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Tuesday, 13 June 1989
Page: 3849

Senator SCHACHT —Is the Minister for Finance aware of recent calls for the Government's expenditure on pensions and benefits to be reduced through improved targeting? Does the term `improved targeting' usually mean tighter income testing? If the income test on the age pension were tightened, what effect would this have on the effective tax rate on aged people's superannuation moneys?

Senator WALSH —I am aware of calls from members of the Opposition, and especially from the new shadow Treasurer, Dr Hewson, for improved-that is, tighter-targeting of welfare benefits. The answer to the last part of the question in which I am asked what effect tighter targeting would have on aged people who had some superannuation income, is that it would depend on the extent to which the targeting was `improved', as Dr Hewson put it, or, in reality, tightened. If, for example, the withdrawal rate of the pension were to be 100 per cent-that is, if at some point for each dollar of non-pension income the pension payable were to be reduced by an equal amount-the effective marginal tax rate for somebody in receipt of superannuation payments would be 100 per cent. There is a considerable gap between the income test which applies now and the 100 per cent figure, which is the tightest bit of targeting that we could get in this area.

I do not imagine that even Dr Hewson is contemplating a one for one withdrawal of pension entitlements because of superannuation income, but he is clearly contemplating something tighter than presently applies. I wonder how that ties in with the alleged concern of the Opposition for aged people in receipt of or expecting to be in receipt of superannuation benefits, and how it thinks that that will provide a saving incentive of the type that it is always talking about.

It is also a well known fact that, far from pursuing a policy of improved targeting-that is, tighter targeting-the last time the present Leader of the Opposition contested a Federal election his policy so far as age pensions were concerned was to have no targeting at all; that is, to abolish the assets test so that everybody could escape the target, so that everybody could become an invisible target by transforming income, through some devious means, into assets if he had not already done so. It would be nice to know whether the Opposition stands for tighter targeting a la Hewson, or no targeting at all, as Mr Peacock proposed the last time that he was Leader of the Opposition.

I refer to a comment that Dr Hewson made prior to being the shadow Treasurer and, indeed, prior to being a member of the House of Representatives. In the Business Review Weekly of October 1986, he wrote that the Opposition would have no credibility until it spelled out the details of its taxation policy. Likewise, it will have no credibility until it spells out the details of its expenditure policies and, in particular, with reference to this question, whether it stands for tighter targeting or no targeting at all.