of $10m on the amount projected on the basis of the way in which the graph was moving up in 1984. That is, the would-be new applicants have not bothered to apply because they have realised that the Government's legislation means that their applications would not be worth while.

We were told that the administrative costs would outweigh the savings, but that of course has been proved wrong. The Government's estimations were correct and the Opposition's projections have been destroyed. The administrative costs in my Department have been only $3m in the year, and that takes account of the number of treatment savings as well-service pensioners are able to avail themselves of treatment facilities. The total savings in a full year will be between $40m and $45m in my Department. As the Minister for Social Security (Mr Howe) has indicated, his savings will be approximately $100m.

I listened yesterday to three maiden speeches and I have also noted the speeches of other Opposition members over the last year or two, all of whom have gone on the public record as preaching economic restraint and calling on the Government to implement a reduction in the deficit and to reduce the size of government. They have taken the philosophical position of small government, a reduction in public sector spending and the like. One finds it difficult, therefore, to appreciate this because the Opposition parties do not seem to know where they are going or to have any understanding of fiscal responsibility. They have not suggested where there should be cuts in public sector spending, and when the Government does take steps to realise that objective, we are subjected to opposition of the type that Senator Messner in particular has introduced. We have seen an irresponsible attempt by the Opposition parties to make short term political gain by abandoning their so-called philosophical position.

As other speakers have said, if it is good enough to have a means test in respect of incomes-and that has always been associated with welfare payments-it is good enough to apply the same principles to assets. Senator Collard made a great deal of critical comment about assets being taken into account, but up to 1976 the means test was in the pensions legislation and no attempt was made to abolish it. If it is good enough to have an incomes test in respect of welfare payments, it is proper also to have regard to assets, because it is from assets that one gets income. As the whole legislation has unfolded and as we have seen its development, it has been understandable that the pensioner communities at large have moved from being somewhat concerned, as a result of the propaganda and the attitudes taken by the Opposition and some sections of the media, to a position where they now accept that the Government's propositions were sensible, fair and reasonable, having regard to the Government's overall strategy of reducing the deficit and directing welfare funds where they should go-that is, to the needy. It is not hard to appreciate the position of the Australian Council on the Ageing. The Chief Executive Officer, Mr Cliff Picton, has said that the figures have vindicated the Council's support for the assets test when it was proposed in 1983. He went on to say:

This order of savings in expenditure should enable the Government to keep faith with the poorest pensioners who rely on the pension payment as their sole income. It is hoped that the Government will now move quickly to honour the election promise to increase pensions to 25 per cent of average weekly earnings.

Of course we cannot do that unless we either have more taxes or take away benefits from other sections of the Australian community. The Government in its wisdom-I believe correctly so-has taken the view that there were sections of the Australian community who were able to accumulate sufficient assets in their lifetime to provide for their retirement. We pay credit to them. Therefore, I find it hypocritical that Opposition senators, who purport to stand for fiscal restraint and needs-based welfare, should abandon their so-called principles at the slightest scent of some political advantage. This puts in a revealing light their supposed reaffirmation of liberal philosophy that we have heard so much about during their recent alpine frolic at Thredbo. Of course, one has to look at their public position.

I remind the Senate what the present Leader of the Liberal Party said when he made his run for the leadership against Mr Fraser back in April 1982, almost three years ago. He said that the success of the Liberal Party depended on imaginative, growth oriented policies and political leadership with a capacity and a will to understand and to relate to the community. When he was talking of social services, what did he say? He said that government had a clear duty to protect and assist those in genuine need. He favoured a fundamental reform of taxation and government expenditure. He said that claims on the public purse needed to be rigorously assessed on the criterion of meeting genuine social need. Of course, he was only re-emphasising what a previous Liberal Treasurer had said a short time prior to that when he referred to the millionaire pensioners.

We are aware that millionaire pensioners have been beneficiaries of both the Department of Social Security and the Department of Veterans' Affairs. It is improper for those people to have access to a needs based welfare system when we have two and a half million people living on something like $160 a week and enjoying meagre assistance in the form of fringe benefits. The Government, committed as it is in the prices and incomes accord to raise living standards, saw the need to make sure that our welfare system was based on need. It set out to save sufficient funds so that we could meet our important political and moral commitments to raising the living standards of those who rely solely upon the welfare payments from the Commonwealth Government.

I remind honourable senators opposite that the service pension is a welfare payment. It is the age pension paid five years earlier for those who serve in a theatre of war. The Government has a commitment to that section of the veteran community. But, as I indicated recently in a speech in Queensland, the figures show that 92 per cent of those in receipt of a service pension receive less than $50 a week on top of their base pension. In fact, 49 per cent of those in receipt of the service pension have no supplementary income whatsoever. The Government, committed as it is to the redistribution of welfare and the raising of living standards, had set about the process of saving money and taking from those who were able to provide for their retirement in order to meet its commitment to raise the standard of living to 25 per cent of average weekly earnings. Our capacity to assist people to live in dignity is governed to a great extent by our success in ensuring that scarce welfare funds are not frittered away on those who have substantial independent means. That is why there is very little protest from pensioner organisations and organisations such as the Australian Council on the Ageing.

Senator Haines has said that the income test is 'the most inequitable system that any political party ever devised for determining those eligible for the pension'. If that is a fair comment, and I suggest it is, it is equally equitable to have a system applying to a person's assets. Service pensioners themselves have co-operated fully with the test procedures. Barely one per cent of the forms sent out in my jurisdiction are still to be returned. About 70 per cent of those losing the pension just ticked the box when they sent the forms back to the Department because they realised that their assets were in excess of that determined by the legislation. They did not bother to argue the toss; they realised that they were in the area to be affected and were prepared to accept it. I think that, in itself, by and large establishes the validity of our policy.

The Government took the hard and principled decision in respect of the assets test. I believe that any government worth its salt, when it viewed the growth in the welfare payments and the age component which is growing rapidly in the Australian community, would have acted responsibly, whatever its political colour. I believe that the previous Ministers for Social Security and Veterans' Affairs would have been forced to take somewhat similar action to that which this Government took, having regard to the tremendous growth in government spending in these areas. I pointed out previously that Senator Messner said three years ago:

All welfare, whether in aged or repatriation areas, should be based on need.

He warned that, with big proportional growth in the number of aged expected, looking after Australia's aged would become more and more expensive. What did the current Leader of the Opposition (Senator Chaney) say in this place when he was the Minister for Social Security? He said:

I am concerned that since the change from the means test to the income test in 1976, there appears to have been a marked increase in the number of people, some with quite substantial amounts of money, who are contriving to make themselves eligible for the pension by participating in artificial income-avoidance schemes and by placing significant sums in non-interest-bearing accounts. Such practices restrict the Government's ability to provide assistance to those in genuine need.

That was exactly what I pointed out in the early days of the debate on the assets test. On another occasion in 1981 he said:

The Social Services Act already contains provisions which are designed to counter attempts to circumvent the income test. However, due to the proliferation and active marketing of sophisticated and contrived schemes in recent times, these provisions have been found to be inadequate in certain respects.

He said on another occasion:

There is a growing practice of avoiding income for pension purposes, or even more commonly for pensioner fringe benefits. There is no essential difference regarding these income-avoiding schemes (which are designed so as to obtain a pension), as far as the general community effect is concerned, between this and tax avoidance. It is, quite simply, the welfare face of the income-rigging coin.

We have plenty of evidence that the Opposition parties were aware of this problem. Former Treasurer Lynch, a senior member of the former Government, Mr Peacock, Senator Chaney, Senator Messner, Senator Dame Margaret Guilfoyle and many others are on the public record drawing attention to the magnitude of the problem. But it took this Government to have the courage to do something about it. Contrary to what was said in the intervening period since the 1983 Budget, the Government's stand has been vindicated. Substantial savings have been made and those savings will result in due course in a higher standard of living. We have had statements from a whole range of other public minded citizens. The Executive Director of the Business Council of Australia said almost a year ago:

The government deserves support for attempting to tackle this politically difficult problem now. . . It is important that the government gets community support for tackling the hard and thankless task of expenditure restraint through means testing welfare.

It would be disappointing if any sector of the community, through vested interest or for short term political advantage, were to make the test of reform more difficult.

Senator Haines of the Australian Democrats referred earlier in the debate to what was said by Alexander Downer, who I understand is now a South Australian Liberal member of the Parliament. He said:

The latest version of the assets test proposed by the government offers a much more equitable formula than has previously been produced.

I pay tribute to those public-minded citizens who sat on the assets test panel, who looked at the problem and who came up with certain recommendations for the Australian Government. Mr Downer went on to say:

It would be folly . . . to reject the asset test outright, as it is the only avenue which leads to effective control over the spiralling costs of retirement policies.

One could go on and on with statements from the Confederation of Australian Industry, from John Elliott, who is another prominent member of the Liberal Party of Australia and from many other public figures, including officials from the Young Liberal Movement such as Mr Birrell and Mr Crawford. They all talk about the need for government to have a needs-based welfare system.

In the few minutes I have left to speak on this matter I want to take up the point raised by Senator Collard who, though properly concerned, has over-emphasised the problems facing those who live in rural communities. For example, about 160 people have appealed through my Department to the review panel on the basis of hardship relating to rural properties. I understand that several hundred are also involved in appeals concerning the Department of Social Security.

The assets test legislation asks that the 15 per cent who it is perceived may have assets in excess of the amount set down in the legislation, fill in a second form. In probably less than 1,000 cases is there conflict between the assessment made by the pensioner of the value of property and the assessment made by the valuer appointed by the Australian Taxation Office. Of course those cases will now go to adjudication, to arbitration, to establish whether the assessment of the owner or the assessment of the valuer from the Taxation Office is correct. In the event of the matter not being resolved it is proper, in the interests of both the applicant or pensioner and the Government, that some other valuation be established. I reiterate that the Government is committed to what the Prime Minister said: No Department of Social Security-I can add Department of Veterans' Affairs-inspectors will be going into pensioners' homes. But if we have to resolve a conflict of assessments of the property owner and the Taxation Officer valuer, obviously there will need to be another assessment. How we reach that point in a way that does not invade the privacy of the individual and does not involve intrusion into the home but does reach a solution may need some consideration.

We have two and a half million pensioners and we have less than 1,000 appeals based on hardship. We are trying to establish a system by which the matter will be satisfactorily resolved. The great majority of cases have already been resolved because in excess of 90 per cent of pensioners have not been affected at all. Only a very small number of cases, probably around 0.001 per cent, still involve a conflict between the application of the legislation and the owner of the property. That problem has to be resolved. We have to work out a system by which the interests of both parties are protected. I assure the Senate that in no way will we be intruding upon the privacy of any person, but we will probably have to revert to a third party for valuation. Senator Collard asked why we could not use the valuations of the Valuer-General in each State or of valuers from local authorities. That is fair comment, except that we are aware that in various parts of rural Australia there are great differences in valuations from one year to the next; there are variables which are not easily identified. Some States have a two-year valuation and some have a one-year valuation. This is important because a $10,000 variation in the value of a property may affect whether a person maintains his pension or loses a portion of it. The Government is committed to finding a sensible formula that will in no way disadvantage pensioners if there is a difference of opinion relating to a valuation so that it will have the co-operation and understanding of everyone affected.

I finish as I began by saying that the Government's projections in respect of the assets test have been borne out. There will be a considerable saving; we are talking now of around $140m or $150m. In due course that money will be allocated back to the two and a half million pensioners. Considerable advantage will go to the overwhelming majority of those people who rely for their livelihood upon a pension or benefit, whether it be a social security or service pension or benefit, and that will meet an important social and political commitment for which this Government stands.