BILLS;Social Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015;Second Reading – 22 Jun 2015

I want to reiterate some of the issues Senator Moore mentioned earlier in her contribution in regard to the Social Services Legislation Amendment (Fair and Sustainable Pensions) Bill 2015. This legislation has been unduly rushed. The speed at which this bill is being passed through this place is utterly ridiculous. The changes are not going to be implemented until January 2017, yet we are being expected to pass this bill today. This bill passed the House probably three or four hours ago, so I would have to wonder what the great rush is. One of the big areas of concern I have is that the Senate Community Affairs Legislation Committee has also been extremely rushed in its report. It is extremely unusual that a bill that will affect so many people—hundreds of thousands of single pensioners and couples—is rushed so quickly and so unnecessarily.

As much as I do not want to say it, it would appear that the Greens and the Liberals have done a dirty deal and the bill is being rushed through before that deal falls apart. I find it extremely hypocritical of the Greens to rush this bill. They have come into this place on many occasions in the seven years that I have been here and complained when other bills are rushed due to a genuine need. It is utterly hypocritical. As a member of the Senate Community Affairs References Committee, I know how well these committees work in a bipartisan manner. As Senator Moore said earlier this evening, the committee only received answers from the department this morning, yet the report was tabled earlier this afternoon. I am at a loss to understand why there were just 18 days between when the inquiry was referred to the committee and when the committee reported on such an important issue. This issue affects so many people.

Labor senators on the committee had very little time to even write a dissenting report, but I thank Senator Moore, Senator Carol Brown and Senator Peris for the important comments they made. The Labor senators highlighted the deal done between the government and the Greens to amend the reporting date and to require this report to be finalised two full months in advance of its prior reporting date, the agreed reporting date. This change presented significant difficulty in ensuring this inquiry could fully investigate the impact of the changes proposed in the bill. We on this side consider the change of reporting date to be contrary to proper process and contrary to the proper functions of the Senate. As I said, I do not know how many times I have heard the Greens come in here and complain about things they think are not due process or are not proper functions of the Senate. The change in the reporting date unnecessarily shut down a proper public debate and discussion about the changes. As I said, this is an issue that will affect thousands of Australians, mainly on low- to middle-incomes. I wish to record Labor’s strong opposition to the change.

I note that the conclusions drawn by the government and Greens senators are contrary to the evidence presented. It is really a case of the evidence saying one thing and the committee report saying another. In particular, a significant number of participants in the inquiry have taken issue with the changes proposed by the government to the assets test. I am particularly concerned about the disproportional impact that this will have on women. I would like to quote evidence in the dissenting report from Industry Super Australia:

The proposed changes in the taper rate will amount to a 15 per cent overall cut in the retirement income of some people who are on incomes below a comfortable standard, while people on higher incomes are largely unaffected. Women are especially harmed—under the proposal, eight in 10 single women retiring in 2055 will do so on incomes below that needed for a comfortable living standard …

The Bill’s negative effects on single women will hit those on pretty modest incomes: Women aged 55-59 will be affected from earnings above $46,220; women aged 45-49 are affected from earnings above $40,568 and those aged 25-29 from earnings above $23,954.

Their evidence—and this was in the dissenting report also—indicated that:

The proportion of new retirees affected by the proposed change will increase sharply over time. The proportion of new cohorts of retirees affected by the proposed asset test change increase from one in three today to seven in 10 by 2050. This influx will increase the overall proportion of the Age Pension population who are worse off from just over 10 per cent in 2017 to over 40 per cent by 2055.

People might think 2055 is quite a way off. But if you are a young person, or even a not so young person, in the workforce now and you are working towards your retirement, 2055 is not that far off. That is one concern I have. I have other concerns with this bill, and not just in regard to the process and the contents. To begin with, there is the title. The title of this bill includes the words ‘fair and sustainable pensions’. Yet this bill cuts the pensions of single pensioners by up to $8,000 a year, and of couples by up to $14,000 a year. I doubt that there are many Australians, particularly among those relying on their pension for income support, who would regard that measure as either fair or sustainable.

The Prime Minister looked down the barrel of a camera and promised no change to pensions, yet it was not very long after that that he launched the most savage attack on pensioners as one of the key elements of his cruel and unfair budget—it was only one of a number of savage attacks, I might say, but it was a savage attack. It was a cut which would have seen the pension drop from 28 per cent of average weekly earnings to just 16 per cent within four decades. Within the next ten years, pensioners would have been worse off by $80 a week, and the measure would have ripped $23 billion out of the pockets of Australian pensioners. This was just the first wave of the Abbott government’s attack on Australia’s pensioners. My Labor colleagues and I spent a year fighting this savage attack on Australia’s pensioners and, fortunately for the 3.5 million pensioners, we won that fight. But now we are faced with the second wave of the government’s attack—a cut to the pension which will affect 320,000 pensioners, of whom 90,000 will lose their pension altogether. This is an extraordinary move from a government which promised—listen for it—no cut to pensions.

Labor does not support the government’s proposed changes to the pension asset test, and we will oppose this bill. These changes will disproportionately affect pensioners on low and middle incomes. Independent analysis of the proposed changes shows that the impact of these cuts will fall hardest on people with below-average incomes. Assuming a five per cent return, a single pensioner generating an income of only $25,000 a year from their assets will be around $8,000 a year worse off. Based on the same return—that is, five per cent—a couple earning $20,000 a year each would lose $14,000 a year. While about a tenth of Australia’s 3.5 million pensioners are currently affected by these changes, the effects will be felt by more and more pensioners over time. Within ten years, around half of all new retirees leaving the workforce will be impacted by these changes. And in the future it will continue to be those on low incomes who experience the greatest impact. To illustrate this point, a couple 20 years from retirement earning only $45,000 each will be worse off by $1,500 a year each. By contrast, a couple earning $145,000 each will lose only $113 a year.

It is estimated that, under the current assets test, about half of all single Australians retiring in 2055 will not achieve a comfortable retirement. I am not sure what the government thinks is fair and sustainable about this. Under the proposed changes, this will increase to 70 per cent of single men and 80 per cent of single women. In fact, as well as attacking the living standards of low and middle-income Australians, the government’s change to the asset test provides a perverse incentive for retirees to divest themselves of their assets instead of saving for their retirement. Professor Miranda Stewart, director of the Tax and Transfer Policy Institute at the Australian National University, said that the proposal is poor policy because it penalises savings. Her submission to the committee’s inquiry into the bill said:

The proposed asset test tapers effectively doubles the rate of the wealth tax on pensioners while simultaneously narrowing the tax base, contrary to generally accepted good principles of tax and transfer design.

…   …   …

Assuming a return to savings of 5%, a consequence of the asset test is that income from savings is heavily taxed at an effective marginal rate around 160% …

What Professor Stewart means by this statement is that pensioners will be worse off by $1.60 for every dollar they earn from their savings. Similar comments have been made by National Seniors Australia and by the Committee for Sustainable Retirement Incomes. In fact, the message the government is basically sending to new retirees is this: withdraw your retirement savings and go on a spending spree. This may be great for short-term economic stimulus, but in the long term it is going to result in people relying on more, not less, government assistance for their retirement incomes.

It appears that the government will get the support they need for this cruel cut to the pension because of the deal they have done with the Greens. It is interesting that the Abbott government would ally themselves with the Greens, because on the day before the election—in fact, the very same day Mr Abbott that made his no-cut-to-pensions promise—he also promised, in a Fairfax op-ed, that the coalition: ‘will not do any deals with the Independents and the Greens’. Well, we all know what has happened. I think it behoves those on this side of the chamber—those of us who stand up for pensioners—to remind the Greens that their charter says that they will introduce measures ‘that redress the imbalance of wealth between rich and poor’. I would invite the Greens to reflect on this statement and to consider who this change to the assets test will affect, particularly with reference to the analysis I mentioned earlier. If this measure goes through, as it appears it will, Labor will have no hesitation in reminding the 320,000 pensioners affected—and the millions more who will be affected over time—that it was the Liberal-National coalition, with the support of the Greens, who voted to cut their pension. And, contrary to the claims of the government that it will only affect the well-off, this Liberal-Green pension cut is an attack on low and middle-income Australians.

Labor is not opposed to fair and sensible savings, but we are opposed to cruel, short-sighted and ill-thought-out policies like the government’s proposed change to the pension asset test. It is important that we address a couple of deliberate misconceptions that the government is trying to peddle about Labor’s position on this matter because if you listen to speakers on that side of the chamber you would think that Labor is not serious about making savings. But their argument is really a straw man. It is patently ridiculous to suggest that, just because we do not accept every savage cut that the Abbott government puts forward, we are not committed to making savings. I also hear the government’s catchcry, in this debate and in other debates, that if Labor does not accept the government’s savings then we have the responsibility to put forward alternatives. Well, guess what? We have—we have put forward alternatives. In fact, Labor has released policy which will deliver $20 billion worth of savings over the next 10 years. These savings include a crackdown on tax minimisation by multinational companies and better targeting of superannuation tax concessions.

The key argument we always have with the government is not whether savings should be made but who, or what, should be targeted when it comes to making savings. On this side of the chamber, we believe it is those who can most afford it; the government seem to think it is those who can least afford it. Do the government really believe that nothing should be done about superannuation tax concessions when only 10 per cent of Australians receive 38 per cent of concessions? You really have to question the priorities of the government when they think it is fair that a pensioner on less than $30,000 a year should have their pension cut by $8,000 while another retiree can have a superannuation balance of $1½ million and an income of $100,000 a year and pay no tax whatsoever. The Abbott government have their priorities very, very wrong. When seeking to make savings, they immediately turn their attention to the most vulnerable and disadvantaged people in Australia, while looking after the powerful and wealthy. This is why they go after low-income pensioners while opposing proposals for superannuants with multimillion dollar balances to pay a reasonable amount of tax.

I know many of the unpopular measures in their first budget were dumped, including the GP tax, pension indexation and their unfair and unaffordable paid parental leave scheme—I think that was the Prime Minister’s signature tune; his signature policy. Well, it has gone and I hope that, in the not too distant future, so will be the Prime Minister. Let us not forget—because this is really important for people to remember—that these things would be law right now had the government been able to secure the support of the Senate. They did not dump these policies because they were unfair or because they were so clearly rejected by the Australian people. They dumped these policies because they could not get them through the parliament.

Of course, whenever the government try to justify their broken promises and their cruellest cuts, what do they do? They try to blame Labor by pointing to the position of the budget. Despite all their finger-pointing, it was the current government who doubled the deficit so soon after coming to power. People need to be reminded of that. They tried to fudge the 2013 Mid-Year Economic and Fiscal Outlook and pretend that the budget had been left in worse shape than they thought. It is a cheap parlour trick and remains a pathetic excuse for Mr Abbott breaking his clear, unequivocal promise on pensions.

I have had hundreds of pensioners contact my office to express their disgust at the government’s betrayal, and I know my colleagues on this side also have. Senator Polley, Senator Ketter, Senator Urquhart and Senator Conroy—all of us on this side—have received those emails and had pensioners contact our offices. Let me remind and assure pensioners: Labor will continue to stand up for you and we will continue to hold the government to account for their broken promise. We will not waver on this issue, because on this side we understand that those on low and middle incomes deserve a break, not those who can well afford a break so that they can make even more money.