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Thursday, 4 December 1986
Page: 3335

Senator MICHAEL BAUME(10.39) —The Opposition does not oppose the Superannuation Legislation Amendment Bill (No. 2), but it will be seeking to amend the second reading motion by adding the following words:

At the end of the motion, add: ``, but the Senate is of the opinion that the Government has failed to apply adequately the provisions of the Superannuation Act relating to the payment of invalidity pensions, thus causing a significant loss of revenue to the Commonwealth''.

This legislation is aimed at containing the rate of invalidity retirements and associated costs under the Commonwealth superannuation scheme. The simple fact is that it goes nowhere near reaching anything like a reasonable level of containment. In fact, it is a largely phoney gesture which is aimed at seeking political benefit but does very little to stop the incredible rip-offs in the area of Commonwealth Public Service invalidity that have been revealed by the Waste Watch Committee that I chair.

Let us deal, first of all, with what the Government says it is doing. It says it is containing the rate of invalidity retirement and associated costs. It says:

As part of that initiative, this Bill contains provisions which will require invalidity pensioners under the scheme to report any employment. Invalidity pensions will be adjusted where annual earnings exceed a specified limit.

It then goes on to reveal:

Of the 74,000 Commonwealth scheme pensioners, 28,000, or almost 38 per cent-

that is, more than one in three. It goes on:

receive invalidity pensions . . . Invalidity pensions offer higher benefits than those otherwise obtainable on early age retirement.

It is interesting that, if 28,000 receive invalidity pensions-the average pension, I believe, is around $15,000-about $420m a year is being paid in invalidity pensions under the Commonwealth Public Service scheme.

The second reading speech of the Minister for Community Services (Senator Grimes) says:

A survey of Commonwealth scheme invalidity pensioners conducted earlier this year by the Australian Government Retirement Benefits Office and the Australian Bureau of Statistics has indicated that 12.4 per cent-

that is, one in every eight-

of invalidity pensioners under 65 years of age were employed sometime during 1985.

One in every eight people who had been invalided out of the Commonwealth Public Service had nonetheless been able to get jobs somewhere. The average earnings of those employed was $4,540 and the average pension paid to them was $15,200. In some cases earnings from employment plus pension exceeded the salary that the pensioners would have received had they continued in their previous Commonwealth employment; so in some cases-I think it was only 1.3 per cent-people were better off. The Minister continued:

Invalidity pensions payable under the Commonwealth Scheme are based on the premise that the recipient is unfit to perform duties. The Government therefore considers it imperative that the invalidity provisions of the scheme should not provide a taxpayer financed supplement to those who engage in employment.

That is exactly what the Opposition has been saying for some time. It has been the burden of the Opposition's very strong attacks on the method of administration of the existing scheme and the reason that we have been providing so much detail of how many people are being invalided out of the Commonwealth Public Service compared with those who retire due to having reached retirement age.

Under this legislation, the Government will require those people who have been invalided out but who have not attained 65 years of age to provide information to the Commissioner for Superannuation regarding any employment in which they are, or intend to be, engaged during the year. Invalidity pensions payable to such persons will be reduced on a dollar for dollar basis where the aggregate amount of the pension and income from personal exertion exceeds a specified limit. Provision is also made in this legislation for invalidity pensions payable to persons who have not attained the age of 65 to be cancelled where the pension has been suspended for 12 months because the person failed to provide information on employment or failed to comply with a request to attend a medical examination which would establish whether he or she had been restored to health.

When I heard the second reading speech I was initially prepared to be a little self-congratulatory, saying: `Is it not good that the Government has done something to correct what the Waste Watch Committee had pointed out was a monumental rip-off?'. It is a monumental rip-off that is not new; it has been going on for some years. It particularly seems to go on when there is some restraint on Public Service levels and when many people who are surplus to requirement, perhaps, and who are not doing as good a job as the management in the bureaucracy would like, are forced out. There is no doubt that the invalidity retirement, which is much more rewarding than being retired in any other way at an early age, has been a convenient method of getting rid of unwanted public servants. The only problem is that it has been at massive expense to the taxpayer. There is a far greater benefit to the public servants involved. Naturally, it seems that in past years-there is no doubt that the figures were high under the previous Government as well-it has been more convenient for some sort of conspiracy to exist in the bureaucracy, and for some members of the medical profession to provide certificates, based on ailments that are very difficult to diagnose, saying that someone is no longer fit for work.

Neurosis has been the prime avenue for getting people out of the Public Service. They can retire on invalidity grounds with a high pension, but it is very hard to establish how genuine the neurosis is. Bad backs also rate high on the list. So there is no doubt that there has been a monumental rip-off of enormous dimension. I pointed this out at some length in a series of Waste Watch Committee releases. I will point out the extent of this rip-off, particularly in Victoria. We are aware that the number of people retiring through invalidity throughout the Commonwealth Public Service is greater than the number who retire because of reaching retirement age, but it is far worse in Victoria. There, twice as many Commonwealth public servants retire through invalidity as through reaching retirement age, which by the way is exactly the opposite to the situation in New South Wales where twice as many retire through reaching retirement age as through invalidity. I do not think it is simply because of the climate, differences in the codes of football, or whatever other differences exist between New South Wales and Victoria. It is clearly a matter of major concern that there is some kind of rip-off involved. The Waste Watch Committee pointed out that 309 public servants in Victoria retired last year from neurosis compared with only 95 in New South Wales, yet there are something like 10,000 more Commonwealth public servants in New South Wales than there are in Victoria. This needs an explanation. In other words, more than three times as many Victorian Commonwealth public servants became neurotic and unable to work as in New South Wales. These incredible Victorian statistics reveal an invalidity retirement rate per 100 contributors to the Commonwealth Superannuation Fund of 1.41 per cent compared to less than half that at 0.62 per cent in New South Wales. It is 0.71 in Canberra. So 1.41 per cent in Victoria is about double the Canberra experience and more than double the New South Wales experience. That is according to the latest annual report of the Commissioner of Superannuation.

The report also reveals some extraordinary differences between the invalidity experience in different government departments, with the Department of the Special Minister of State having an incredible ratio of five invalidities to every one age retirement. Apparently working in that Department with the Special Minister of State, Mr Young, has a serious effect on public servants' health. Many other departments have similar problems and where there is clear evidence that this kind of problem is persisting we outlined them in the current Estimates Committee hearings. Nothing effective has been done to stop it.

We thought that this legislation looked as though it was going to be a serious attempt to stop the rip-off that we have been calling for. In fact, we find that taken together the new provisions concerning invalidity pensions under this Bill are expected to result in net savings in excess of $4m per annum. As I have already pointed out, the total cost of invalidity pensions amounts to about $420m. In other words, this will save less than 1 per cent. This is the Government's great leap forward; it is one per cent of the task. To that extent I think it is reason- able for the Opposition to complain that the Government has not shown sufficient will, sufficient determination, to bring a proper end to this extraordinary rip-off. For example, I noted in the Senate Estimates committee hearing that these figures were unacceptable. I pointed out that in the Department of Immigration and Ethnic Affairs almost three times as many people were retiring through invalidity as through reaching the retirement age. The report of Estimates Committee B to the Parliament stated:

The Committee was also informed that under current arrangements there is a significant incentive for officers to be retired on invalidity grounds prior to their planned retirement age. The Committee wishes to express its concern about this matter and informs the Senate that it will continue to monitor the situation at future Estimates Committee hearings.

That bipartisan concern surely underlines the need for very effective action to take place, but it simply has not happened. We have an attempt to save one per cent of the money; a large proportion of which is clearly being ripped off. There has been no effective response to requests that this matter be looked into. I note that the Minister for Community Services said to me during the debate on the Appropriation Bill (No. 1) 1986-87 that he was concerned about some of these figures, particularly the figure I now raise with him. That figure confirms, if you like, the Government's lack of will. Already many methods are available to the Government to do something about the matter.

I noted earlier that the Department of Finance responded to questions in Senate Estimates committee hearings by revealing that already the Commissioner is empowered by section 74 of the Superannuation Act to require invalidity pensioners, who have not attained the age of 65 years, to provide information about employment and undergo medical examinations. There is a clear opportunity; there are clear rules under which the Government can, if it has the will, take a very strong supervisory role about the extent to which these systems are being ripped off, being misused. As I have said, in many areas apparently this is being done in a collusive way between the employee, the employer-in this case the management of the appropriate department-and the doctor involved who writes what can be described only as a pretty phoney certificate.

It is interesting to note that one of the great dynamic leaps forward in this legislation relates to requiring people to have medical examinations and failure to do so means the loss of the pension. Under section 74 we already have a requirement which has not been properly applied by this Government for people to undergo medical examinations and to provide information about employment. The Department of Finance continued in its response to the Senate Estimates Committee by stating:

If the Commissioner concludes . . . as a result of these examinations-that they are sufficiently restored to health to resume duty, he notifies the relevant employing authority and any subsequent re-employment action becomes an employer responsibility. If re-employment takes place in circumstances in which the pensioner again becomes an ``eligible'' employee for Superannuation Act purposes, the AGRBO is so informed by the employer and the pension is cancelled. Pension is also cancelled if a pensioner unreasonably refuses to accept an offer of re-employment.

Here the Government has clear power to do something about this rip-off; it has existed and nothing effective has been done. In fact the effort has diminished, as some figures which I will reveal in a minute clearly demonstrate.

The Department of Finance also stated:

An invalidity pension is also cancelled if an invalidity retiree becomes employed in a permanent capacity by the Commonwealth Public Service or a statutory authority as a result of a direct approach to the employer.

In other words, the employee does not have to go through the `restored to health' procedure. A table is provided by the Department containing statistics regarding the experience of AGRBO over the past four years with the review of invalidity pensioners. This is the review that is supposed to take place under existing legislation, which by the way has been only very moderately and modestly changed-a one per cent change as we have been seen from the figures, aimed at saving $4m out of a total expenditure of $420m.

Let us look at what has happened. In 1982-83, the last financial year of the previous Government, 936 medical examinations were carried out as required under the existing legislation that I read out. One of the Hawke Government's great achievements has been to reduce every year the number of medical examinations of such people. The number went from 936 in its first year in office to 565 in its second year in office and 356 in its third year in office. It has been cut by almost two-thirds. The number of people found fit for re-employment in the last year of the Fraser Government was 126 and the figure is now down to 27-from 126 to 27.

Senator Townley —It is a rip-off.

Senator MICHAEL BAUME —As Senator Townley says, it is a clear rip-off. There has been no will, no determination and no enthusiasm by this Government to save money when it is confronted with a clear and continuing rip-off which the taxpayers of Australia have to pay. On that simple question of the number of people found fit for re-employment, $1.5m is involved in that list. With the average annual superannuation invalidity payment being $15,000, if the number of people found fit for re-employment is reduced from 126 to only 27, about $1.5m a year is knocked off taxpayers' money. This table clearly indicates the lack of determination by this Government to do anything about the position.

On 18 November I asked for an explanation of why the existing procedures, which clearly save the Government considerable amounts of money in terms of people found fit for re-employment, people whose pensions are cancelled and so on, have not continued. I would like to know the answer to that question. I asked it of the Minister for Community Services, who is in the chamber at present. I got the impression from him that he also was concerned about it and would seek a response. As I said then, it does not give one much faith that the new arrangements being introduced to fix this problem will be effective if there is also no will behind their implementation. That is the essential point. We can legislate until the laws are coming out of our ears. For example, we legislated last night to give the Commissioner of Taxation additional powers because he had not used effectively the powers he already had and thus had to be protected by some extra law. Here we have clear evidence that existing legislation would have gone a long way towards clearing up this situation but it has not been used effectively. The rip-off has continued and clearly there has been a total failure to conduct medical examinations under the existing arrangements.

This would probably not be so serious if it were not for the fact that the experience within the Commonwealth Public Service is so outlandish compared to that in the rest of the community. The 1982-83 census of superannuation funds-which is out of date but later information confirms and increases the strength of the point I am making-reveals an enormous difference between the superannuation experience of the public sector, the government sector, and of the private sector in Australia. The percentage of public sector retirements due to disability ends up at something like 28.28 per cent when all the States are taken into account but in the private sector the figure is 8.14 per cent. In other words, the number of retirements and early retirements due to disability from public sector superannuation funds is something like 3 1/2 times worse than the number of such retirements from superannuation funds in the private sector. This enormous difference means that, in the first place, the Government should be alert to the problem. I seek leave to incorporate in Hansard the table I referred to showing the lack of will of the Government to undertake medical examinations.

Leave granted.

The table read as follows-






fit for Re-




by APS or



(Note 2)



(Note 3)






















1. In any one year, the figures relating to `examinations', `found fit', `re-employed' and `cancelled' do not necessarily relate to the same individual pensioners.

2. The `Re-employed' column includes both pensioners who are re-employed following direct approach to an employer and those found fit through AGRBO invalidity review process and then offered employment.

3. The `Pensions Cancelled' column includes both pensions cancelled following re-employment and pensions cancelled for unreasonably refusing an offer of re-employment.

Senator MICHAEL BAUME —I thank the Senate. I wish to conclude my remarks by making a very strong point about the Government's lack of will. Earlier this year a leaked internal discussion paper produced by the Department of Finance and the Public Service Board confirmed the allegations of the Waste Watch Committee, which I chair, about compensation rip-offs by calling for a complete overhaul of the bottomless pit of compensation claims. This Bill is supposed to be a complete overhaul yet it is going to save only one per cent of the $420m going into invalidity retirement pensions, a large proportion of which clearly relates to phoney retirement. I am not in any way criticising those people who have genuinely retired because of ill health, and there are many of them within the Commonwealth Public Service. My comments are aimed specifically at those people, particularly in Victoria, who have been involved in what is clearly a racket.

If this is a complete overhaul of a bottomless pit and we are saving only one per cent. I just wonder what the Government is about. This legislation appears to be nothing more than window dressing-a superficial response to a scandalous situation on which the Waste Watch Committee has reported. I am not opposing the legislation as it is at least a tiny step in the right direction, which is better than no step. We should be aware that it is only a tiny and gratuitous step aimed at politics rather than reality and rather than saving any considerable amount of money. I move:

At the end of the motion, add:

`, but the Senate is of the opinion that the Government has failed to apply adequately the provisions of the Superannuation Act relating to the payment of invalidity pensions, thus causing a significant loss of revenue to the Commonwealth.