Speech by The Hon Jenny Macklin MP

Centenary of the age pension

One hundred years ago today, landmark legislation was introduced into a young Australian Parliament that was to put Australia at the forefront of social policy reform and forever entrench the notion of a ‘fair go’ in the national conscience.

On this day in 1908, the House of Representatives debated, and passed, the Invalid and Old-Age Pensions Act 1908. Considered something of a ‘social experiment’ it had its genesis before the turn of the century when it was raised by a forward-thinking South Australian J. H. Howe.

Back then the pension was modest in both its reach and its rate. Ten shillings a week paid to 34,000 customers – the equivalent of 12 per cent of male total average weekly earnings.

It was paid at age 65 for men and women, at a time when men had a life expectancy of 55 and women 59. Aboriginal people, Africans, Pacific Islanders and New Zealand Maoris, were excluded.

But it was a start and widely considered to be long overdue.

Andrew Fisher, a day after losing the Prime Ministership but still leader of the Labor Party said on 3 June 1908: “This parliament, on three different occasions, has been pledged to secure the passing of an Old-age pensions Bill at the earliest moment. How can we get away from that pledge? How can we, as honest men, decline to carry out that duty? Shortly after I had the honour of being appointed the leader of the Labour Party, I submitted a motion drawing the attention of the Government to the urgent need of a Commonwealth system of old-age pension.”

His frustration was borne of the difficulty his party – our party – had faced in achieving what was then the second key plank of an infant Federal Labor’s platform – a Commonwealth old-aged pension:
The problem, thought difficult, is not insuperable. I have before said in this Chamber that if the interests of the great and powerful factions – of merchants and similar classes, who are well able to claim their own rights – were involved, the question would not have been allowed to lie in abeyance for seven years after the mandate of the people had been given.”

A passionate King O’Malley, the Member for Darwin, declared that if the Labor Party had received earlier assistance in placing an Old Age Pensions Act on the statute book, thousands of old, honest, hard-working soldiers of industry who have passed away would perhaps have been living now or would have died surrounded by a few of the comforts of life.”

For many years, pensions were regarded as a privilege rather than an entitlement – it was up to special magistrates to decide whether an applicant was a person of good character and deserved a pension. This provision was not formally removed until 1974.

By the 1950s, pensioners had moved from having to report to their local post office to receive a cash payment to receiving a hand-written cheque; in 1962 the residency test was halved to ten years; in 1966 Aboriginal Australians were granted full rights to the pension; and in 1975 the right of appeal was introduced.

And the Whitlam Government’s introduction of benchmarking the pension to workers’ earnings has seen a doubling of the pension in real terms since 1972.

In his landmark 1972 policy speech at the Blacktown Civic Centre, Whitlam committed Labor to “raise the basic pension rate to 25 percent of average weekly earnings.”
A benchmark first achieved in 1974.

In 1983 the Hawke Government’s Statement of Accord agreed to maintain the basic rate of pension at or above 25 percent of average earnings, a commitment reaffirmed by the government’s statement, Better Incomes: Retirement Income Policy into the Next Century released in 1989. A series of increases achieved this benchmark over the life of the Labor government.

Under the Hawke and Keating Governments the pension increased from 24 percent of Male Total Average Weekly Earnings under the Fraser Government in 1982 to 25.8 percent on leaving office in 1996.

In 1990 the Hawke Government introduced the bereavement payment equivalent to 14 weeks pension payable to the surviving member of a pensioner couple.

And in 1994 the Keating Government introduced the Commonwealth Seniors Health Card.

Australia’s Age Pension has endured through most of the 20th century and into the 21st century – 100 years of profound social and economic change, two world wars, a depression, recessions and booms – and, today, it continues its vital role in providing income support on the basis of need to older Australians.

The changes have been enormous but the principle of giving older Australians security, support and dignity remain the cornerstone of the system.

This is the Australian way and it has always been the Labor way. We appreciate and acknowledge the extraordinary contribution that senior Australians have made, and continue to make, to the Australian community-through their experience and insight, through the care they provide for partners, friends and relatives and through their mentoring and volunteering.

The Government knows that many pensioners are finding it tough to make ends meet. Cost of living pressures like groceries, bills and petrol mean it is harder and harder to make ends meet.

While there is more to do to get this right, we have made a start.

The recent Budget changes will give many aged pensioners an additional $900 this year on top of their fortnightly pension. This includes a bonus payment and a permanent increase in an important pension supplement – the utilities allowance which is increasing from $107 to $500 per year.

These budget initiatives worth $5.2 billion over five years are the latest changes in a century of ongoing reform to the pension – a fundamental pillar of Australia’s social and economic infrastructure.

There’s also extra help with dental and aged care, and we’re making it cheaper to travel interstate through national travel concessions for seniors.

Individually these are modest measures to assist with cost of living pressures – together they demonstrate this new Government’s commitment to continuing the Labor tradition of protecting the financial security of retired Australians.

The Government knows more needs to be done and is determined to get this right for the long term.

Fixing the system is more complicated than at first glance.

The age pension intersects with the tax system and a range of payments and allowances; we need to evaluate where to make changes in the system to have the greatest impact.

To deliver security to age pensioners and carers, the system needs to be reformed and strengthened. The Government is determined to get this right for the long term, not perpetuate the short term quick fixes of the former Government which saw one off payments made only when an election was around the corner.

In fact the previous government only offered Bonuses to seniors in the months before two elections. Just before the 2001 election seniors received a $300 one-off payment, and in the lead up to last year’s election, they again offered a one off $500 bonus to senior Australians.

In twelve years of the Howard Government there was no improvement to the base rate of the age pension. Those opposite claim credit for legislating the 25 per cent of male earnings benchmark in 1997, but as I have already outlined, this Labor policy had already been delivered consistently over the period of previous Labor Governments.

This Government wants pensioners to be able to rely on more than just the electoral cycle to give them financial security.

The Prime Minister announced a review into retirement incomes, including the age pension as part of the Inquiry into Australia’s Future Tax System, announced in the Budget on 13 May.
This kind of inquiry was the key recommendation from the recent Senate Inquiry into the cost of living pressures on older Australians

A key component of the inquiry will be to look at the adequacy of existing support for seniors and carers, and suggest measures which could strengthen their financial security in the long term.

Other issues being considered will be the effectiveness of lump sum payments and achieving a balance that targets those with the highest need while retaining incentives for people to keep doing some work if they want to.

We are determined to make this review as inclusive and comprehensive as possible; we want older Australians to be involved in telling us how we can make the system work better for them.

The review of support for seniors and carers is being led by Dr Jeff Harmer and will report by February next year. And to make sure Dr Harmer hears people’s life experiences I will be setting up a reference group to advise him.

This reference group will meet regularly until February next year. From July, we will be calling for public submissions following the inquiry’s initial discussion paper.
There will be an opportunity for further public contribution on draft outcomes before the review is finalised.

One hundred years on, the age pension remains the bedrock of Australia’s income support system. Key elements established in 1908 remain in 2008: the age pension is paid to everyone entitled to receive it, regardless of past earnings; it is non contributory and funded from general revenue; and is means tested to ensure it is targeted to those most in need.

But just as we all understand that the needs of older Australians have changed significantly, so we acknowledge the need for comprehensive reform of the pension system – reform that gives our seniors the certainty and security they deserve.