Chapter 2
Key issues
2.1
Submitters commented on the four measures proposed in the Bill, with all
submissions expressing concerns related to issues of discrimination, equity and
financial disadvantage. The key issues discussed in this chapter are:
-
the proportional payment of pensions outside Australia (items 2–4
of Schedule 1 to the Bill);
-
cessation of Pensioner Education Supplement (item 17 in Part 1 of
Schedule 2 to the Bill); and
-
the pauses on indexation (items 1–2, Schedule 4 to the Bill).
2.2
The committee has previously examined these proposed measures and
reference to its conclusions in those inquiries will be made throughout this
chapter, where relevant.[1]
Proportional payment of pensions outside Australia
2.3
Schedule 1 to the Bill proposes to reduce, from 26 weeks to six weeks,
the length of time for which recipients of Age Pension, and certain
recipients of Disability Support Pension, Wife Pension and Widow B Pension,
would be paid the basic means tested rate while outside Australia, from 1 January
2017.
2.4
The Explanatory Memorandum states that this measure would 'reinforce and
strengthen the residence-based nature of Australia's social security system'.[2]
Submitters' comments
2.5
Some submitters did not support the proposal contained in Schedule 1,
arguing that it would discriminate against older Australians, particularly
those who were not born in Australia or who could not satisfy the Australian
Working Life Residence maximum period of 35 years.
2.6 The Federation of Ethnic Communities' Councils of Australia (Federation
of Ethnic Communities' Councils) argued that nearly 40 per cent of older
Australians were not born in Australia. Consequently, the measure would 'disadvantage
a significant section of the Australian population who were born overseas and
maintain important ties with their places of birth'.[3]
In its view:
...disadvantaging measures, with a large group of people having
a significantly lower level of rights than another part of the population, are
inequitable and do not contribute to social cohesion within Australian society.[4]
2.7
The National Welfare Rights Network highlighted that older Australians
from culturally and linguistically diverse backgrounds are most likely to be
adversely affected by the measure:
They are more likely to have humanitarian and compassionate
reasons for travel (e.g. to visit parents and family members overseas who may
be elderly and require care or other assistance). Reducing the rate of Age
Pension after just 6 weeks is too short a period in such circumstances.[5]
2.8
The Refugee Council of Australia agreed, explaining:
Due to the numerous problems with family reunion, refugee
community members are often required to travel overseas for long periods of
time to visit their relatives and community members, as they are not able to
bring their family members to Australia. This is especially important for those
who have sick or dying relatives in secondary countries of asylum. As such, refugee
communities may travel overseas for several months.[6]
2.9
The Welfare Rights Centre Sydney expressed the view:
...it is not unreasonable for an Age Pension recipient with
close family overseas to want to spend an extended period of time with family
overseas, particularly when dealing with illness or bereavement or when periods
of extended caring is required.[7]
2.10
Other submitters argued that the measure would reduce the income of some
older Australians who receive social security payments. St Vincent de Paul
Society argued that the measure would particularly affect older Australians who
come to Australia as refugees:
From what we see in our work, this is likely to affect those
who came here from poorer countries as adults the hardest. It is unfair that a new
Australian from a refugee background, who has had to return to their country of
origin for a few months, should have their Pension cut significantly more than
someone who has lived in Australia their whole life and then permanently
emigrated overseas.[8]
2.11
The Federation of Ethnic Communities' Councils argued that some older
Australians would receive less financial support if the measure were enacted,
and argued that the current level of support would be significantly reduced and
noted the Global AgeWatch Index 2015 that ranked Australia 17th in
terms of providing for quality of life in older age. At the same time, the
Index ranked Australia lowest in the region in the income security domain (62nd),
due to a high old age poverty rate (33.4 per cent) and a pension income
coverage (83 per cent) below the regional average.[9]
2.12
The Federation of Ethnic Communities' Councils submitted that 'the
proposed changes to the portability of benefits would further weaken Australia's
poor performance in this area'. The following illustration was provided:
...a recipient with a yearly income and asset tested rate of
$3,500 and 18 years working life in Australia would get an overseas rate of
$1,808.30 a year [(3,500 x 217) ÷ 420]. The person in this example ordinarily
gets $134.60 per fortnight. Under the new measure...the $1808 annual rate
(roughly $69.55 per fortnight) would apply after 6 weeks rather than the
current 26 weeks. This is a significant difference in income, which would be
more pronounced for individuals on a full pension with no assets.[10]
2.13
The Chinese Australian Services Society supported the measure proposed
in Schedule 1 to the Bill, as it would 'allow for the aged population to
develop a stronger tie with Australia' and strengthen the sustainability of the
welfare system,[11]
but suggested that the Bill should provide for special circumstances so that
older Australians' income support payments are not affected after six weeks
absence from Australia due to reasons beyond their control:
There could be a situation, when they are unable to return to
Australia during an overseas trip due to a particular reason, such as a serious
accident, medical emergency or natural disaster. This needs to be considered
when changes are made to their payment. Therefore, we would like to suggest the
Government [add] a mechanism to increase the six‑week period under
special circumstances.[12]
2.14
The committee notes that it has previously examined and expressed its
support for the measure proposed in Schedule 1 to the Bill, as 'the measure reinforces
the residence‑based nature of Australia's pension system'.[13]
Cessation of Pensioner Education Supplement
2.15
Item 17 in Part 1 of Schedule 2 to the Bill would repeal the Pensioner
Education Supplement, from 1 January 2016. Notwithstanding the cessation of
this payment, the Minister for Social Services (Minister) noted:
The Government remains committed to providing incentives for
income support recipients to improve their employment prospects through study
or training. However, more appropriate channels of Government-funded study and
training assistance for income support recipients are available through
employment service providers, the Higher Education Loan Program, FEE HELP and
VET FEE HELP tuition loan programmes.[14]
2.16
In addition, the Minister highlighted that there are other income
support payments (such as Youth Allowance (Student) and AUSTUDY) that are
particularly targeted toward students, and which consider students' particular
circumstances and needs: 'These student payments will continue and will
not be affected by the removal of the pensioner education supplement'.[15]
Submitters' comments
2.17
Some submitters did not support the proposal to cease the Pensioner
Education Supplement, from 1 January 2016. These submissions argued that people
receiving the payment are financially disadvantaged and rely on this extra
income to cover the on‑going costs of education and training. Submitters further
argued that the proposed measure contradicts the policy objective of enhanced
workforce participation.
Current financial disadvantage
2.18
Two submitters—the Australian Association of Social Workers and The
Salvation Army—particularly described the impecunious circumstances of people
who currently receive income support and the Pensioner Education Supplement.
2.19
In 2015, the Australian Association of Social Workers and James Cook
University conducted research into the financial circumstances of students,
including 54 social work students who were in receipt of a Disability Support
Pension. The research found that this group of students was in 'extreme
financial stress':
...55% of the students indicated that they regularly
went without food or other necessities because they could not afford them.
Students also indicated that at times they had insufficient money for food
(59%), clothing (67%), accommodation (43%), transport (56%) and medication (52%).
In addition, the lack of financial resources directly
affected the students' study experiences: 87% of students indicated they did
not have not enough money to pay for all recommended texts or educational
resources, 35% had problems with accommodation caused by a lack of income and
35% felt that the lack of financial support increased the likelihood of
dropping out of the course.[16]
2.20
Each year since 2012, The Salvation Army has conducted its Economic and
Social Impact Survey, which explores the levels of deprivation and disadvantage
experienced by people who have accessed its Emergency Relief Services. In 2015,
the survey results revealed a 'bleak picture of entrenched and persistent
poverty and disadvantage' and the 'inadequacy of income support payments':
The study showed 88% of respondents received some form of
income support. Among this group, a major theme for those receiving Newstart,
Disability Support Pension and Parenting payments was the inadequacy of income
support and insufficient financial resources. Many of these individuals and
families accessed Emergency Relief assistance as the last resort to meet their
basic needs. These people had $125 per week (median per week) to live on after
accommodation expenses ($180 median per week). This equates to just $17.86 per
day to meet all other living expenses.[17]
2.21
The Salvation Army argued that, within such a tight financial
environment, the Pensioner Education Supplement was a 'critical payment towards
the additional costs associated with education'.[18]
Reduction in income support
2.22
Other submitters agreed that cessation of the Pensioner Education
Supplement would negatively affect people already on low incomes and inhibit
their ability to undertake, or discourage them from undertaking, education and
training.[19]
2.23
The St Vincent de Paul Society submitted that the payment is a
significant amount to people on very low incomes:
For the pensioners who receive the Supplement, this represents
a 9‑12% cut in the income support they will receive. This is clearly
significant...[and] will have enormous ramifications for these families' ability
to feed and shelter themselves, let alone continue to engage in education.[20]
2.24
Similarly, the Combined Pensioners and Superannuants Association of NSW
Inc. submitted:
Eighty four per cent of people receiving the Pensioner
Education Supplement have no additional income other than their Centrelink
payment. Nine out of every ten people affected are either Disability Support
Pensioners or sole parents: two groups which the Government wishes to be job
ready. Ceasing the Pensioner Education Supplement will be a barrier to
pensioners taking up training and education opportunities.[21]
2.25
Some submitters suggested that women, younger people under 25 years of
age, carers and Aboriginal and Torres Strait Islander peoples would be most
affected by the cessation of the Pensioner Education Supplement. For example,
the Welfare Rights Centre Sydney submitted:
At June 2014 there were 46,885 people undertaking a course of
study with the [Pensioner Education Supplement (PES)]. Three-in-ten (13,700)
were aged under 25, indicating that this payment offers beneficial supports
that assists young people to continue in education and study. Seven per cent of
those studying with the PES were Indigenous. Data from Senate estimates
indicates that eighty per cent [of] PES recipients are women.[22]
2.26
The Refugee Council of Australia submitted that refugee communities
encounter barriers to education (particularly the up-front and ongoing costs)
and supports—such as the Pensioner Education Supplement—that mitigate these
barriers should be maintained:
Due to conflict and time spent in refugee camps or countries
of first asylum, many people arrive in Australia with disrupted education.
Others may also arrive with significant skills and education, but these
qualifications are not recognised in Australia. Support to continue education...[is]
needed to enable many people to gain adequate skills and qualifications in
Australia.[23]
Transitional arrangements
2.27
Both the Welfare Rights Centre Sydney and the National Welfare Rights
Network observed that the Bill does not include transitional arrangements, for
those Pensioner Education Supplement recipients who are part‑way through
a course:
...the average time that the PES is received is 3.5 years. It
is unfair to cease access to this supplement for people who are in the process
of completing a course of study. When changes were made impacting single
parents in 2006 and 2013, transitional rules [were made] to sensibly allow parents
to complete their course.[24]
Negative impact on enhanced workforce
participation
2.28
Several submitters argued that cessation of the Pensioner Education
Supplement would not assist income support recipients to acquire or improve
their education and training, with a view to re-entering the workforce. The argument
was that the Bill does not support people to improve their financial position
and advance out of welfare dependency.[25]
2.29
For example, the Australian Council of Social Service submitted:
Further education and skills development improves work
prospects, enabling people to rely less on income support in the future. Sole
parents in particular may need to obtain further educational qualifications to
re-enter employment after a period of full or part time care.[26]
2.30
In a joint submission, The Women and Work Research Group and The Work +
Family Policy Roundtable stated that the Bill does not provide 'a coherent
policy response to the need to increase women's employment participation':
A positive and comprehensive policy to facilitate the
increased workforce participation of sole parents and other women needs to be
both carer‑friendly and to benefit women in all socio-economic groups.
The reductions to pensions and benefits in this Bill can only increase the
disadvantage of sole parents and other carers (and those who have a
disability), particularly along with other proposed changes in the Social
Services Legislation Amendment (Family Measures) Bill 2015 and Social Services
Legislation Amendment (Family Payments Structural Reform and Participation
Measures) Bill (No. 2) 2015.[27]
2.31
The Women and Work Research Group and The Work + Family Policy
Roundtable added:
...attacking sole parents' attempts to improve their education
limits their options for accessing employment and, if they manage to find
employment, limits them to poor quality intermittent casualised jobs. The
measures in the Bill thus directly undermine the federal government's
commitment to increase women's labour force participation on a sustainable
basis.[28]
2.32
Some submitters referenced the Minister's comments about the
availability of 'more appropriate channels of Government‑funded study and
training assistance for income support recipients'. These submitters contended that
the three identified channels—HECS-HELP, FEE HELP and VET FEE HELP—would not
replace the income that would be lost, if the Pensioner Education Supplement
were enacted.
2.33
For example, the National Welfare Rights Network noted that HECS‑HELP,
FEE HELP and VET FEE HELP offer assistance only for the costs of tuition:
PES is therefore a critical payment which assists with the
additional costs of study and encourages and enables Disability Support
Pensioners and single parents to undertake study. Encouraging study during
periods of unemployment is sound policy and the centrepiece of the government's
'earn or learn' scheme directed at younger people. Maintaining PES assistance
is important also for carers, particularly those who are likely to transition
off carer payment and onto Newstart Allowance while still of workforce age (eg
because of the life expectancy of the care receiver).[29]
2.34
In addition, the Australian Association of Social Workers submitted that
most students are likely to already be receiving assistance through two of the
three identified channels (HECS–HELP and FEE HELP).[30]
2.35
While the Chinese Australian Services Society supported the proposed
measure, as a refinement of the income support system and to reduce 'those
payment supplements that are no longer viable', its submission suggested:
There is evidence that active participation in social and
community life improves the life quality and in some cases, the life expectancy
of older people. This participation often depends on the self-development of
senior citizens and the existence of appropriate support for learning.[31]
2.36
In its prior examination of the measure now proposed in Schedule 2 to
the Bill, the committee was satisfied that 'other supports remain available to
assist low income pension recipients and those seeking to undertake further
education'.[32]
The committee notes the Government remains committed to providing
education and training incentives to income support recipients and that there
are other targeted payments available to people seeking to study and/or train.
Pauses on indexation
2.37
Items 1–2 of Schedule 4 to the Bill would pause indexation of the income
free areas for all working age allowances and for Parenting Payment Single, and
the income free areas and other means test thresholds for student payments,
commencing 2016. The Statement of Compatibility in the Explanatory Memorandum
notes:
The changes to the value of income test free areas and
thresholds for certain Australian Government payments assist in targeting
payments according to need. Payments will not be reduced unless customers'
circumstances change, such as their income increasing in value.[33]
Submitters' comments
2.38
Some submitters expressed the view that indexation is essential to
maintain the real value of income support. Submitters—such as the St Vincent de
Paul Society and The Salvation Army—commented that pausing indexation reduces
the real value of income support, leaving payment recipients worse off
financially. For example:
Freezing income free areas for three years essentially
reduces the adequacy of private income for people affected by the means testing
and income thresholds. It is a measure that reduces incomes solely for the
purposes of budget savings and is essentially punishing people who are on income
support.[34]
2.39
The Welfare Rights Centre Sydney identified Newstart Allowance as a payment
which would most clearly be affected by the proposed measure. Its submission
stated that 'a substantial number of unemployed people, including about 45 per
cent of single parents on Newstart, will be impacted by this threshold freeze'.[35]
2.40
The Chinese Australian Services Society commended the measure for
'working towards the sustainability of our payments system' but expressed
concern for families in 'special hardship'.[36]
2.41
The Welfare Rights Centre Sydney—and other submitters—argued that the
measure would be a work disincentive: it would discourage people from engaging
in casual and part-time work, as any earnings would more quickly erode their
income support payment. For example, the Australian Council of Social Service
submitted:
By freezing the indexation (to CPI) of payment free areas
this measure would reduce in real terms the amount that people on income
support can earn before their payments are reduced. This will reduce the
overall income for people partly reliant on income support as well as paid
employment. Income free areas should not be adjusted through ad-hoc freezing of
indexation to achieve short term budget savings at the expense of reducing the
incomes of people on low wages.[37]
2.42
The Combined Pensioners and Superannuants Association of NSW Inc. clarified
how much Newstart Allowance recipients can earn, before the earnings begin to
affect their income support payments:
...on Newstart Allowance a person may earn up to $102 per
fortnight [three hours per week] before they lose their eligibility to the full
rate of the allowance. Reaching this threshold not only means that their Centrelink
payment begins to taper off, it also means they cease to be eligible for certain
state based concessions... To 'pause' indexation of this income free area for
three years will be to the detriment of recipients who are able to earn some
income.[38]
2.43
The National Welfare Rights Network submitted that the rate of workforce
aged payments is widely recognised as inadequate and 'to propose undermining
existing free areas by freezing indexation, in the face of clear inadequacy of
workforce age payments, is indefensible'.[39]
2.44
Three submitters—the Combined Pensioners and Superannuants Association
of NSW Inc., The Salvation Army, and St Vincent de Paul Society—called for
the income free thresholds to be indexed to movements in the national average
wage, rather than being paused as proposed in the Bill.[40]
2.45
The committee notes that income support payments would not be affected
by the measure proposed in Schedule 4 to the Bill, unless a person's financial
circumstances change.
Committee view
2.46
The purpose of this Bill is to reintroduce measures that formed part of
the Government's budget repair strategy. In addition, the Minister has noted
that the Social Services portfolio is committed to fiscal discipline, to effectively
reduce long‑term pressures, target resources to those who most need them,
and ensure the sustainability of Australia's social security safety net.
2.47
The Explanatory Memorandum has explicitly identified the savings to be
achieved by the Bill and who would be affected by the proposed measures. The
committee notes that submitters focussed on the latter and argued essentially
that disadvantaged people would be significantly and adversely affected for a
short-term policy objective.
2.48
In respect of Pensioner Education Supplement, the committee heard that
it would not be fair to cease this payment for people who have commenced but
not yet completed a course of education or training. The committee agrees that
such a move would be unfair and counterproductive. Noting the financial
circumstances of income support recipients, the committee considers that the
Bill should be amended to include suitable transitional arrangements for
students currently receiving Pensioner Education Supplement.
Recommendation 1
2.49
The committee recommends that the Bill be amended to include
transitional arrangements for current recipients of the Pensioner Education
Supplement, to enable them to complete their education or training course.
Recommendation 2
2.50
The committee recommends that the Bill be passed.
Senator Zed Seselja
Chair
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