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Fairer Indexation of Military Pensions Speech

Speeches in Parliament
Penny Wright 12 Sep 2012

Senator WRIGHT (South Australia) (17:11):

As the Australian Greens spokesperson on veterans' affairs, I am very aware of the cause of fairer indexation of military superannuation pensions. I have spoken at length to organisations representing veterans and their families and I, along with many other MPs, have received extensive correspondence from the veterans' community about this issue.

Let me say at the outset that this is not a new issue but the coalition is a recent convert to the cause of fairer indexation of military superannuation pensions. Perhaps we should reframe this MPI to include the failure of the coalition to deliver fairer indexation while they were in government too. After all, they were in government for 11 years and had numerous opportunities during that time to reform the system, but they did not do so. There were two inquiries during those years-in 2001 and 2002-which recommended that government consider fairer indexation for superannuation pensions to better reflect costs of living. But the coalition did not act. Why was it that they waited until 2010, when they were out of power and in opposition, to first introduce legislation to change the indexation arrangements? Could it have been that they wanted to make it a Labor government problem?

The current situation is unfair. The Defence Force and Commonwealth public service schemes in question have been closed to new members but they still have significant current membership which is affected by the issue. These Defence Force superannuation pensions in question are indexed to the consumer price index. Once a useful measure of increases in living expenses, it is widely acknowledged that this does not always reflect the underlying increase in prices affecting the costs people face every day. The CPI, as acknowledged by the Australian Bureau of Statistics, is not a measure of cost of living but a measure of inflation. This is an important distinction. In contrast, the age pension has an indexation formula which takes into account changes to wages by reference to MTAWE, or male total average weekly earnings, and the Pensioner and Beneficiary Living Cost Index. It is clear that the indexation applied to the age pension has seen increases on a greater scale than those to the defence and Commonwealth superannuation payments and they have been lagging behind over time.

It is important to acknowledge that there cannot be a direct comparison between the age and service pensions and superannuation pensions. The age pension is a safety-net payment to reduce poverty in retirement, while the superannuation pensions provide retirement pay and comprise part of a person's remuneration for services rendered. The two payments also differ in respect of the rate of payment and the impact of income and assets. The maximum rate of the age or service pension single is approximately $19,000 per year while the average rate for a defence superannuation pension is approximately $24,000. In addition, the age and service pensions are reduced according to income and assets, while the superannuation pensions are not. However, the Greens accept there is unfairness in the current indexation measures for Commonwealth superannuation pensions, both military and civilian. I note that there have been a number of inquiries that have found that the CPI is not the most appropriate means of indexing Defence Force personnel superannuation pensions. Over the past 10 years, there have been three separate Senate inquiries and two government commissioned inquires that have made recommendations on this issue. The three Senate inquiries in 2001, 2002-both in the time of the Howard coalition government-and 2008, all recommended that government consider fairer indexation for superannuation pensions to better reflect costs of living.

Most recently, in 2009, the Matthews review commissioned by the government in 2007 recommended no change to the indexation measure unless a more robust measure of price inflation is available. The government appears to have accepted this recommendation, but we say that the government should further consider the matter of fairer indexation of Commonwealth superannuation pensions as a priority.

The Greens have been supporters of the campaign by both defence and civil personnel on this issue for some time now. Senator Bob Brown wrote to the Finance Minister in November 2009 asking the minister to-reconsider the-government's response-to-the-Matthews review and develop a fairer indexation method. The Greens formally requested that the federal government consider this policy change as part of this year's budget. We now know that a change to indexation was not included in the 2012 budget, but we will continue to negotiate with the government to urge them to find a way in which we can achieve a financially responsible reform of the indexation of pensions.

I acknowledge that this issue has a long history in the parliament. It has been an unresolved problem for governments of both of the old persuasions over many years and its significant cost and dispute over funding mechanisms have dogged its resolution. The cost impact of this is something that we need to be mindful of in the current fiscal climate. There are two costs involved in changing the indexation-the cash cost per year and the unfunded liability into the future. These are substantial. The Matthews review estimated the cash costs to be $111 million over three years from 2010 and $23 billion in unfunded liability by 2020. There is still some dispute between the government and the opposition as to the actual costs involved, but it is clear they are significant and it is essential that any serious proposal be properly costed.

In 2011, the Greens did not support the coalition's bill because the coalition did not propose a responsible means of paying for the reform. After 11 years in government, they introduced the reform, wanting to make it the government's problem without indicating how it could properly be paid for. After consideration in 2011, the Greens took the view that, without an identified and budgeted means of paying for the change, it was not fiscally responsible to support the legislation, however meritorious its aim. The money has to come from somewhere.

The Greens have consistently proposed serious revenue measures to fund reforms such as this and others which would result in a fairer share of our national income. Indeed, we called for the implementation of the original Resource Super Profits Tax, as advocated by Treasury, to see a fair return to all Australians from our shared mineral resources-resources that belong to all of us. Instead, in the face of a vociferous and hugely well-funded campaign by mining companies, the government settled for a mere shadow of the original tax, the Minerals Resource Rent Tax, which will net almost nothing, at a loss of up to $10 billion per year-$10 billion income which could have funded reforms like this.

I was very interested to see that billionaire Gina Reinhart has recently given her support to the campaign for fairer indexation. But, unfortunately, words are fairly cheap. I did not notice her suggesting that she would fund it herself from her own considerable wealth-and she reportedly earned $18.87 billion in 2011-or any acknowledgement that if she and the other mining companies who were so opposed to the original mining tax were to pay a fair share of the profits they make from mining our shared resources there would be more money available to the governments to fund outstanding and long-needed reforms such as fairer indexation of military superannuation, the NDIS, an increase to Newstart and more funding for Australian schools. Instead we have $10 billion a year forgone, supported by the coalition.

I acknowledge that there are many passionate and committed advocates for change to see fairer indexation for all Commonwealth and Defence Force superannuation pensions and I will continue to listen to these concerns. I continue to urge the government to find a way in which this reform can be effected in a financially responsible manner. I have been working with veteran organisations and their supporters on a range of measures to acknowledge the contribution and service they have provided to our Australian community, including their needs in relation to mental health services and welfare and support for their partners and families.

The bill that was introduced by the coalition in the House of Representatives was in a sense trying to jeopardise the passage of unrelated veterans entitlements legislation, to be put off to the never-never until some time when this sort of reform is funded. It was not done in good faith. In fact, the coalition were not prepared to allow the Greens to even see the amendments before they were tabled in that House. If they were genuine about negotiating with the Greens and trying to get that legislation passed, they would have been prepared to provide some information about the nature of that bill. Instead they did not, because it was a stunt. It was a stunt that was at risk of jeopardising the passage of other unrelated legislation which would have put on hold entitlements for veterans which were not related to this.

Senator Ronaldson: Did you ask for it?

Senator WRIGHT: We did ask for it and we were told that it was not available, and we were not able to see it. It was disingenuous. It was a stunt. And that is what a lot of this has been. The coalition should have passed legislation when you had the power to do it. The Greens will continue to work with the government to find a way in which this reform can be effected in a financially responsible manner.

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