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Wednesday, 24 June 2009
Page: 4122


Senator HUMPHRIES (12:11 PM) —I want to contribute a little bit to this debate, particularly on account of the fact that I was able to participate in part of the all too brief inquiry by the Senate Community Affairs Legislation Committee into the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009.

My colleagues and I acknowledge a certain inevitability about aspects of this legislation. Certain elements of the legislation are welcome and represent the identification of issues within welfare policy which need to be updated. In other respects the bill represents a sad reflection on the changing nature of our society and our need to adjust our expectations as a society on account of, in particular, the ageing of that society. I will come to those issues in a moment.

As I indicated, there are a number of elements of this legislation which deserve to be supported and which reflect the way in which our system has worked. I am particularly happy to see the government’s decision to increase the base rate of the single pension by $30 per week and the increase in other pensions that accompany that increase, with the exception of the sole parent pension. It is a tribute to the former Leader of the Opposition, Dr Brendan Nelson, who campaigned so long and hard for there to be an increase in the age pension, particularly the single age pension, that the government has responded as it has to this issue.

Although senators in this place and others in other places during the course of this debate have criticised the coalition for its supposed lack of action in this area, I note that what the government has done in this area represents a relatively small step towards consolidating the financial position of those on an age pension, particularly single pensioners. Its funding increase for those on couple pensions, given the other adjustments made in the nature of the pension, could hardly be called much of an advance at all, to be frank. In the light of other budget measures, particularly those affecting private health insurance, on which so many senior Australians rely, one would have to wonder whether the net position of many people on an age pension has actually improved as a result of this measure. I nonetheless welcome it because we are at a point where the plight of older Australians and their relative lack of buying power compared with the past needs to be acknowledged. I have long argued that pensioners should be allocated better funding, and that was reflected in the work of the report of the Senate Standing Committee on Community Affairs, brought down last year, on living standards among older Australians. In that report there is a pointer to other work that needs to be done by the government to address the issue of poverty in later years in life.

As recently as September last year, the coalition called very consistently for recognition of the plight of the single pensioner, and in fact it put forward legislation in this chamber to do just that. The government did not proceed with that legislation at that time. It preferred its own approach to this question. While the coalition welcomes the long-overdue changes to pension rates, I note how bitterly the previous bill was opposed by the Labor government, even though its objective was very similar to this aspect of the present legislation. Had that bill passed, many senior Australians would have already received over $1,000 in additional income. It is unfortunate that, in order to take its own approach to this matter, that benefit to older Australians has had to be denied. So, better late than never, but this is not the end of the exercise that we need to undertake to address poverty amongst older Australians.

As of later this year, the pension income test taper rate will increase from 40c to 50c for each dollar of income over the income-test-free area. Under the new rules, where a pensioner has ordinary income over the income-test-free area, their rate of pension will reduce by 50c for each dollar of income above the free area. The legislation consolidates the various existing supplements and allowances paid to pensioners—that is why it is not always easy to discern what is going on in this respect—and then it increases them to some degree. It increases them by a little over $2 in the case of single pensioners and by over $10 in the case of couple pensioners. Any measure to reduce complexity and improve efficiency is certainly welcomed, particularly where it concerns pensioners, who often have to deal with multiple departments and services in order to conduct their day-to-day affairs.

I do reserve some concern for the replacement of the former government’s Pension Bonus Scheme with a new work bonus scheme. As a matter of course and necessity, it has been part of the public discourse to create options for those at retirement age to continue to participate in the workforce. The former coalition government scheme provided a lump sum of up to $30,000 to pension eligible people who opted to delay their retirement. Mr Abbott, in the other place, pointed out on Tuesday that the former scheme was not as widely used as originally anticipated, so there is some basis to look at reform. My hope is that the arrangements proposed by the government are more widely accepted and used by those who are willing and wanting to work past what might otherwise be their retirement age. Of note is that the bill is providing for an immediate rather than deferred benefit, which, particularly in today’s economic climate, may provide more of an incentive to older people to continue working.

Where my concern arises is the potential to perceive this scheme as a way to force continued employment rather than encourage or incentivise it. This goes hand in hand with the other, perhaps most problematic, part of the legislation, which is the decision to raise the pension eligibility age from 65 to 67, phased in from 2017 to 2023. The arguments in favour of this have been well rehearsed and I think do provide a certain demographic compulsion to go down this path. The pension age was set at 65 back in 1908, when life expectancy at birth was under 60 years. Today life expectancy at birth is over 80 years. In 1908 someone who was 65 years old could expect to live a further 11 years. Today someone who is 65 years old can expect to live for a further 19 years. It is anticipated that life expectancies will continue to rise in the immediate future.

Having said that, there are a number of comments that need to be made about this reform. First of all, it needs to be recorded that the government sprang this policy on the Australian community without any warning. It is a major change—a change that you could argue is necessary to engineer but one that you would think a government that wants to engineer a program like Operation Sunlight would care to put in its published election policies. Some might say, ‘Well, the government is facing dire economic times and needs to make some hard decisions.’ We on this side of the chamber have certainly agreed with that assumption to some degree, but we also point out that the changes the government has engineered to the age pension do not begin to have an effect on the financial bottom line of the government until 2017, when I think we would all hope the global financial crisis will have ended. Certainly, we hope that it will have ended by 2023. So this is not the product of the immediate financial crisis that the government faces and that the world faces. This is a piece of engineering which the government could and should have forecast and put up in black and white before the last federal election. It has not been honest and open with the Australian people on this issue. At the very least, it should certainly have released the Harmer pension review report well before the budget to enable proper public consultation and discussion to occur about changes of this kind.

Our primary concern, obviously the government’s primary concern as well, should be to ensure that there is a strong safety net for those who are unable to continue to remain in the workforce. It was confirmed at budget estimates on 2 June that around 130,000 people each year will have to work longer in a workforce that is hardly suited—at the present time at least—or equipped to provide for senior Australians. It is always difficult for people over the age of 60 to make transitions in the workforce from one kind of job to another or to find a new job if one disappears. Notwithstanding legislation to ban age discrimination, it is true that older Australians face many barriers. Yet we are expecting 130,000 more people to be out in the workforce as a result of these arrangements.

The second comment that needs to be made is that I suppose Australians have been conditioned to an inevitable and irresistible uplift in standards of living. We have certainly experienced that almost continuously and without break from at least the time of the Second World War. The older generation of Australians who lived before that time were used to a measure of privation and hardship but, through their hard work, they have been able to bequeath to younger Australians a growth in their standard of living. There is a little irony here that that will be in some way compromised because of this decision.

Having said all of that, we acknowledge that there is a demographic irresistibility about this change. The intergenerational reports commissioned by the former coalition government identified the ageing workforce and the potential issues it would raise in the near future. At this time there are approximately five workers for every one person dependent upon social security. By 2040, without policy change, there will be just 2½ workers for every one person dependent on the taxpayer. That is an issue that we simply cannot walk away from. We need to encourage, facilitate and incentivise older Australians to see themselves as having a role to play in the workforce—certainly, if not in the paid workforce, as volunteers if they are capable of doing that. I would like to have seen more carrots than sticks in these arrangements, but that is apparently not to be.

I might add that I am very pleased that the government has also decided not to proceed with the measure announced, I think, in last year’s budget to include gross tax-free superannuation pension income in the income test for the Commonwealth seniors health card. That was widely seen as a retrograde step that attacked the living standards of self-funded retirees. Thanks to the pressure placed by my coalition colleagues and me and by seniors groups and other increasingly forceful advocates for this part of the electorate, the government has accepted that its proposals were wrong and has now quietly withdrawn them in this year’s budget. Now only income that is salary-sacrificed into superannuation will be included in the income test for the Commonwealth seniors health card. There are a number of downstream issues arising from the government’s decisions on the eligibility age for the pension as far as superannuation is concerned which the government has not, I think, fully addressed as yet, but on this side of the chamber we will be more than willing to draw those issues to its attention and see that they are addressed in a comprehensive way that does not disadvantage those Australians who fund their own retirement.

I want to close by acknowledging that we need to engineer a strong and vital dialogue with older Australians, including those on pensions, and to try to bring them into our confidence with changes that we in this place and in the parliament see as necessary to engineer to reflect the changing demographics of Australian society. It is unfortunate in the extreme that, on budget night, many Australians in their mid-50s and younger were told, without any previous telegraphing of this decision, that they would be expected to work longer. It is suggested that some can make new arrangements based on the fact that they have been given this advance warning about the increase in the age pension age, but that will be more theoretical than real for many older Australians. It is a necessary decision but one that, I would have to say, all of us would have to support with some misgivings. I hope that we can engineer other changes affecting older Australians in the future with a great deal more consultation and inclusion as part of the democratic process.