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Tuesday, 11 September 1990
Page: 1616

Mr LES SCOTT(9.42) —I begin by offering my congratulations to those honourable members who have had the opportunity to make their maiden speeches today and this evening. The Parliament has certainly gained by the information that has been put forward by those new members.

I wish to address my remarks to Appropriation Bill (No.1). The issue of social justice is one that has rated highly on this Government's agenda since coming to office in 1983. This Budget has continued that proud record by ensuring that the rights of less well-off Australians are maintained. With such complex arrangements in today's social security framework, the redistribution of benefits requires changes which are by their name just as complicated. There is just no easy solution.

I say from the outset, however, how disappointed I am at the way some media institutions and so-called professionals have compounded any misunderstandings some people may have had by explaining only the fearful and emotive side of the changes announced in the recent Budget. Nowhere has this been more apparent than with the changes to the pharmaceutical benefits scheme (PBS).

It should be remembered that it was the Chifley Labor Government that made the first inroads into the establishment of a pharmaceutical benefits scheme. This is an ethos very much a part of the present Labor Government as well. This has been shown by the changes made to the pharmaceutical benefits scheme since this Government came into office. Despite the rising cost of pharmaceuticals, the Government has maintained free medications covered under the PBS scheme for pensioners and health benefit card holders, large discounts for health care card holders and their dependants, including unemployment beneficiaries and low income earners, and the most basic charge possible to other members of the community requiring prescribed medications. This commitment has meant a tremendous increase in the cost of maintaining the PBS scheme. Even those honourable members opposite would agree that it would be a foolish Government that would pursue the same course of action, regardless of the social and economic consequences.

To put the Government's case into perspective, the PBS scheme is currently costing the Australian taxpayer about $1,200m a year. With our quickly ageing population this figure will drastically increase so that by 1992 the estimated cost on the current rate of increase would reach some $2 billion. However, the increasing cost to the PBS is not completely due to the ageing population. A large part of the increase over recent years has been due to prescription drift whereby more expensive drugs come on to the PBS list and doctors are increasingly prescribing the new drugs in preference to the ones already on the list.

Apart from these two factors, however, a problem of great concern to the Government is the dangerous amount of overprescribing by some chemists and doctors and the resultant stockpile of medication by patients, a problem recognised by the pharmaceutical industry for some time. This was obviously posing an unnecessary burden on the rest of the country because of the millions of dollars it cost every year. Also of particular concern to the Government was the fact that these people were also putting their own lives at risk by taking outdated medications which may either have had no effect on the condition for which they had been prescribed the medications or may had an even more dangerous reaction.

No matter which way it is viewed, the PBS is clearly not able to continue in its present format. A solution canvassed in some circles was that a suitable level of deterrent be introduced to discourage these people from stocking up on medications. The Government's obvious concern here was that the pensioners' lot would be severely disadvantaged by the extra cost imposed on them, particularly the chronically ill. How ironic it is, then, that the very people who suggested imposing a deterrent against stockpiling are the ones making the most noise about the PBS restructuring for pensioners. The solution would have seen the chronically ill forking out money every time they went for some medication without a cent going back into their pockets.

It is very much with the welfare of the aged of our community in mind, then, that the Government decided to introduce a $2.50 charge for prescriptions for pensioners to be offset by a complementary $2.50 increase a week in the pension. Overseas experience shows that price disincentives such as the $2.50 up-front payment do act to achieve around a 15 per cent decrease in the usage of the PBS system.

The Government's prime goal in arriving at a disincentive to stockpiling medications is not to make anyone's life worse off. The average number of scripts used by pensioners is 27 per year and under the new rules the Government is providing compensation for 52. This means that not only will those people most in need receive their required medication free, but they will also be better off than they were before. The Government clearly recognises that there are some cases where people are currently taking more than one script per week and that, although these people would soon be taken up by the safety net once they reached the $130 worth of medications, they do have special needs. We are therefore currently looking at ways of addressing the situation.

It should be remembered, though, that the Government is by no means the only player in maintaining the supply of vital medications to those in need. There is a big role to be played here by the medical fraternity itself. In my own electorate office I have had a number of calls from people currently taking more than one script per week. The question to be asked here is whether these people really need to be taking this number of prescriptions. The doctors of the Department of Community Services and Health have found that many of those people currently on multiple prescriptions are not receiving them because their condition dictates it, but rather because their doctors are over-prescribing. In some cases it has even been found that some of the drugs prescribed have completely nullifying effects against each other.

The result of these changes is a far more efficient PBS scheme, well prepared for the increase in demand on it as we enter the next century. This Government is all about facing up to forthcoming changes and attacking them now while keeping in mind the unique needs of the elderly.

Before speaking out in criticism of these changes, those honourable members opposite should firstly look at where the problems of increased demand on the PBS began. The signs of an increasing demand were clearly on the wall in the latter part of the Fraser years. In the last five financial years of the Fraser Government, the cost of maintaining the PBS scheme rose from $315.6m in 1978-79 to $506m in 1982-83, a rise of just under $200m. These five years saw the greatest single rises in demand on the PBS in any one year since 1978-79. There was a rise of 25.7 per cent in demand on the PBS in 1981-82 over the previous year.

What did the Opposition do to prepare Australia for the great demand in pharmaceuticals that now confronts us? It did absolutely nothing. In contrast, the changes detailed in this year's Budget not only address the need for restructuring within the PBS, but of equal importance they cater for the adequate provision of medications for the elderly and less well-off, ensuring that the ideal eventually has been maintained. Contrary to the views of some, under the new PBS scheme social justice has indeed been done.

Pensioners, because of their plight, have gained all the cameras' attention in the past few weeks but other less well-off groups throughout the community will also benefit from the PBS changes. The eligibility criteria for the health care card which provides concessional pharmaceutical benefits will be raised to the same level as the family allowance supplement (FAS). This initiative will remove the present anomaly under which some low income families are eligible for part FAS but not concessional pharmaceutical benefits. As a result, low income families will receive a substantial reduction in prescription costs from a maximum of $11 to $2.50.

I found in my own electorate that the campaigns of misinformation on some changes announced in the Budget are just as prevalent concerning the new deeming rule for pensioners' savings accounts. We on this side of the House recognise that for many pensioners old habits die hard and that some people will take time to come to grips with the changes.

What this all comes down to, though, is the ever-widening gap between what banks are prepared to give their customers in return for leaving their savings with them and what they charge customers wanting to borrow money. A common response has been, `But they always look after me and they are so friendly towards me'. To those people I say this: Like the Sydney chemists who recently gained notoriety for overcharging their patients on PBS items, I, too, would greet all my customers with a smile if I was lending out their money for three and sometimes four times the amount of interest that I was giving them on their savings. In some cases the banks have become no more than smiling assassins of the financial highways.

Before looking at the implications of the one change that has grabbed all the sensational headlines in the past few weeks, let us look at the proud record of this Government in caring for pensioners. When this Government came to office, the legacy of the previous coalition Government had pensioners receiving a mere $77.25 a week, or 22 per cent of average weekly earnings. Today, the standard pension rate is $141.20 per week, or 25.3 per cent of average weekly earnings, thus surpassing the goal of this Government to make the standard pension payment at least 25 per cent of average weekly earnings.

For a married couple the combined pension rate has increased from $128.80 a week to $235.40 a week. In real terms, after allowing for inflation, both the standard and combined pension rates have increased by 9.9 per cent since March 1983, compared to a fall of 2.4 per cent under the previous Fraser Government.

This Government has not been content merely to increase the amount of money going into pensioners' pockets each week. In 1987, the Government brought about a greater degree of flexibility and earning capacity for pensioners with the introduction of the pensioner earnings credit scheme. This scheme allows maximum-rate pensioners to undertake seasonal or casual employment with earnings above the free area for short periods without a reduction in pension. The scheme provides encouragement for pensioners to supplement their income.

As I mentioned before, this Government's ability to plan ahead for the multitude of changes that will face Australia into the next century has not only become its hallmark, but has stood us clearly apart from honourable members opposite.

Today there are 1.9 million people in Australia over the age of 65. By the year 2021 this number will have risen to approximately 3.9 million. This represents an increase in the proportion of this age group in our population of 18 per cent. As was the case with the conservatives' lack of determination to face up to this dramatic change in the case of the pharmaceutical benefits scheme, so, too, has it been the case in the demand on pensions.

Apart from the increased demand on the age pension itself, there are also the equally important associated areas of housing, community services and health, some aspects of which I have already addressed. The clearest example of the difference in approach to this problem between this Labor Government and previous coalition governments is the three-stage reform plan included in last year's publication Better Incomes: Retirement Income Policy into the Next Century. The first stage of this plan, which came into effect in July of this year, provided for the income test-free area for pensions to be made 100 per cent tax free. This eliminated the tax payable on non-pension income within the pension-free area and simplified the way in which the social security system interacts with the tax system.

The second stage of the Better Incomes plan, which will come into effect from 1 July 1991, is to index annually the income test-free area for social security and veterans' affairs pensioners, something that has never been done before by any Federal government. This will continue to be 100 per cent tax free. Maintaining pensioners' incomes in real terms provides for a great deal of financial stability for pensioners in organising their finances.

The third stage of this Government's reform will address the position of pensioners who have income above the income test-free area, that is, part-rate pensioners. Another integral part of the Government's overall planning for the welfare of our retirees is the decision that by 1995 all age and service pensioners, both full-rate and part-rate, will be removed from the tax system, with part-rate pensioners being subject only to the withdrawal rate on their pension entitlement.

To reduce the demand on Government provided pensions as we enter the next century, a heavy emphasis has also been placed on award based superannuation. The deeming rule announced in this year's Budget is very much a continuation down that path of preparing Australia for the next century. What do we get from the critics-more alarmist talk and fearmongering questions about people having their pension entitlement reduced and losing their health care entitlements and fringe benefits? That has got to be rubbish.

The one question regarding the deeming provisions that has not yet been asked, but which I will take up today, is why the Opposition is supporting the very people preventing pensioners from earning a decent rate of interest on their savings. The answer is clear. When it comes down to a choice of either defending the rights of pensioners to a decent level of weekly disposable income or siding with the smiling assassins in the banks who are making record annual profits, while at the same time lending out pensioners' investments at around 10 per cent more than they are giving, the Opposition's allegiance clearly lies with the banks.

An Australian Associated Press report of 22 August 1990 stated:

Australia's banks could lose tens of millions a year if pensioners move their savings from low interest accounts into high interest accounts, according to a major commercial bank. The bank spokesman, who did not want his institution identified, said those most likely to be hardest hit by changes affecting pensioners savings announced in last night's Federal Budget were the Commonwealth and state banks, which had a high proportion of low interest deposit account accounts.

It is no wonder the spokesman did not want his bank identified. For too long the banks have been exploiting the older members of our community who only seek security for their savings. With the new rules, this will cease.

How many people will be affected by the deeming provisions? Contrary to the ramblings of some, only one in eight pensioners and beneficiaries need be concerned by the new provisions. The point ignored in much of the coverage on the deeming provisions is that they very much tie in with both the income test-free areas and earning limits for fringe benefits for pensioners.

Take the case of the single pensioner. With no additional income apart from the pension, this person would have to have more than $20,000 in the bank before his pension would be affected at all. A person in this position would need to have more than $51,400 in savings accounts before he would lose entitlements to a pharmaceutical benefits health (PBH) card entitling him to fringe benefits such as discounts on telephone accounts, rates charges at a local level and car registration charges at State level.

I refer to another example highlighting the fairness of the deeming provisions. Take the case of a single pensioner with the same amount of savings who has a part-time job mowing lawns or ironing which earns him some $40 a week. Even though this person's pension is reduced because the deemed income capacity of savings, combined with job earnings, places him over the income test-free area, his weekly disposable income would be $192.71 compared with the $181.20 he was earning before the changes. This means an increase in disposable income of $11.51 a week, or just under $600 per year. To lose entitlement to a pharmaceutical benefits health card, someone in this position would need to have more than $30,600 in bank deposits.

For married pensioner couples the case is similar. Pensioner couples with no additional income apart from the pension, to be affected at all by the provisions, would need to have more than $36,000. To lose entitlements to a PBH card, a couple would need to have more than $87,280 in bank deposits. Pensioner couples with $50,000 in savings with an additional income of $70 a week would end up with a weekly disposable income of $336.09, compared with the $305.04 they are currently earning under pre-deeming conditions. That gives these people $30.69 more a week, or more than $1,500 extra each year.

Where does the extra earning capacity come from? The banks. What has been ignored by the Opposition in its criticism of the changes is the situation we have today and have had for the last few decades where ordinary Australian pensioners and taxpayers have been subsidising bank profits. This money has, in turn, been returned to only a very small number of Australians who are shareholders in banks.

The new provisions for deeming have both winners and losers. The losers here, though, are not the pensioners and small savings investors, but the banks. Those with small savings accounts are very much the winners. For a while there will certainly be some profits cut off the bottom line for the banks. This means there will be less pressure on the taxes paid by every Australian.

When it comes to planning for a fast ageing population, we have two plans: the one put forward by the Government that delivers a comprehensive package of measures that is both sustainable and equitable, addressing all the needs of an older community, or one which is made up of haphazard solutions that serve only to create a greater demand on the public purse in retirement. The provision for an adequate pension and the maintenance of suitable health standards for our population in retirement is one of the highest priorities within the Government's social justice framework.

Another integral part is the delivery of a flexible tax system that caters for the needs of our diverse work force. This Budget has very much improved on the modifications already done since 1983. It has given the largest percentage tax cut to breadwinners whose income range places them outside the areas of special assistance such as the family allowance supplement. The flat $12 a week wage increase provided in the February 1990 agreement is designed to assist low and middle income earners and is balanced by a rising incidence of tax cuts for middle to upper income earners, levelling out at incomes of $50,000. Of particular assistance to those people on moderate incomes is the decision to apply the 21 per cent tax rate right through the income scale to $21,700, abolishing the 29c rate, which formerly cut out at $17,600.

To highlight the difference in commitment to people on these moderate levels of income, in 1983 under the Fraser Government a person earning $20,000 a year would have paid 46c in the dollar in tax. Today this level of income has a tax rate of just over half that amount. That is not just rhetoric but social justice in action. A person on this level of income will be in for a tax cut of $4.80 a week. That is equivalent to a pre-tax wage rise of $6.90 a week. The total value of the tax cuts to be paid from 1 January 1991 is $1,200m in 1990-91 and a further $2,500m in 1991-92.

The Government stands proudly on its achievements of delivering a tax scale where taxpayers will continue to pay less tax than if the scale had been indexed for inflation since 1983. The new tax scale will confirm Australia's position as a low tax country by international standards. The latest Organisation for Economic Cooperation and Development (OECD) figures show that in 1988 total tax revenue as a percentage of gross domestic product in Australia was 30.8 per cent. This placed Australia easily at the low tax end of the 24 OECD countries, with only the United States with 29.8 per cent and Turkey with 22.9 per cent having a lower level of taxes.

The common theme amongst the initiatives I have spoken on today is social justice and this Government's commitment to that ideal. Upon implementation, these measures will prepare Australia better for the changing needs we face as we enter the next century.

Madam DEPUTY SPEAKER (Mrs Sullivan) —Before I call the honourable member for Isaacs, I remind the House that this is the honourable member's maiden speech and I ask the House to extend to him the usual courtesies.