Jenny Macklin's attack on Abbott's age pension, parental leave plans unfounded

Updated

With the Abbott Government talking of a "budget repair job" and the release of the National Commission of Audit Report on May 1, there has been widespread speculation about the measures the Government will include in its first budget, to be delivered on May 13. Changes to the age pension have been a hot button issue.

On May 2, Opposition spokeswoman for families and payments Jenny Macklin told journalists: "Tony Abbott wants to cut the conditions for age pensioners, and at the same time pay wealthy women $50,000 to have a baby. That's what I call twisted priorities."

Ms Macklin also said: "So Tony Abbott and Joe Hockey are saying to Australian pensioners that you're going to have to work longer."

ABC Fact Check examines her claim.

The claim: Jenny Macklin says the Government has twisted priorities because it wants to cut the conditions for age pensioners while paying wealthy women $50,000 to have a baby.

Jenny Macklin says the Government has twisted priorities because it wants to cut the conditions for age pensioners while paying wealthy women $50,000 to have a baby. The verdict: The Government is not cutting conditions for current age pensioners now or in the future, and while women on any income over $100,000 would be able to receive a payment of $50,000 under the Coalition's paid parental leave scheme, the scheme would deliver higher benefits to women on all incomes than they currently receive. Ms Macklin's claim is unfounded.

Qualifying for the age pension

According to the Department of Human Services, the age pension "provides income support and access to a range of concessions for eligible older Australians". There are age, income and assets tests that people need to meet if they are to get a pension.

The qualification age for men born before July 1, 1952 and women born between January 1, 1949 and June 30, 1952 is 65. Women born before January 1, 1949 qualify at 64.5 years old. Changes brought in by the Rudd Labor government mean that the qualifying age will gradually increase to 67 by July 2023.

The income test varies depending on exactly what sort of income is being earned. However, generally people can receive at least some pension as long other income they earn is less than $1,841.60 a fortnight (around $48,000 a year) for a single person or $2,817.20 a fortnight (around $73,000 a year) for a couple.

The assets test includes most things that a person or their partner owns, including cash, shares and superannuation. The assets test does not include the "principal home". The asset limits for a full pension are $196,750 for single homeowners, $339,250 for single non-homeowners, $279,000 for couple homeowners and $421,500 for couple non-homeowners. The limits for part pensions are $758,750 for single homeowners, $901,250 for single non-homeowners, $1,126,500 for couple homeowners and $1,269,000 for couple non-homeowners.

Beyond just the pension payment, once people become eligible for at least a part pension they then qualify for a variety of other benefits including the Pensioner Concession Card, which allows cheaper medicines, doctor visits, public transport and other concessions.

Payments under the pension are indexed to average male weekly earnings, rather than overall average weekly earnings.

What the various tests mean in practice is that a retired couple who own their own home (of whatever value) can still hold up to $1.1 million in other assets such as cash at the bank and earn up to $73,000 in non-pension income a year and still get a part pension and concession card. The Commission of Audit points out that "under current arrangements someone can transfer their savings in superannuation or other sources to upgrade their home or pay off the mortgage and simultaneously increase their pension entitlement".

The National Commission of Audit says 80 per cent of eligible Australians receive a full or part pension. The figure is projected to remain constant over the next 40 years.

The Abbott Government's changes

The only measure that the Government has committed to is the increase in the eligibility age to 70 in 21 years' time. Fact Check can only base its analysis on what the Prime Minister and his ministers have said, rather than speculation on what they may do in the future.

Before the 2013 federal election, the Coalition promised not to change the age pension. For example, on September 2, 2013, Mr Abbott gave a speech at the National Press Club during which he said "pensions don't change". On September 5, he told ABC Radio that "I can assure your listeners that there will be... no cuts to pensions".

Since the election, there has been considerable speculation about whether the Government would keep this promise.

On April 28, Mr Abbott gave a speech to the Sydney Institute, during which he said: "Prior to the election, we said that we wouldn't cut the age pension. I want to assure vulnerable people that the age pension won't be less tomorrow than it is today and that people turning 65 tomorrow are certainly not going to have to wait five years to retire." He stated that "there will be no changes to the pension during this term of parliament but there should be changes to indexation arrangements and eligibility thresholds in three years' time." Mr Abbott did not rule out a change to the age when people qualify for the pension.

On May 2, Treasurer Joe Hockey confirmed that the Government intended to lift the pension eligibility age from 67 to 70. Talking with Radio 2GB's Alan Jones that morning, Mr Hockey said: "Increasing the pension entitlement age to 70, we are intending for that to occur in 21 years' time." Mr Hockey confirmed the Government's plans in a speech to the Australia-Israel Chamber of Commerce that evening, when he said: "If you are 65 today you are not going to lose your pension" but the Government will "introduce legislation to increase it to 70 by July 2035."

The Commission of Audit Report made a number of recommendations about pension policy, including implementing a 15 year transition of the method of indexation of pension payments to average weekly earnings and tightening the assets and income tests from 2027-28 onwards. The Government has not announced whether it will adopt any of the recommendations. In any event, they will not impact current pension recipients.

Paid parental leave

The proposed paid parental leave scheme taken to the election by the Coalition was intended to "provide mothers with 26 weeks of paid parental leave at their actual wage, or the national minimum wage (whichever is greater), plus superannuation" and fathers with "two weeks out of the 26 weeks for dedicated parental leave at their actual wage or the national minimum wage (whichever is greater), plus superannuation".

The key part of the scheme as initially designed was that mothers earning up to $150,000 would receive 26 weeks pay at their actual wage. People earning more than $150,000 would still qualify but only get as much as people earning $150,000. On current wage rates, this meant that the minimum amount that people could receive would be around $16,000 and the maximum would be $75,000. On April 30, 2014, Mr Abbott announced the scheme would be scaled back, so that people only get their wage up to $100,000, reducing the maximum payout to $50,000.

The existing paid parental leave scheme, set up by the former Labor government, pays eligible mothers the minimum wage for 18 weeks, currently around $11,000 pre-tax, regardless of whether they earned more or less than this prior to going on leave. People are only eligible for the payments under the current scheme if they earn less than $150,000.

What Labor said when it was in government

Then treasurer Wayne Swan announced in the 2009 budget that Labor would progressively increase the qualifying age for the pension to 67 by 2023. Mr Swan called the measure a "major structural saving... to support the longer term sustainability of our pension system". A joint media release issued by Mr Swan and Ms Macklin, who was minister for families, community services and Indigenous affairs at the time, referred to the increase as "a responsible reform to meet the challenge of an ageing population and the economic impact it will have for all Australians".

Encouraging women to stay in paid employment is vital to boost workforce participation. So too is increasing the age pension age. Jenny Macklin, 2009

In a speech she gave on June 3, 2009, Ms Macklin referred to the increase in pension as a "tough decision" that the former Howard government "chose to avoid", and pointed to the United Kingdom "increasing its pension age to 68". Instead of dismissing paid parental leave as paying women "to have a baby", in that same speech Ms Macklin said that the Labor government was "catching up with the rest of the world by introducing a comprehensive paid parental leave scheme... which supports women to maintain their connection with the workforce during their childbearing years". Both issues were brought together, when Ms Macklin argued that: "Encouraging women to stay in paid employment is vital to boost workforce participation. So too is increasing the age pension age."

The verdict

The Government's announcement that it will extend the progressive increase in the qualifying age for the pension from Labor's 67 by 2023 to 70 by 2035 does not cut conditions for current age pensioners now or in the future. Australian pensioners today are not being told they're going to have to work longer.

When it comes to paid parental leave, because the Government's scheme is not means tested, Ms Macklin is right: Women on any income over $100,000 - including the minority on very high incomes - will be able to receive a payment of $50,000. However, under the Government's scheme, all mothers, including those on low and middle incomes, will receive higher payments than under the existing scheme that Ms Macklin brought in.

Although Ms Macklin refers to "twisted priorities", when in government she described measures to raise the pension age and introduce paid parental leave as "vital" workforce participation measures.

Ms Macklin's claim is unfounded.

Sources

Topics: business-economics-and-finance, welfare, parenting, community-and-society, alp, aged-care, social-policy, money-and-monetary-policy, budget, australia

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