Introduction
Coalition Senators believe the bill should be supported.
That said, the private senator’s bill introduced by Senator Dean Smith on
3 August 2022 is now redundant, as all the features of the bill were adopted by the Senate as amendments to the Government’s Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022 on 28 September 2022.
These amendments to the Government’s legislation were supported by independent Senator Pocock, the Jacqui Lambie Network and the Australian Greens.
The amendments included adoption of Schedules 1 to 3, which:
suspend benefits and entitlements instead of cancellation;
extend qualification for pensioner concession cards; and
increase the Work Bonus from $300 to $600 per fortnight.
Background
On 26 June 2022, the Coalition announced its proposal to increase the Age and Veteran Service Pension Work Bonus Scheme to encourage pensioners to return to work, or work longer hours, and help ease labour market shortages.
To action this, Senator Dean Smith introduced a private senator’s bill—the Social Services Legislation Amendment (Enhancing Pensioner and Veteran Workforce Participation) Bill 2022 (bill).
The bill also includes initiatives contained in the previous Coalition Government’s Social Services Legislation Amendment (Workforce Incentive) Bill 2022, which sought to provide working pensioners greater flexibility to return to employment, but was not passed prior to the election.
Purpose of the bill
The bill makes workforce involvement as attractive and worthwhile as possible for Australian pensioners in the following ways.
Increasing the Work Bonus Scheme
The bill doubles the Age and Veteran Service Pension Work Bonus Scheme, the amount that can be earned without impacting pension payments, increasing it from $300 to $600 per fortnight, or $1200 for a couple.
Working pensioners will also continue to accrue unused Work Bonus Scheme income up to a $7800 cap, exempting future earnings for pension income test purposes.
Removes disincentives for working pensioners
Age pensions are currently cancelled where a recipient’s total income exceeds the income test for a 12-week period.
Pensioner Concession Card (PCC) access is subject to the same test and timeframe.
Under the bill, pensions will be suspended for up to two years instead, during which time pensioners undergo a simplified process to resume the pension if their income falls to the prescribed level.
Both age and disability support pensioners will be able to keep their PCC for two years under these circumstances, as an acknowledgement of the importance of the concessions the PCC offers working pensioners.
Pensioner partners of working pensioners will also enjoy the same pension resumption and PCC arrangements for a two-year period.
The bill also includes an annual review mechanism, requiring a Ministerial Review to be tabled in Parliament on the operation of the amendments and the sunsetting of the amendments every 12 months, unless determined otherwise by notifiable instrument.
The existing pension rules deter pensioners from being able to remedy cost of living pressures and their ability to respond to labour shortage issues
The pension should not financially punish older Australians who want to continue to work.
This measure to support older Australians and veterans who choose to work is needed in the current economic environment, where the labour force participation rate is at a record high and the unemployment rate at 50-year low.
Our labour market continues to be tight with many small businesses and regional businesses reporting skills shortages as their most significant challenge.
Easing skills shortages will help to ease inflationary pressures and put downward pressure on interest rates.
There are more than 2.5 million pension recipients; around 80 000 (3%) are employed.
Many pensioners have told us that they would work on a part time basis, or an extra day or extra shift, if it were worthwhile.
Increasing the amount pensioners can earn every fortnight so significantly has the potential to make a meaningful difference to their household finances.
Crucially, it also makes the prospect of returning to work, or working additional hours, an economically viable option where it previously has not been.
Increasing pensioner workforce participation has accompanying mental and physical health benefits for them and their community.
Political leaders have called for action
The initiative has received support from Victorian Premier Dan Andrews, who was quoted in the Australian Financial Review on 30 August 2022 as saying:
I don’t reckon we can afford the luxury of saying, ‘No, you can’t work, we’ll lock you out’, while we’ve got such post-COVID skill shortages in every single industry … The notion that we’re penalising people, or keeping them out of the workforce, while every industry is begging for staff, it just doesn’t make any sense to me.
NSW Treasurer Matt Kean also expressed support in the Australian Financial Review on 30 August 2022, stating:
We have a grey army of workers who want to get out there and work but there is no incentive to do so … We need to start opening the borders and stamping passports, but we also need to tap into the potential we have here and that is a pool of older Australians who would love to work more as long as their pension isn’t affected.
Budget cost
The estimated costs associated with the bill can be broken down into two sections:
The Work Bonus Scheme initiative would cost the Budget around
$145 million in 2022-2023.
The increased flexibility and Pensioner Concession Card measures, adopted from the previous Coalition Government’s unpassed Social Services Legislation Amendment (Workforce Incentive) Bill 2022, were expected to produce savings of $5.5 million over the forward estimates from 2021-2022.
Witness evidence to the committee expected costs to the Budget to be repaid, even with modest take-up.
The Institute of Public Affairs (IPA) said:
This plan would deliver a net budget benefit of $1,502 per fortnight per pensioner, equal to $39,052 annually per pensioner through less pension paid and more income tax received. This means that only 3,713 pensioners out of the 1.7 million, or 0.21% of pensioners who are receiving the full rate would need to enter the workforce on an average capacity to fund the policy.
The Coalition asked the IPA if their calculations have been disputed.
Mr Daniel Wild from the IPA replied:
No, not to our knowledge. We know that there has been some commentary with concerns about the potential cost of the private member's bill before us. But to my knowledge those figures have not been disputed in the public domain.
The positive broader economic benefits were highlighted by the National Farmers Federation, which said:
Furthermore, according to a report published by Deloitte in 2012, an increase in the participation of the mature age workers would lead to a significant boost to GDP: a 3% increase in participation would result in $33b.
Other views on the bill
The committee’s report demonstrates the near universal view from stakeholders of the real-life cost-of-living pressures facing Australians, and the labour shortage issues confronting businesses in our cities, and regional and remote areas.
So serious are the cost-of-living issues that the Treasurer, Hon. Jim Chalmers MP characterised them as ‘skyrocketing’.
In evidence to the committee, the Treasury described the labour shortage issue as ‘severe’:
The labour shortages currently across the economy are quite severe and quite distinct. Recently, the ABS published information that showed the number of vacancies available exceeds the number of people who are actively looking for work. There are, of course, a number of businesses who are desperately looking to fill those vacancies. So there is a need to improve policies that ensure that there's a matching of available workers to those vacancies.
The committee’s report provides abundant and persuasive evidence the community is looking for an immediate, permanent and effective measure.
In addition to the evidence in the committee’s report, we add the following comments to demonstrate support.
National Seniors Australia said:
National Seniors Australia welcomes the proposal put forward by Senator Dean Smith to double the Work Bonus limit.
…
According to the latest ABS data – 107,700 people 60 – 69 are not in the labour force, not retired and not currently employed, but want to work.
The views of agriculture producers were summarised by Grain Producers Australia, which said:
GPA supports the positive intent of this Bill, to introduce changes to the social security entitlements and payments for Australia’s veterans and pensioners, to help incentivise greater participation in the agricultural and rural workforce, by introducing more flexible rules and modern arrangements.
Australian agriculture has faced long-term structural challenges with labour supply and whilst these problems are widely recognised, lasting solutions continue to elude policy-makers and governments.
Chambers of Commerce and Industry also detailed the seriousness of the challenges.
The Chamber of Commerce and Industry WA said:
In this context, it is those economies that can extract the most out of their local workforces that will gain a competitive edge in the global economy. …
ABS data shows there is currently significant latent demand for over 65s to work. In 2019, the average hours of additional work sought by people over 65 was 685,000 hours. The total number of hours has since swelled and now stands at 724,000 hours.
The Victorian Chamber of Commerce and Industry said:
During the current skills and labour shortages, pensioners and veterans can help provide business with the workers they need to keep operating. Not only can they fill roles, but the community can benefit from their experience in training, managing, and mentoring other staff as well as lifting overall productivity and bringing broader skills into the labour market.
…
A recent survey conducted by the Victorian Chamber showed 75% of our members that responded reported that they are struggling to hire staff.
The effectiveness of the Work Bonus
Contrary to some evidence, Coalition Senators believe the Work Bonus is an effective tool to provide immediate relief to cost-of-living pressure for Australian pensioners and encourage their re-entry to the workforce.
Coalition Senators note remarks in the committee’s report doubting the effectiveness of the Work Bonus as a tool:
The committee is mindful of statements from DSS [Department of Social Services] that there is no evidence that increasing the Work Bonus from $300 to $600 per fortnight, as proposed in the bill, would incentivise aged pensioners back into the workforce.
Coalition Senators assume this comment is based on remarks by the Department of Social Services suggesting the Work Bonus does not incentivise aged pensioners back into the workforce given the experience in 2019 when the Work Bonus was increased modestly from $250 to $300.
The positive expectation of Coalition Senators that more significant increases to the Work Bonus will have an obvious improvement in workforce participation is based on evidence provided to an Australian Law Reform Commission Discussion Paper in 2012, where Departments noted:
Since the new Work Bonus was introduced, the number of pensioners of age pension age with employment income in the previous 12 months grew by around 15.25 per cent from 118,000 (July 2011) to over 136,000
(July 2012). During that same period the average gross employment income of pensioners with employment income grew by more than 5 per cent from $16,694 to $17,498.
Coalition Senators believe the evidence from increases to the Work Bonus in June 2011 provide a strong evidence base on which to base the policy. As such, the doubling of the Work Bonus is expected to encourage significant numbers of aged pensioners to re-enter the workforce.
Further evidence is provided in the media statement issued by the former Labor Minister for Social Services in July 2012:
In just one year, about 135,000 age pensioners have been able to work while having less income counted under the pension income test thanks to the Australian Government’s Seniors Work Bonus.
Recommendation
Coalition Senators believe the bill should be supported.
Recommendation
Coalition Senators believe the Government should join with others in supporting the Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022, given the bill now contains all elements of this private senator’s bill.
Recommendation
The Government should give priority to debating the Social Services and Other Legislation Amendment (Lifting the Income Limit for the Commonwealth Seniors Health Card) Bill 2022 when the Parliament resumes on 25 October 2022, and respect the decision of the Senate by passing the bill unamended.
Senator Dean SmithSenator Slade Brockman
Senator Jacinta Nampijinpa Price