Transcript by The Hon Scott Morrison MP

Press Conference, Sydney

Location: Sydney


MINISTER MORRISON: Thanks for coming here today. I am very pleased to be here today to announce the Government’s plans for fairer access to a more sustainable pension that will be announced in next week’s Budget. More than 170,000 pensioners with modest assets will have their pensions increased from January 2017 by an average of around $30 per fortnight. This will include around 50,000 new full pensioners who are currently on a part pension. More than 90 per cent or 3.7 million pensioners and other Australians who have pension-linked benefits will either be better off or will have no change to their pension arrangements as a result of this being the sole area of change to pensions that is being proposed by this Government.

At the same time, the Government will be taking off the table the measures that were put to last year’s Budget in relation to the indexation of pensions. That means that there will be no longer any plans to change the indexation of pensions from the current formula as was proposed last year. We always said if something was to come off the table, something has to come on the table and the measures that I’m announcing today are what are coming on the table. The changes that were in last year’s Budget would have impacted the future indexation of more than four million pensioners around Australia and those receiving pension linked payments and those changes will now not proceed. A statement has also been released by the Minister for Veterans Affair, Minister Ronaldson, today noting that the withdrawal of last year’s measure also means the effect of the reversals to indexation will apply to service pensions, veterans disability pensions including the special rate or what is known as the TPI, the war widow’s pension, wholly dependent partner payments and special rate disability pensions. They will continue to be, as is the case now, the greater of the CPI, male total average weekly earnings movements or of course the hybrid measure on the CPI.

The savings achieved by this new plan for fairer access to a more sustainable pension will be $2.4 billion dollars over the Budget and the forward estimates. Under the proposed changes, the assets free area as it is known will be increased to support pensioners with low and modest assets. In order to qualify for a full pension from January 2017 the assets free area will increase from $202,000, where it is today, to $250,000 for single home owners and from $286,500 to $375,000 for couple home owners.

The family home will not be included in the assets test and never will under a Coalition Government. At the same time the Government will reduce the maximum value of assets you can hold to qualify for a part pension. For couples who own their own home, the maximum threshold is currently up to $1.15 million dollars and $775,000 dollars for single home owners, not including the value of the home. Once again, the family home is not included in that assets test. This will be reduced through $823,000 and $547,000 for couples and singles respectively. For pensioners who do not own their own home, their thresholds, at both the lower end and the higher end, will be set at $200,000 above those for pensioners who own their own home. Now, this increases the gap between home owning pensioners and non-home owning pensioners on these thresholds by just over a third or around 36 per cent. That is intended to recognise the high living costs associated with pensioners who don’t own their own home.

This way forward under the fairer access to a more sustainable pension proposal effectively restores what was known as the $3 taper rates, which were changed in 2007 by the Howard Government. I note that at that time the Budget was in surplus and there was $40 billion in the bank. Thanks to the Labor Party’s six years, that is no longer the case and those levels of taper rate changes from 2007, when it was reduced from $3 to $1.50 are no longer affordable. Over 14 years, for every $1,000 in assets above the minimum threshold for the full pension, fortnightly payments were reduced by some $3. This was changed to $1.50 in 2007. Now this put, at the time it was indicated 110,000 extra people on the part pension and increased the cost to taxpayers by almost $1 billion a year. As we said, that’s when the Budget was in surplus and there was money in the bank. It is estimated that as a result of the changes that I am announcing today, approximately 91,000 current part pensioners will no longer qualify for the part pension from January 2017 and a further 235,000 will have their part pension reduced.

All people, I stress all those, affected by the scaling back of the maximum asset threshold under this proposal will be guaranteed eligibility to the Commonwealth Seniors Health Card. That card provides the same concessional access to pharmaceuticals and other medical benefits and concessions as is provided to those who are on the pension. Those impacted by these changes will be able to maintain, it is estimated, their current level of income after their part pension is reduced or taken away by drawing down less than 1.84 per cent on their additional assets, that is for single home owners, that is the worst case scenario and in the worst case scenario for couples that is 1.76 per cent. So those affected by these changes have assets and by drawing down on those assets to those modest amounts they will be in a position to maintain their incomes at the levels they are currently at.

The Government is seeking to ensure fairer access to a more sustainable pension. These are the only changes the Government is putting forward for the pension. By reducing eligibility to the pension for those with more assets, they will become fully self-funded retirees. This means though, we must retain the incentives through the tax system for superannuation. The Government does not support Labor’s proposal to tax superannuants more on the income they have generated for their retirement. Receiving a Government welfare payment is not the same as being able to keep your own money. That is what we believe in the Coalition. We will tighten up welfare eligibility by removing perceived entitlements that do not have a strong link to need in the welfare system but we will also retain incentive through the tax system for people who provide for themselves.

Now on another announcement today, we are announcing an income deduction cap on defined benefits schemes. The Government will be closing a loophole opened up in 2007, through an unintended consequence of some legislative changes at the time that is currently allowing around 48,000 superannuants on higher incomes from some public sector and large corporate defined benefits superannuation schemes to effectively fly under the radar on the income test for the pension. When determining eligibility for a pension, it is important that income is properly assessed to ensure fairness in the system. For most people with a defined benefit income stream, the gross income they receive from those schemes is subject to the income test for the pension. However, for some, particularly for those who are part of some large State Government public sector schemes, significant portions of their income are disregarded in assessing their eligibility for a pension under the income test. The reason for that is to reflect what is seen as the voluntary after tax contributions made when they were working but the amounts being deducted in these cases are in excess of those notional contributions.

For example, a couple with a defined benefits scheme income of say $120,000 a year is currently able to reduce what is assessed by the pension income test by around 50 per cent; treating this portion of their income as a draw down. The remaining $60,000 is then assessed as income under the income test for the pension which results in them receiving a pension in part of some $7,500 per year on top of the $120,000 they were drawing down from the scheme. We will be closing this loop hole by applying a 10 per cent cap on the amount that can be deducted for these purposes as we believe this represents a fairer assessment of these types of arrangements. Around two-thirds of those who are involved in these schemes are already within that 10 per cent cap and they will be unaffected. The measure will also not apply to any military or veterans pensions. The change will also not affect the means test treatment of income streams purchased for retail providers of these products such as AMP and AXA and funds of that nature, self- managed superannuation funds and small APRA funds as they don’t operate in this way. Closing this loophole will save taxpayers around $470 million in the Budget and forward estimates. Happy to take questions.

QUESTION: Minister, what you’re saying now – you’re now excluding any changes to the tax treatment or tax incentives for superannuation during the term of this Government?

MINISTER MORRISON: Well that was actually the commitment we took the last election and that’s what we’ve honoured in full. We have also honoured in full our commitments on the pension as well. We have said there would be no changes in this term and what I have said today very clearly is that the Government believes that we must maintain the incentives that exist for superannuation. Welfare is for need. Superannuation requires incentive and that is what the Government intends to continue.

QUESTION: Can you also give us some idea as to whether or not between the two alternatives of changing the indexation system for pension, which you have now abandoned, and this new package, what is the effect on the bottom line? Is this going to save money for the Budget or is it going to lose money or cost money to the Budget?

MINISTER MORRISON: As I said, these measures save $2.4 billion over the Budget and forward estimates. So particularly over the Budget and forward estimates this is an improved position. Over the longer term the other measure had a larger longer term impact but what I am announcing today is the product of many months of consultation, both with stakeholders in the sector and I particularly want to thank National Seniors, COTA and ACOSS and other organisations with whom I have been in discussions with for some time as well as crossbench Senators such as Nick Xenophon and David Leyonhjelm and Bob Day and Glenn Lazarus and others who have been working and understanding these proposals for some time now and my own colleagues on the Government benches. I would hope that those in the Parliament will see this as those I’ve been speaking to see it and that is a common sense, constructive, consensus proposal that really does strive for fairer access for a more sustainable pension. We have to maintain the goal of a sustainable pension. We have to maintain the goal of the march towards surplus and this Government through this proposal is doing both of those things.

QUESTION: The Greens have come out today and flagged possible support for the measures you have announced but they want a broader review into retirement and superannuation. Are you happy to run with that?

MINISTER MORRISON: Well look that is a matter for Prime Minister and the Treasurer. There have been active discussion around those types of proposals for some time, of course we have quite a number of reviews that are on foot at the moment, particularly the Tax White Paper but there are other reviews. I think many of the issues that have been raised in the context of the discussions we have had around this issue will fit neatly into things like the Tax White Paper discussion. But, that said, we remain in open dialogue with stakeholders on this issue. I don’t think necessarily these matters should be linked because this is a proposal which I think stands on its own two feet both in terms of fairness, in terms of consensus but also I’d add to those things in terms of ensuring a more sustainable pension for the future. Now back in 2007, when the $3 taper rate was changed to $1.50, the Greens voted against that change. In reversing that decision I would expect that they would welcome that and I notice their comments today. I have had no discussions with the Greens about these matters. I know what their position on the record is and I would simply trust they would act consistent with their record.

QUESTION: A review is small price to pay to get these measures through the Senate?

MINISTER MORRISON: Look, measures will be presented to the Senate and we will take it at that point. But I think these measures stand on their own two feet and I think they are worthy of support in their own right and that is not to rule out any other discussions that can be had on other topics. That is really for the Prime Minister and Treasurer to discuss.

QUESTION: What is your advice to the 91,000 who won’t get the pension?

MINISTER MORRISON: My first word to the 91,000 is to thank them for providing for their own retirement which will now see them be fully self-funded retirees. They are in a position in the worst case scenario to draw down on the assets they have, for couples over $820,000 of around about 1.7 per cent, to maintain the income they have had until now. We do know that on the pension both in the first five years of the pension and the last five years of the pension, the majority of pensioners are either increasing their assets or have got their assets at the same level. The whole point of providing taxpayer funded incentives through the tax system for superannuation is that people draw down on that in their retirement. It is not intended to be a taxpayer underwritten bequest program. It’s intended to be a superannuation scheme to ensure a good and very liveable standard in retirement.

QUESTION: Are you confident of securing support in the Senate for these plans?

MINISTER MORRISON: I believe these measures do deserve support and I’m encouraged with the discussions I’ve had with those who will be reviewing these matters in the Senate.

QUESTION: Just to clarify the savings. You say that savings will deliver over $2.4 billion to the Budget. But what I am not quite clear on is how does that compare to what would have been – what would be delivered to the Budget under the planned changes to the indexation system?

MINISTER MORRISON: In last year’s Budget and there’s been a few changes in the parameters since last year’s Budget, but in last year’s Budget from memory it was around about $270 million or there abouts in the Budget and forward estimates. As you can see it’s a fairly significant increase on the saving. But the previous measure had a much larger longer term impact. Over the longer term last year’s measure had a bigger contribution to savings. This I think represents a consensus, a compromise on where we were before. If you are not going to change the rate at which all pensions go up, then you need to look at eligibility and it was ACOSS some while ago who put this forward I think quite constructively into the debate. It was something the Government was already considering and I think a sort of a common sense consensus has built around this notion of fairer access for a more sustainable pension.

QUESTION: Given that retirees though would hopefully be living for decades in their retirement, is $800,000 really enough to get them through?

MINISTER MORRISON: Well the pension is a safety net; it is not a superannuation scheme. The pension is there for those whose assets have fallen to a level where they would require that level of support. The pension is not there to provide an incentive, it’s there to help people in our community. The average assets held by pensioners is around $113,000. So $820,000 is well, well, well in excess of what the average pensioner has available to them. And even those with superannuation, the average held among pensioners is around $200,000. So we are talking about a cut-off point which is more than four times what even those with superannuation on the pension are able to achieve. I think this is a fair compromise. We are not stepping back from acknowledging how this will impact in some cases.

But that is why I make the point about superannuation. A superannuation scheme is where you use the tax system to encourage people to be self-supporting. That’s why on that scheme the Government and I am just appalled at what Chris Bowen has put forward in terms of taxing the income of those who provided for that income directly and paid tax for it on the way in. Labor isn’t seeking to have a sustainable superannuation scheme. What they’re seeking to do is broaden the tax base to pay for more welfare. That is not what this Government is doing.

QUESTION: Why shouldn’t someone who has a house, say, worth $2 million, why shouldn’t that be in included in the assets test?

MINISTER MORRISON: What you are proposing is that the family home should be in the assets test. Not only are there great difficulties technically in being able to implement such a policy, but equally, the family home provides stability for millions upon millions of Australians. And it has been something that gives them a sense of surety and security in their older age. Where people want to down size and move into smaller homes, I have always thought that as a sensible idea, it particularly assists for those as they get older to move into more age appropriate accommodation. The Commonwealth currently spends large sums of money refitting people’s homes so they can age in place and more people are staying in their home rather than going into residential age care accommodation. I think the family home in the assets test is one that violates that principle position of fairness to most Australian families and it’s not something this Government is going to touch.

QUESTION: Is it fair that someone who has a home worth $2 million compared to someone who might have a home worth $500,000.

MINISTER MORRISON: What I find interesting about this debate is we often leap to the extremes to justify a change for the majority. And that is why I don’t tend to buy into that argument.

QUESTION: Did you watch ‘Struggle Street’ last night?

MINISTER MORRISON: Let’s stay on the pension for a second. If you want to ask questions about what television programs I watch we can do that later.

QUESTION: So if you have a home [inaudible] but as long as you have that – if you fall within that threshold you don’t get anything but the person with a $2 million house who doesn’t have as much –

MINISTER MORRISON: The family home is not included in the assets test. But any assets you have in addition to the family home are. What we are doing today is raising up the threshold so more people on lower assets and modest assets will be able to get a better pension, some $30 per fortnight on average per week. For those on the higher levels of assets for couples over $820,000 for example, then we are bringing it to that level. We believe that is a fair and more sustainable way to have the pension on the right track. The pension is currently $42 billion a year; it’s rising to $70 billion in the next ten years.

QUESTION: So if you were renting, for instance, versus someone who was in a $4 million home…

MINISTER MORRISON: For those who don’t own their own home, there is a $200,000 addition to the thresholds. So we are making sure and we are expanding that gap by over a third because we recognise that those who don’t own their own home have higher living costs and that is reflected in what we have done here with these changes.

QUESTION: Coming back to the question of a review of some sort of retirement income policy generally, leaving aside whether or not the Greens are making this a condition, do you see attractions in such reviews since all of these matters that we have been talking about today – superannuation, pension, et cetera, et cetera, tax are all inter-related?

MINISTER MORRISON: What is important, I think, particularly in this area, is there is some stability and there is some certainty. I think that is important for superannuation and I think it’s important for people to have a good idea about what any changes are down the track. The changes I have announced today don’t come into effect until January 2017, so that gives quite a lead time for people to make preparations for that time. It is important that people I think also get a clear message from the Government today that this is the only change to the pension that we are putting forward, the only change to the pension, by constraining the eligibility and getting on to a far more sustainable track. In relation to the other reviews that are out there, we already have a white paper on taxation and a series of other reviews that are under way.

We don’t want to create any unnecessary anxiety or uncertainty on the part of pensioners or superannuants. That’s is why I and the Prime Minister and the Treasurer and others have been sending a very clear and consistent message to those who are saving for their retirement that we don’t think that Labor’s tax sledgehammer on your retirement income earnings is the right thing to do. I note that they go beyond that just on superannuation. The Shadow Treasurer, former Treasurer, Chris Bowen has floated stripping away the negative gearing incentives, that we know ordinary Australians all around the country, are using also to provide for their retirement, particularly in places like Sydney and Melbourne and Brisbane and others. They want to strip that away. People who are saving for their retirement to be fully self-funded retirees are not the problem. They’re the solution and Labor wants to tax them.

QUESTION: Negative gearing affects housing affordability for many people trying to get into the market as well?

MINISTER MORRISON: Well I actually don’t accept that argument. I think there is a very different analysis of that which leads you to a very different conclusion.

QUESTION: That is one argument?

MINISTER MORRISON: Well there are lots of arguments that doesn’t mean they are right.

QUESTION: You’ve put together a jobs package for this Budget. Is that going to replace the under 30s quarantine welfare policy?

MINISTER MORRISON: We will have more to say about those matters in the Budget.

QUESTION: Did you watch Struggle Street last night?

MINISTER MORRISON: I did my wife and I, we watched it last night. Look with these sorts of programmes there are the great risks of stereotyping parts of the community. I am from the Shire and Channel 10 had crack at us a number of years ago which we didn’t particularly welcome. And the fact most of them who were actually on the programme didn’t even live in the Shire just sort of showed the credibility of those sorts of things. We all come from different parts of the country. Australia is the best country in the world to live, whichever part of it you live in; whether it’s in Mount Druitt or the Shire or Kununurra or anywhere else. So I think it is unfortunate that parts of Australia can be stereotypes in those ways. That said I thought there were some very real issues that were canvassed in that programme the sorts of issues that as the Minister for Social Services we deal with every day. It just highlights why you need to do things which help people to get out of the cycle of welfare and get into the cycle of work and that’s what this Budget is going to be about. Whether it’s for families, whether it’s for young people, whether its people as they grow older, we want to encourage everyone in this country to unlock their potential and to be able to be as self-supporting as they possibly can. We don’t want to write people off and we don’t want to see them written off. It grieves me as an Australian to see people in those situations and we have to turn it around.

QUESTION: Minister would you support a move in NSW to introduce the Healthy Welfare Cards in outback aboriginal communities?

MINISTER MORRISON: At present with the Healthy Welfare Card we are considering a number of sites for trials and that’s where the proposal rests at this present moment. There are no plans at this point to take the Healthy Welfare Card beyond a trial application. Those trial sites will be identified on the basis of intensive community consultation which Parliamentary Secretary Alan Tudge has been engaged in now for some months. They have been in a number of locations, no final decisions have been taken on where those sites will be, but we have been very encouraged by the very practical and positive response we have had from a number of those sites.

QUESTION: Minister, are you gratified by the commentary that has been around in recent days that you’re solving the problems, that you are Mr Fix-it and have been presenting the arguments well and that this will set you up well for a leadership bid one day?

MINISTER MORRISON: I dismiss all that other than to say we’ve already got a fixer in the Federal Parliament, and he’s my good friend Christopher Pyne.

QUESTION: Can I just check very quickly is the pension (inaudible)

MINISTER MORRISON: There have been no changes to those arrangements and those measures are still outstanding from the previous year’s Budget. It’s an interesting question because recently we had the Leader of the Opposition tell us about what was important in this Budget and the need to address the Budget challenges. Well in my own portfolio the Labor Party still opposes some $12 billion worth of savings, they even oppose some savings that the Labor Party themselves introduced when they were in Government. This is Bill Shorten’s ‘festival of ideas’, the year of the idea. He has come up with two and they are both taxes. I think that tells you everything you need to know about Chris Bowen and Bill Shorten. They think the answer is more taxes to pay for broadening welfare. We think the answer is welfare based on need not entitlement and a tax system that gives people incentive to provide for their own future, for their own families. Thank you.