Certainty and security for seniors and carers

Statement by the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin, MP

Carers perform a vital role in our community caring for people with disabilities, the frail, the elderly and the infirm.

They do a selfless job which often prevents them from participating in the economic life of our nation.

As a result many survive on low incomes, bear significant personal and financial costs and isolation from their local community.

The Government values the role and contribution of carers who make enormous personal sacrifices through their selflessness and hard work.

Our senior Australians, through a life time of effort, have laid the foundations of the prosperous nation we all have the privilege of calling home.

For some, work over a lifetime has been matched by superannuation savings and this will improve as our superannuation guarantee matures. But today many older Australians do not have these savings and survive on modest pension income.

Many age pensioners are struggling to get by on the base pension rate, particularly single women who have worked hard all their lives, raised families but have little or no superannuation. As the cost of living rises, they are finding it harder to make ends meet. This is particularly so if they are renting their home.

We recognise that rising food and petrol prices and the cost of heating and other utilities can determine whether Australians are able to live in comfort and dignity and remain active in their communities.

The recent practice of paying one off bonuses to carers and seniors when the Budget allows, though better than nothing, has created uncertainty for both groups. The former government’s repeated practice of not providing for these payments in the forward estimates – including those to be paid by the new Government before the end of the June this year – left carers and seniors with no financial security.

This government is committed to developing a reliable, long term system to support our carers and seniors, not perpetuating the short term quick fix ways of the past. In the interim we are paying seniors and carers a bonus valued at $1.8 billion.

There are also differing views about how assistance to seniors and carers is paid, and whether current arrangements are the best for the future. We have paid the bonuses this year to give our carers and seniors assistance while we work with them to answer these questions.

In recognition of the role of carers and seniors and given the cost pressures they face, in March the Prime Minister committed the Government to examine ways to deliver increased financial security to them in the longer term.

This commitment was reinforced by the findings of Senate Inquiry into the cost of living pressures on older Australians.

Last year, when in Opposition, we initiated this Senate Inquiry into Cost of Living Pressures on Older Australians because we understood that seniors were doing it tough.

During the last decade, the needs of age pensioners have been neglected.

It was Labor that first made, and delivered on, pledges to link the pension to a proportion of average weekly earnings.

Over the last decade, community calls for better levels of support, particularly for those who rely on the age pension as their sole source of income, were ignored.

Since the election, the new Labor Government has begun to address these concerns.

The first piece of legislation I introduced into this Parliament as a Minister was a Bill to increase the Utilities Allowance from $107.20 to $500 a year and to increase by half the Telephone Allowance for those with the internet at home.

The first instalment of these higher payments was made in March this year, another is due in June, and again in September and again in December and then next year and into the future.

For the first time, the Utilities Allowance has been extended to 130,000 Carer Payment recipients in recognition of the costs they face.

Importantly we have locked these changes into the forward Budget estimates.

Together with the $500 bonus, the increase in the Utilities Allowance and the Telephone Allowance, will ensure that a Single Age Pensioner receives an 7 per cent increase on their pension income.

Our plans for national transport concessions are underway, and we are developing a new indexation formula for the age pension that better reflects the spending patterns of pensioners.

The Budget also announced new measures to improve dental care for older Australians, and increase the supply of aged care beds. More affordable rental dwellings will be built.

But we know more needs to be done.

We know that the basic structure of the retirement income system needs urgent attention.

The Combined Pensioners and Superannuants Association told the recent Senate Inquiry that seniors:

who in good economic times are thrown the odd one-off payment, are entitled to a fair go and additional structural financial support from the Government to assure a modest standard of living.

The first three recommendations from the Senate Inquiry which reported in March called for the government to review:

• the suitability of base pension levels;
• pension, Commonwealth superannuation and military pension indexation rates;
• the financial disadvantage of single older women;
• incentives and initiatives related to superannuation savings, especially for older people in vulnerable groups; and
• indirect benefits and concessions paid to older Australians.

The committee specifically recommended:

In particular this review should consider measures that will ensure a reasonable standard of living for older people, especially women, those on below average incomes, those who have lived with long-term chronic illnesses and those whose earning capacity has been greatly limited by their caring responsibilities.

For a decade there has been little attention paid to these issues.

More than 2 million Australians receive the age pension, which is the single largest individual item of Commonwealth expenditure.

The age pension sits at the core of Australia’s social security system. Myriad rates, thresholds, rules and incentives, all with complex interactions, rest on its foundations.

I understand that many feel frustrated that our first budget did not fix all of these concerns. Finally given a voice by our Senate Inquiry, millions expect reform.

Six months into our first term we are addressing 11 years of Coalition neglect.

This Government is committed to long term – not short term – solutions.

That is why today I can announce that the Government is listening and responding to the issues raised by seniors and carers.

We are committed to building a modern social security system for a modern Australia.

Key to this is acting on the need to provide greater financial security to seniors and carers.

Because assistance to carers and seniors are part of a complex social security environment, they require careful consideration.

The interaction of working age income support payments such as Carer Payment with the taxation system result in lost benefits where individuals attempt to balance care for relative or friend and some paid work.

Carers Australia, in their pre-Budget submission, highlighted the financial uncertainty carers face and the limits their role as carers places on securing their financial future.

There are complex relationships between the taxation and superannuation systems, pension payments and for carers.

The Government’s commitment to introduce an Emissions Trading Scheme by 2010 also raises questions about how individuals on low incomes such as carers and seniors might be compensated for higher energy costs.

These are substantial reform challenges. To provide genuine and sustainable long term financial security for seniors and carers, these issues will be addressed as a central element of the inquiry into Australia’s Future Tax System announced by the Treasurer in Tuesday night’s Budget.

The terms of reference of this inquiry include consideration of improvements to the tax and transfer payment system for individuals and working families, including those for retirees.

The Future Tax system review will also take into account the relationships of the tax system with the transfer payments and other social support payments, rules and concessions with a view to improving incentives to work, reducing complexity and maintaining cohesion.

The terms of reference of the inquiry also provide for the chair, Dr Ken Henry, to task members of the review panel to oversee programs of work related to their field of expertise.

I am pleased to announce that as part of the review Dr Henry has agreed that Dr Jeff Harmer, the head of the Department of Families, Housing, Community Services and Indigenous Affairs who is also a panel member, will complete an investigation into measures that might be adopted to strengthen the financial security of carers and seniors.

Dr Harmer will report to the Treasurer and I through the chair of the panel by no later than 28 February 2009 on:

• the appropriate levels of income support and allowances, including the base rate of the pension, with reference to the stated purpose of the payment;
• the frequency of payments, including the efficacy of lump sum versus on going support; and
• the structure and payment, concessions or other entitlements that would improve the financial circumstances and security of carers and older Australians.

To support this important work, the Treasurer and I have asked Dr Harmer to convene a reference group of representatives from carer and seniors groups to ensure his work reflects the views and aspirations of those who will benefit from any reforms resulting from this inquiry.

This announcement is a major step forward in moving on from the short termism of the past, and will provide carers and seniors with genuine financial security and certainty.