Almost a million retirees are being short-changed by the Morrison government as it fails to increase their fortnightly payments to reflect the hit long-term savings are taking because of falling interest rates.
Pensioner groups are accusing the government of using them to save money by deliberately sticking with a decision made in 2015 by then-social services minister Scott Morrison that assumes high returns on investments such as term deposit accounts. Of course, with the current economic decline, overseen by the Coalition, these assumptions are no longer correct.
Under current social security laws, pensioners – including those on a Veterans’ Affairs pension – are allowed to earn up to $168 a fortnight before their payments are reduced. Income from financial investments, such as term deposits, are included in the pension income test.
The government assumes a rate of return on these investments which is described as the deeming rate. Currently, the deeming rate for singles is 3.25 per cent for assets over $51,200 and 1.75 per cent for those under that level.
Deeming rates have remained unchanged since 2015 but official interest rates have fallen from 2.25 per cent to 1.25 per cent with the Reserve Bank of Australia signalling they will fall even further. At the time of their last move, Mr Morrison said the reduction would cost the budget $200 million a year in extra pension payments.
National Seniors chief advocate Ian Henschke has claimed that part pensioners were being hit hard by the government which was failing to reduce deeming rates.
He said while the recent fight over franking credits had affected about 10 per cent of his organisation’s membership, deeming rates was affecting the other 90 per cent!
“This is just another example of the government using pensioners as a milk cow,” he said.
“It’s hypocritical of the government, which was telling the banks to pass on all of the recent cut in official interest rates but at the same time they hold the deeming rate at the same level it’s been since 2015.”
But the misery doesnt stop there!. Even on the issue of energy prices, the failure of the Morrison Government is clear – especially in an economic climate where wages and pensions are stagnant.
ACOSS and BSL recently commissioned the Australian National University (ANU) Centre for Social Research and Methods to undertake a distributional analysis of energy prices and compare the results with a decade ago. The results found that despite very strong energy price increases over the past decade there has been relatively little change in energy costs compared to incomes. The average share of energy costs to disposable income increased from 2.3% to 2.4% over the last decade. However, people on low incomes have fared far worse, paying disproportionately more of their income on energy bills (6.4%); and this has risen more than other income quintiles since 2008 (5.9%).
The underlying problem is we have a federal government that only caters for their elite corporate mates, whilst those doing it tough will continue to get squeezed.