Browsing articles in "welfare"
Wednesday 24th June 2015 - 10:11 am
Comments Off on Pensions: the system that grew like Topsy

Pensions: the system that grew like Topsy

by Alan Thornhill

analysis

The Federal government has won some unexpected support for its move to tighten eligibility for the Age pension.

A well respected research and advocacy organisation – the Australian Council of Social Service – has welcomed it, describing the new curbs as “sound and fair.”

But ACOSS qualifies its approval, by arguing that more needs to be done.

It says the changes the government made this week, after reaching an agreement with the Greens, are “significant and complex.”

And it says they deserved a Senate Committee hearing.

However this influential organisation is making no secret of what it really wants in all this.

That is a full review of Australia’s retirement income system.

Or, at least, a light shone into some dark places.

Such as who benefits from the generous tax concessions, that are now part of Australia’s superannuation system?

ACOSS believes it already has an answer to that low-burning question.

In a paper just published, it says the rich are unfairly favoured, at present.

It says:”… the top 10 per cent currently receive the one third of the benefits of superannuation tax concessions, costing the Federal Budget over $30 billion a year. ”

Those figures, based on research ACOSS itself did, show that our MPs might well make some real progress towards fixing Australia’s budget deficits if they had just a little more courage.

But even the thought cancelling lucrative tax breaks, treasured by the rich and powerful, are just too much for many of our – otherwise brave – politicians.

Perhaps, though, some of the troubles we are having with our pension system flow from the nature of the system, itself.

Broadly speaking, there are two kinds of retirement income streams.

The first might be called the “automatic right” system.

This is based on the common idea that “I paid my taxes, throughout my working life, so I will be entitled to a pension – like everyone else – when I retire.”

(Take care, the Scandinavian and other countries which do have this kind of system, usually have quite high taxes, as well).

The second – and cheaper – kind merely aims to prevent unnecessary suffering, by preventing poverty, in retirement.

Keen students of Australian politics won’t be too surprised to learn that we haven’t really decided yet, which of these systems we should have.

However our system – if that is not too grand a name for it – does contain strong elements of the second kind.

The Treasurer, Joe Hockey, neatly illustrated the difference between the two, when he taunted Labor, in parliament last week, by saying it was no longer “the workers’ party” and had become “the welfare party” instead.

That taunt was based on Labor’s opposition to the government’s planned pension reforms.

But Labor has made some strong points, in the debate.

It has accused the government, for example, of “trousering” the $2.4 billion it expects to save through its reforms, at the expense of thousands of pensioners.

Yet, Labor adds, the government is still not doing anything about those juicy tax breaks the super rich have been -and still are – getting through super.

The raw numbers, too, might well cause hesitation.

Those who have studied the matter say 130,000 Australians, with modest assets, will see their pensions rise by $30 a week, as a result of the reforms.

(That won’t happen, of course, until after the next Federal election).

However another 235,000, who now get part pensions, will suffer cuts, while yet another 90,000, with substantial assets, will lose their part pensions, altogether.

In effect, the government will be telling them to “live on those assets for a while, then come back and see us, when you need to do so.”

Pensioners’ homes will be exempt from this process.

So we might well see some old people “trading up” to protect those “excess” assets, instead of moving to a smaller home or unit, as the upkeep of their present homes becomes “too much.”

That is just one of the looming issues.

The Greens believe they have secured an undertaking from the government, to look at those expensive superannuation tax breaks for the very rich.

They say they won that, in an agreement with the government, to allow its pension reforms through the Senate.

However the Prime Minister, Tony Abbott, doesn’t remember that.

He says his government is not contemplating any changes to present superannuation tax.

How can we sort out all of these contradictions?

Perhaps we do need that retirement incomes review that ACOSS is proposing.

And a few more brave MPs.

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Tuesday 23rd June 2015 - 11:30 am
Comments Off on Pensioners “betrayed” – Labor

Pensioners “betrayed” – Labor

by Alan Thornhill

Labor says the Federal government and the Greens have “betrayed” Australia’s pensioners.

The Shadow Minister for Payments and Families, Jenny Macklin, made this accusation today, after the government and the Greens combined in the Senate last night to tighten eligibility for the Age pension.

The new rules were first flagged in the government’s May budget.

But the Government needed the Greens’ help in the Senate, to have its measures passed in that chamber.

Ms Macklin said:”This is the culmination of Tony Abbott’s relentless campaign to cut the pension.

“First he tried to cut indexation.

“Now he has ripped $2.4 billion out of the pockets of pensioners.

“Pensioners now know that when Tony Abbott told them there would be no change to pensions, he lied,” Ms Macklin said.

“And as of today, the Greens are now complicit in Tony Abbott’s betrayal,” she added.

“Because of the grubby Liberal-Greens deal, hundreds of thousands of pensioners are set to have their pension cut,” Ms Macklin added.

“Over the next ten years, around half of all new retirees will be affected.

“Some singles will lose $8,000.

“Some couples will lose $14,000.

“And many of these pensioners are on super incomes of less than $25,000,” Ms Macklin said.

She said:”Labor fought this measure every step of the way.”

The government disagreed.

The Social Services Minister Scott Morrison said it was both a win for pension fairness and for the budget bottom line.

“This is a fairly emphatic endorsement of the Government’s policy, but also of the Government’s budget,” he said.

“The have-a-go budget is gaining real traction in the Senate.

“Some $3.5 billion worth of savings passed the Senate, not just the pension assets test change but also the seniors supplement passed,” Mr Morrison added.

The Greens leader Richard Di Natale said in striking the deal with the Coalition, he had managed to convince the Government to put superannuation back on the agenda.

However the Prime Minister, Tony Abbott, has told parliament there will be no changes to superannuation.

Tuesday 23rd June 2015 - 7:43 am
Comments Off on Pension tests tightened

Pension tests tightened

by Alan Thornhill

Tests for the Age Pension will be tightened, as the result of a deal between the Federal government and the Greens.

That deal saw the new tests – which the government announced in its May budget – become law when the Senate passed the necessary legislation late last night.

This means that at least 170,000 pensioners with low and modest levels of assets will have their pension increased by around $30 a fortnight.

However the changes will also mean cuts in part pensions for another 235,000 people.

And 90,000 others – with large amounts of assets- will lose their part pensions entirely.

The changes will save the government $2.4 billion.

Labor had opposed them.

The Greens leader Richard Di Natale said that – in striking the deal with the Coalition – he had managed to convince the Government to put superannuation back on the agenda.

But the Prime Minister, Tony Abbott, told parliament – after the deal was struck – that his government is not planning any changes to superannuation.

The government described last night’s vote as a major victory.

Social Services Minister Scott Morrison said it was both a win for pension fairness and for the budget bottom line.

“This is a fairly emphatic endorsement of the Government’s policy, but also of the Government’s budget,” he said.

“The have-a-go budget is gaining real traction in the Senate.

“Some $3.5 billion worth of savings passed the Senate, not just the pension assets test change but also the seniors supplement passed.”

However, Labor’s Jenny Macklin said the Greens had been “completely dubbed” as the Government had made it clear they would not change tax concessions on superannuation.

Thursday 18th June 2015 - 4:50 pm
Comments Off on Government defends new pension rates

Government defends new pension rates

by Alan Thornhill

Scott Morrison told parliament today that pensioners were not treated badly in the May budget.

In fact, the Social Security Minister said, “the most vulnerable” would be receiving a rise of $30 a fortnight.

He said the new rates, to apply from January 1 2017, had been set after discussions with interested parties, including the Australian Council of Social Service.

Mr Morrison’s defence of the government’s position followed an attack earlier in the day, by the Shadow Minister for Families and Payments, Jenny Macklin.

Ms Macklin said new research had shown that Tony Abbott’s second budget is “just as unfair as his first.”

Her observation was based on research by Ben Phillips, of the Institute of Governance and Policy Analysis.

Mr Phillips, in turn, used modelling by the National Centre for Social and Economic Modelling.

Mr Phillips said the May budget papers, combined with old measures yet to pass the Senate, show that the government expects to get a total of $18 billion, over the forward estimates period, through savings and tax increases.

But he said that while the poorest 20 per cent of households would account for 33 per cent of this extra money, the top 20 per cent would account for only 7 per cent.

Ms Macklin said this research also shows that more than 1.4 million families will be worse off.

“Tony Abbott’s second budget is just as unfair as his first, and will hit low and middle income families the hardest,” Ms Macklin said.

“80 per cent of families with children earning below $75,000 will lose out overall,” she added.

Ms Macklin also said six out of seven families who receive Family Tax Benefits will be worse off because of the Government’s child care changes and Family Tax Benefit cuts.

“One in ten families receiving Family Tax Benefit will be over $4,000 a year worse off,” Ms Macklin added.

“The Government’s child care changes will push some families out of the child care system altogether, while others will have their access cut in half,” she said.

“By linking child care changes to Family Tax Benefit cuts, Tony Abbott and Scott Morrison are holding families to ransom.

“Tony Abbott promised not to fix his budget at the expense of the family budget – but that was a lie,” Ms Macklin said.

“Low and middle income families, and children who need access to early education and care, will be hurt the most by Tony Abbott’s Budget,” she added.

Wednesday 17th June 2015 - 5:35 pm
Comments Off on That pension deal:what it means

That pension deal:what it means

by Alan Thornhill

by Alan Thornhill

Tony Abbott told Parliament today that 170,000 pensioners – with modest assets – would be $30 a fortnight better off, under a deal the government has struck with the Greens.

And Australians with a million dollars worth of assets – as well as a family home – would face cuts in their part pensions.

But the changes will not take effect until January 2017.

However Mr Abbott surprised many observers by saying that the government will not be reviewing tax breaks on superannuation.

The Democrats had said that this, too, was part of the deal.

However thousands of Australians approaching retirement will face tighter pension tests, under it.

The proposed changes, designed to gradually restrict the Age pension to people the government believes really need it.

In the deal, announced late yesterday, the Social Services Minister Scott Morrison and the Greens leader Richard Di Natale agreed to a tighter assets test for the age pension.

The agreement will give effect to changes the Treasurer, Joe Hockey, flagged in his May budget.

It will save nearly $2.5 billion dollars over four years, making it the biggest single measure in the 2015 budget.

Labor is bitterly opposing the proposed cuts, which it said would flow from this “dirty deal.”

Bill Shorten declared that Labor would fight planned pension cuts that the government announced in last month’s budget.

The Opposition Leader said Tony Abbott and Scott Morrison had set out to cut the pensions of almost 330,000 low income pensioners.

He said that included 90,000 who would lose their pensions entirely.

“Labor has carefully considered the proposal and it’s clear the Government has not been upfront about the full extensive impact of these cuts,” Mr Shorten said.

“Independent analysis shows that these new cuts will affect half of all new retirees within ten years, he added.

“It shows more than a million retirees will be affected by these cuts, including 700,000 people who will retire in the next decade.”

He said some single pensioners would lose more than $8,000 a year – a quarter of their yearly income of $36,000.

“Some couples will lose approximately $14,000 a year,” Mr Shorten added.

“These are not rich people – they are not on high incomes – and they deserve dignity and security in their old age,” he added.

“People planning and saving for their retirement now will be affected,” he said.

“These people have worked and saved hard their whole life.

“They deserve dignity and respect in their retirement.

“Instead, Tony Abbott is attacking their savings.

“If you’re on a pension, if you will rely upon a pension in the future – the Liberals are coming after you,” Mr Shorten said.

“And the only party standing in the way is Labor.

“And we know, if this government is re-elected they will cut pensions again.”

So what did Mr Hockey, himself, have to say about all this, in his budget last month?

The following extracts, taken from page 27 of his Budget Overview, set out the government’s main objectives.

“A fairer pension system

“Targeting pensions to those who need it most

“The Age Pension is our largest welfare payment, totalling an estimated $44 billion in 2015-16.

“As our population ages, we need to ensure the pension system is sustainable…” Mr Hockey said.

“From 1 January 2017, the asset free area for pensioners will increase, allowing around 170,000 pensioners with moderate assets to receive a full or increased pension.

“At the same time, the asset test taper rate will increase from $1.50 to $3.

“This means for every $1,000 of assets over the asset free threshold, the pension rate will reduce by $3 a fortnight.

“Currently, pensioners with substantial assets can still get a part pension.

“Without changes, a single homeowner could hold assets up to around $800,000
and couple homeowners could hold assets up to around $1.2 million, in addition to their family home and still be eligible for a part pension.

“The changes in the Budget require those pensioners with substantial means to draw on slightly more of their assets to maintain their current income levels in retirement, while the Government continues to support those who need it most.

“In a worst case scenario, this would mean a 1.8 per cent annual drawdown on
their assets,” Mr Hockey said.

Butt he added:”…. those who no longer receive a pension will remain
eligible for a Commonwealth Seniors Health Card or Health Care Card.”

Tuesday 26th May 2015 - 4:11 pm
Comments Off on Labor “uses and abuses” economic research:PM

Labor “uses and abuses” economic research:PM

by Alan Thornhill

Tony Abbott says Labor has “used and abused” economic research in its campaign to show that the Federal budget is unfair.

Speaking at question time in Parliament today, the Prime Minister said the research, by the National Centre for Social and Economic modelling did not – in fact – model this year’s Federal budget.

He did so after the Opposition Leader, Bill Shorten, sought to press Labor’s campaign, at question time in Parliament today.

The Treasurer, Joe Hockey, suggested yesterday that NATSEM’S report might – in fact – be nothing more than a two page document – signed by a Labor staffer.

Mr Abbott said today that NATSEM had put its report up on its website, to give the public access to it.

It concluded that The poorest 20 per cent of Australian families will pay $1.1 billion more into government coffers than the richest households as a result of the budget, highlighting the huge inequity in the government’s four-year blueprint for fiscal repair.

Its analysis also found that the weight budget consolidation is falling disproportionately on low income families, especially those who have school-age children.

NATSEM divided the community into five segments or quintiles, each with a little over 2.5 million families.

It found that the poorest 20 per cent – those with $35,000 or less in disposable annual income – will forgo $2.9 billion over four years thanks to changes to family benefits, pensions and other payments.

But it said the wealthiest 20 per cent – earning $88,000 or more after tax and benefits – will suffer a $1.78 billion hit, some 40 per cent less than the lowest income families.

NATSEM also said that – overall – those in the lowest quintile will see incomes their incomes fall by an average of almost 2.2 per cent while it is a decline of only 0.2 per cent for those in the highest quintile.

Tuesday 26th May 2015 - 8:10 am
Comments Off on Joe’s attack on NATSEM misfires

Joe’s attack on NATSEM misfires

by Alan Thornhill

Labor will press its attack on the fairness of the Federal budget in parliament, after an attempt to discredit the report, on which it was based, was swept aside early today.

The Treasurer, Joe Hockey, tried to discredit the report, at question time in Parliament yesterday, by suggesting that it was nothing more than a two page document – written by a Labor staffer.

But Labor has now countered that suggestion, by releasing the full report it had commissioned – from highly respected National Centre for Social and Economic Modelling – early today.

The Labor leader, Bill Shorten, had based his attack on the fairness of the budget – at question time yesterday – on the NATSEM report.

Government members had then responded vigorously, demanding that the report be released in full.

(Its main conclusions had been published in several newspapers yesterday).

“Release it,” they cried.

Mr Hockey was questioned again on the report, when he appeared on the ABC television program Q&A last night.

He said, then, that he had still not seen the full report.

Mr Hockey was also questioned closely on the program about whether he is “double dipping” by claiming a living away from home allowance, of $270 a night, for staying in a house, owned by his wife, while in Canberra. (See earlier story).

Mr Hockey also agreed – on the program – to lobby states to ditch GST on tampons, sanitary items.

He did so in response to a student who had questioned him on the subject.

The NATSEM report, released – early today – backs Labor’s attack on the fairness of the budget.

It found that the poorest 20 per cent of Australian families will pay $1.1 billion more into government coffers than the richest households, as a result of the budget.

This highlights a huge inequity in the government’s four-year blueprint for fiscal repair.

The NATSEM report also reveals how heavily the burden of budget consolidation has fallen on those less well-off, especially if they have school-age children.

It divides the community into five segments or quintiles, each with a little over 2.5 million families.

NATSEM reported that the poorest 20 per cent – those with $35,000 or less in disposable annual income – will forgo $2.9 billion over four years as a result of to changes to family benefits, pensions and other payments.

By contrast, the wealthiest 20 per cent of- earning $88,000 or more after tax and benefits – will suffer a $1.78 billion hit.

That is some 40 per cent lighter than the lowest income families.

Overall, those in the lowest quintile will see incomes fall by an average of almost 2.2 per cent while those in the highest quintilea face a decline of only 0.2 per cent.

Monday 25th May 2015 - 8:05 am
Comments Off on Parliament:the budget battleground

Parliament:the budget battleground

by Alan Thornhill

The haggling over cuts in this year’s Federal budget has only just begun.

The Opposition Leader, Bill Shorten, and his Shadow Health Minister, Catherine King, made that clear in a joint statement they issued on the eve of this week’s resumption of Parliament.

They said:”This week Labor will hold the Abbott Government to account for its sneaky Budget cuts through the Australian Parliament.”

Its campaign will have support.

The Australian Council of Social Service issued a report at the weekend concluding that low income families would lose heavily, from the combined impact of the Abbott government’s first two budgets.

And the Australian Greens have declared that they, too, will oppose proposed budget cuts they believe will hurt some of the nation’s most vulnerable people.

The government’s main problem, in all of this, is that it still does not have the Senate majority it would need to steer its proposals through parliament.

Mr Shorten led he attack, saying:” Australians know this Budget was…repackaged for an opinion poll.”

But he said the public had been kept largely in the dark on the new cuts and unfairness in this Budget.

“Labor will forensically interrogate the extent and the impact of Government’s latest Budget cuts through all of the accountability mechanisms of the Parliament,” Mr Shorten said.

“The Government has done its best to hide the latest round of cuts to health, education, families, veterans, aged care and security from the Australian people,” he added.

“While the Government claimed this Budget would be good for families these cuts, on top of cuts to family payments from the last Budget, will leave Australian families worse off,” he added.

The Labor leader, too, referred directly to the ACOSS analysis, saying:”… ACOSS has estimated that the combined cost of cuts to families in this Budget and the last, to be around $15 billion in total.

“There is no doubt that these secret cuts will once again be felt by the most vulnerable in our community,” Mr Shorten said.

“The Government has cut $2 billion from health and aged care but exactly where those cuts will be felt remains unclear.”

But he said that includes:-
– $125.6 million cut to Child Dental Benefits (Schedule Budget Paper No.2 page 100).

– $144.6 million cut to the MBS for child health assessments (Budget Paper No.2 page 103).

– $69.6 million cut to dental and allied health for Veterans (Budget Paper No.2 page 180).

– $20.1 million cut from the Dementia and Aged Care Service Fund (Budget Paper No.2 page 151).

Mr Shorten added that the cuts also include almost $1 billion cut to an undisclosed number of health programs Budget Paper No.2 page 110.

“The Government must explain exactly which health programs have been targeted and who will be affected,” he said.

“Labor is extremely concerned that the Government has dishonestly hidden cuts to small programs for Australians suffering severe health conditions in this $1 billion cut, Mr Shorten said.

He declared that Labor “will continue to stand up against this government’s short-sighted, unfair cuts that hurt the most vulnerable in our community.”

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Alan Thornhill

Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.

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