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Wednesday, 8 May 1985
Page: 1844

Mr HOWE (Minister for Social Security) —by leave-I wish to inform the House of the Government's decision to sign a reciprocal agreement on social security with Italy and to start negotiations towards social security agreements with other interested migrant source countries as soon as practicable. I am very pleased to be able to announce Australia's preparedness to sign a social security agreement with Italy and I hope that the Italian Government will likewise announce its preparedness to sign shortly. This is a most significant decision for people with links with both Italy and Australia. It is also important for all migrants, whatever their country of origin, and for all those people who choose to spend part of their lives outside Australia.

The basis on which the agreement with Italy has been negotiated shows that it is possible to negotiate reciprocal social security arrangements linking the Australian social security system and the very different type of social security systems which operate in most other countries. Now that we have bridged this gap in relation to Italy, I am confident that we can do likewise with other migrant source countries. For migrants to this country this decision is one of the most important to be taken by any government since the commencement of large scale immigration.

Honourable members will be aware that Australia has had reciprocal social security arrangements with New Zealand since 1943 and with the United Kingdom since 1954. We are now to have, at long last, comprehensive reciprocal agreements with non-English speaking countries. The type of agreement I am proposing is an improvement on the agreements we currently have, in that it better co-ordinates the social security coverage available from the countries involved. Reciprocal social security arrangements are important for migrants and all Australians who choose to move between Australia and other countries.

To understand their importance, I should point out that most social security systems, unlike Australia's, are contribution based. Many migrants coming to Australia have previously paid compulsory contributions to such systems. However, in a lot of cases, people would not have contributed for sufficient periods to allow them to meet essential minimum contribution requirements. This means that they have effectively lost those contributions. Reciprocal agreements would enable pensions to be paid by agreement countries on the basis of those contributions. In other words, when these migrants reach pensionable age or need income security support for such contingencies as widowhood or invalidity, they would be able to receive some payment from the country concerned. Again I emphasise that this is important not only for migrants but also for all Australians who have, at some time during their working life, lived abroad and contributed to an overseas social security system. Under an agreement an Australian who worked overseas and made contributions to an overseas system may also receive some pension as a result of those contributions. The number of people who might benefit from the reciprocal agreements is very significant. It is estimated that, if Australia can successfully negotiate agreements with the major migrant source countries, about one million people could benefit over the next 20 years.

Agreements are also important for the community as a whole. Payments of foreign pensions represent an inflow of foreign currency which assists the balance of payments. Agreements also have direct budgetary implications, to the extent that such payments are taxable and are taken into account under the income test arrangements of Australia's social security legislation. Of course, to obtain these benefits, Australia would be required to grant its pensions in the agreement country concerned.

I now want to refer to those migrants to Australia who want to retire to their home country or some other country before they reach Australian age pension age. Under Australia's social security law, pensions generally cannot be granted outside Australia. These people, who now leave before gaining a pension from Australia, cannot receive a pension overseas. Under reciprocal agreements such people may be entitled to receive an Australian pension payment proportional to the period of their residence in Australia. Furthermore, because agreements are reciprocal, people may also become entitled to some payment or increased payment from countries which are parties to agreements.

Paying a proportional pension abroad on the basis of residence in Australia is a new concept in this country. Proportional portability was announced by the previous Government in 1983 as the basis for negotiations of reciprocal agreements and it has been used as the basis for negotiations with Italy. Australia's social security law provides for universal flat rate pensions which are needs based, whereas, in most other countries, the amount of pension payable is largely dependent on the level of contributions made; the longer the contributory period and the greater those contributions, the higher the pension. In order to provide a rational basis for reciprocity it will be necessary to amend the law governing social security payments outside Australia so that the level of Australian pension payable abroad reflects the length of residence a person has had in Australia. I propose to bring forward for Parliament's consideration in the Budget session the necessary changes to the law. In the meantime I will be consulting members of the Federal and State ethnic communities councils of Australia about these changes, and agreements in general; and with representatives of ethnic communities about the specific agreements. These consultations have already commenced.

What I would like to emphasise is that this legislation will only come into effect when Australia has as many reciprocal agreements as practicable ready to sign. Pensioners now overseas will not be affected. Proportional payment of pensions overseas and reciprocal agreements go hand in hand. The Government is keen to ensure that the very great advantages of reciprocal agreements flow to the majority of migrants as soon as possible.

I believe that proportional portability, when linked with agreements, is a very reasonable concept. I can appreciate, because it is a new concept within the Australian system, that it may be difficult to understand readily. It is, however, a concept on which most international agreements on social security are based. It recognises that both Australia and any other country where a person has worked, share responsibility for income support. It also recognises that this responsibility is limited to the amount of time spent in each country. Reciprocal agreements will assist Australia and its agreement partners to meet social security responsibilities more compre- hensively.

The present arrangements Australia has for social security payments overseas fall short of a comprehensive coverage. For some people, Australia's position is unduly harsh and for others, it is overly generous. I have referred already to the unfair treatment of those who have left Australia-those people who cannot at present be granted an Australian pension because they have left. Some of those people may have spent the greater part of their lives here. Under the reciprocal agreement with Italy, Australia would be able to pay a pension to such people now living in Italy and reciprocal arrangements with other countries would enable Australia to pay pensions to such people in those countries.

To determine each country's responsibility for social welfare payments, it is necessary to set a period for maximum payment from any one country. Most countries set around 40 years as the period necessary to qualify for maximum payment. The Australian Government has decided to set 35 years as this period. In other words, to qualify for a maximum Australian pension overseas it would be necessary in future to have resided in Australia for 35 years during working life. The government believes that where a person has spent less than 35 years in Australia it is over-generous to pay a full Australian pension overseas. The equitable and affordable solution is for Australia to follow the pattern set by most income security systems throughout the world and to pay its pensions abroad on a proportional basis. To effect such a change the Government will need to introduce legislation to change the current arrangements for paying pensions overseas.

The need for the change was recognised by Senator Chaney when he was Minister for Social Security and this Government will carry it through. Members of the Italian community have been consulted during the negotiation of the reciprocal agreement and they and the Italian Government understand Australia's position on proportional portability. Consultations are continuing and I believe the Australian community as a whole will accept this new package for payments of pensions overseas.

I now turn to some of the main provisions of the agreement with Italy. This agreement would enable periods of residence in Australia to be added to periods of contributions in Italy and, if needed, the total of these periods can be used to gain eligibility for pensions from both Italy and Australia. The minimum period of residence or contributions required under the agreement by either country would be generally one year. Legislation governing the payment of a pension by Australia under this agreement will generally follow the provisions of the Social Security Act. There are some important differences, however, in the way in which Italian pension payments would be treated under the Australian income test. The agreement would provide that where Australia pays a part pension overseas, only a proportion of the Italian pension payable would be taken into account under the income test. Where Italy pays a supplement to top up its pension to the minimum Italian level, such a supplement would, except in some special circumstances, be exempted from the income test.

Reciprocity arrangements will effectively mean that people who have spent part of their life in more than one country will receive a package of pensions consisting of part pension from each country. Within Australia, it is possible that the sum of the part pensions payable would be below the pension currently paid by Australia. This would be unacceptable in Australia and accordingly, the agreement with Italy would provide that, where necessary, the pension paid by Italy will be topped up to the level of the Australian pension. Australia would be prepared to agree to similar arrangements under agreements with other countries. The agreement also provides for administrative arrangements so that each country will assist the other, not only in relation to payments under the agreement, but also in relation to payments made under existing provisions.

I believe that the proposed agreement with Italy has many benefits for Italians residing in Australia and for Australians residing in Italy. The Government is committed to ensuring its effective implementation as soon as possible and to seeking agreements with other countries so that similar benefits can be passed on to other ethnic groups and people who have moved between these countries and Australia. The importance of this matter has been recognised by this Government. Because of the major differences between the Australian and overseas social security systems there are considerable technical difficulties to overcome. Now that we have a model agreement which overcomes many of these difficulties, I am confident that great progress will be made in the future and that we will have the bipartisan support of this House for these important developments.