THURSDAY, 3 OCTOBER 2019
SUBJECTS: Retirement Income Review; Superannuation; Age Pension; Deeming Rates; Newstart; Banks not passing on the cash rate cut.
KARL STEFANOVIC, 2GB: Well older Australians are doing it tough I reckon. The cost of living is high, the pension is barely enough to live off and as the average lifespan increases so does the amount of super you need to survive. The general consensus amongst Government and interest groups is that the current system is out of date and in desperate need of an upgrade. But progress has been slow to come. Last week the Government announced its Retirement Income Review which seeks to lift the lid on the entire support network and identify areas of improvement. The Terms of Reference were released last week. They singled out three key areas for the inquiry to look: at the Age Pension, compulsory superannuation, and voluntary savings measures. It will deliver a final report in the middle of next year. Retirement income is already a political hot potato. There is mounting pressure on the Government to increase the pension, or help older Australians struggling to pay their rent - they need it, don't they? Debate around compulsory superannuation has seen some call to dump it. And then there's Newstart, which was deliberately left out of the Review despite pressure from the Opposition and seniors’ groups to include it. I wanted to speak to the Shadow Treasurer, Jim Chalmers, about all this and he's on the line. Jim, good afternoon to you.
JIM CHALMERS, SHADOW TREASURER: G'day Karl.
STEFANOVIC: The Terms of Reference of this Review are pretty broad. A final Review is due in June of next year. Is that enough time, do you reckon, to review properly?
CHALMERS: I think it is enough time, Karl. There are some big complex issues and all the various payments and parts of the system all interact with each other in a pretty complex way but the issue is not really the time. They've got a good eight or nine months to do the Review. Our issue is we don't want to see the Review be a stalking horse for more cuts to super or more cuts to the pension. A lot of your listeners would understand probably better than anyone that in the last six years there have been a lot of different attempts to try and cut the pension supplements, to increase the pension age to 70 -
STEFANOVIC: Yes -
CHALMERS: All of these sorts of changes and people don't want to see this Review just become a bit of an excuse to do some of that harsh stuff again.
STEFANOVIC: Well especially with these cost of living pressures that they're experiencing out there, the cost of energy, a lot of people are really really struggling. One of the issues you've raised is compulsory superannuation. That rate is set to rise to 12 per cent over the coming years. Do you think it's wise to quarantine even more of someone's wage when the economy needs some spending now?
CHALMERS: Well the 12 per cent Superannuation Guarantee has already being legislated so a lot of people are counting on it, factoring it in. We think that there is a wages problem in the economy, but you don't solve it by raiding our retirement savings. Particularly, you don't make things more comfortable for people in retirement to deal with those cost of living pressures - that you rightly identify - by attacking super. The best thing about super is it takes some of the pressure off the pension, lets people save for their retirement so that they've got a bit of security when they finish working, after a lifetime of work. We don't want to see super diminished. We don't actually agree that, you know, workers should have to choose between the two things. We think that there should be wages growth and the ability to save for retirement, so we think the Government's coming at this from the wrong angle.
STEFANOVIC: Well the Government hasn't included Newstart either in its Review. They say it's not a form of income and they would rather focus on getting older Australians back into work. Should Newstart have formed part of this Review do you think?
CHALMERS: Well they should definitely review and increase Newstart, whether it's part of this Review which is about retirement income. You rightly say that even the seniors' groups want to see Newstart increased. We think that they should have a look at it, and they should increase it for a couple of reasons. Firstly, because it's hard to live on 40 bucks a day when you consider rent and all the various other, you know, electricity and all those other things. But also because it would be really good for the economy to get a bit more money flowing through the shops. We've got a big problem in the economy right now. It's really sluggish and that's because people don't have spending power. If you increase Newstart all of that would end up flowing through the shops and businesses of this country and that'd be a good thing for small business too.
STEFANOVIC: Deeming rates, rent assistance, and the pension are all set by the Government. Should those rates be set, do you think, by an independent body rather than by Government?
CHALMERS: I've heard that idea put, including by people I have a lot of respect for. It's not part of our current policy but we're happy to keep talking with people about it. Take the deeming rates for example, which is a fairly complex thing that largely, the assumption the Government makes about how much people are earning on their savings and investments. If you take that, for example, the reason why some of the seniors’ groups want it independently set is because the Government hasn't been shifting the deeming rate when interest rates change. As my colleague Linda Burney pointed out it's a bit hypocritical to say that the banks, well it's right to say the banks should pass on all the interest rate cuts, but it's a bit hypocritical for the Government to say that at the same time as they're not passing on the cuts to pensioners. We think there is potential for them to do more there.
CHALMERS: If they did the right thing there then maybe these groups wouldn't be calling for an independent mechanism.
STEFANOVIC: Yeah, it's always a bit of a mess, isn't it? Well Treasurer Josh Frydenberg says the Government would never include the family home in the asset test for the Age Pension. Should that be something they consider?
CHALMERS: No, we're not in favour of that, Karl. The problem for Josh - I heard Josh say that - the problem for Josh is he's got members of his own party calling for that to happen. We don't want to see the pension diminished for people and that would be a hammer blow for a lot of pensioners. We don't want to see it. It's good that Josh ruled it out but I just don't quite know if that's going to stick given members of his own party want to do it.
STEFANOVIC: One of the big problems too now is of course the older people get, the older they live, the more they rely on what they have saved, and what they have saved now in terms of interest is getting less and less. We know the cash rate is down to three quarters of a percent. That's obviously hurting retirees that rely on the interest from their savings to get by. It's a perfect storm almost, isn't it?
CHALMERS: Absolutely. I mean, all of those factors together make life difficult for our pensioners. We recognise that. As you rightly point out they kind of all interact with each other. People have got high electricity prices, private health insurance is very expensive, the pension has been under pressure, people are living longer. All of those things do matter. That's why it would've been better if this Retirement Income Review was a proper look at these serious issues rather than an excuse to do harsher things.
STEFANOVIC: Just on that, the big four banks not passing on yesterday's rate cut in full. I mean, what does it say about their promise to act as good corporate citizens after the Royal Commission?
CHALMERS: I mean, people are filthy about this, Karl, for good reason. They just can't quite understand it and if we want interest rate cuts to find their way into the economy, into the shops, people having more spending power, then the banks need to pass it on.
STEFANOVIC: Jim Chalmers, good to talk to you. Thanks for your time.
CHALMERS: Good on you Karl, thanks for your time.