IAL
PRIME MINISTER
E. O. E. -PROOF ONLY
TRANSCRIPT OF PRESS CONFERENCE, 1 JUNE 1984, ON THE REPORT
OF THE PANEL OF REVIEW OF PROPOSED INCOME AND ASSETS TEST
PM: At the outset I would like to sent -two thank yousone
of course to the panel under Professor Gruen for the work
that they have done in assisting the Government and the
community in a better understanding of these complex issues
and I would here in this context directly like to pay tribut~ e
to the work of my two colleagues Senator Grimes and Senator-.
Gietzelt who have throughout co-operated very very closely with
me as we have come to the final stage of the decision making
in this area.
Now, what I want to say on behalf of the Government is that
we believe that we have done what the great majority of the
Australian community would seek to have achieved and that is
to create a capacityi not only in this Government, but in any
successive Government to be able better to provide for those
who are most in need.
You will recall that when we first addressed ourselves to this
issue last year we indicated that our major concern was to
bring to an end that totally inequitable situation under which
pensioners who were very asset-rich and so able to arrange
their assets that they received the whole or part of the pension,
while people significantly less well placed than they were in a
position where they did not receive the pension.
This was an inequity which had been recognised increasingly
within the Australian welfare community and amongst economists
generally. And the scheme that we have brought in now is
fair and reasonable and ensures that that inequity has been
removed. The value of the scheme, therefore, is to be adjudged not
merely in terms of the revenue that wil~ l be obtained from
1985/ 6 of at least 45 million, we believe, and in growing
amounts after that, but also in terms of the removal of that
substantial inequity.
The great thing that we see is that the overwhelming majorit~ y
of pensioners are not only not going to be disadvantaged, but
very importantly and I am sure that they will increasingly
come to understand this, that they will be advantaged, because,
as I say, this Government and successive Governments are going
to be better placed financially to ensure that limited resources
are going to be available in greater amounts to look after
those who are most in need.
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I would make the point here in this conference, as I did
quite openly in the House in my speech, and that is that we
can see that in addressing ourselves to the problem that I
have outlined here, that the first proposal we brought down
on examination can be seen to have been inadequate. I
recognise that and I believe it is to the credit of the
Government that we have not been pig-headed about this, but
we have sat down, tried to get a representative panel to
assist us in our consideration. Quite clearly their work
shows the relative inequities of that standard against other
alternatives.
We believe it is right that we should have taket more time on
this and, as I have said, the Australian community is now
better off because we have been prepared to acknowledge the
inadequacy of the first decision and come to this one.
The Australian community would have been worse off, as I put
it, if we had remained rigid and wrong.
Let me just briefly address myself to the question of the
exclusion of the home. This has been a centrally important
issue of concern with the panel in their thinking and with
ours and with very many people in the community. There is,
as the panel says, no perfect answer, but we believe that in
this area there is a feeling, not merely in Sydney which tenets
to get highlighted, but throughout the community there is some
special significance tttached to the home. People don't like
to feel that that is'something which is included in some sort
of testing in their rightfs in regard to the pension. And we
have recognised that and have moved therefore to exclude the
home, as it was indeed excluded in the first proposals.
I would again make the point here that -1 did in the House and
that is, I suppose, that it may have been easier for this
Government just to wash its hands of all this and say, look,
there is some actual or potential political flak out there
if you move on the question of an assets test. But, as I said
in the House, the Leader of the opposition was right when in
his capacity as a Government backbencher in September 1981 he
addressed himself to this issue and said that Governments
needed to show courage if they were going to get right
priorities in the area of social welfare expenditure.
I believe we have shown that courage and I would hope that
that will be reflected by people in the opposition, not only
those who have indicated by previous statements that they
agree with it, such as the Deputy Leader of the opposition
and Senator Chaney, but more widely.
GRIMES: NO, I would just echo what Bob has said. I think it
ifair and equitable and it will be conceived as such by the
community. / 3
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3.
If I could just correct one furphy which has featured
prominently in both Mr. Peacock and Senator Messner' s
speech today which I think is worth cutting off before
people get too agitated about it.
If people do take the option of a loan or a lien on the
estate, what both those gentlemen have done is to have
calculated the amount that that would total up to if they
live to be 85 or 95 and come to some extraordinary figures.
The one mistake they are making, of course, is that once
people take a loan of that type the amount that they owe
comes off their assets, comes off their estate, in a very
few years, they would very quickly become eligible for the
pension without any need for that loan or lien. The only
person who could reach that level would be a multi
millionaire and they are not going to want to buy a pension
or get a pension anyway.
GIETZELT: I think, ladies and gentlemen, that the final
decision that we have made has been a very equitable one
and it has taken a very firm step in establishing a welfare
system based on need which is an important strategy that the
Government has adopted overall. And that the sort of savings
that we set out to establish will be realised, but probably
on a more fairer basis as a result of the decision that the
Government and the Caucus have adopted today.
JOURNALIST: Mr. Hawke, you have said the system of
admini-stration depends heyily on self-declaration. What are
the safeguards that you a ze including to prevent the avoidance
which you say is occurring in the income test?
PM: Well, it is simply in the absence of assets being counted.
aind being arranged in a way that there is only income that is
involved, then that basic fact of itself meant avoidance. Once
assets are in as well as income tests, then that means that
you move substantially to avoidance. It must be understood,
and it is relevant to your question, Warwick, that now with
an incomes and an assets test in existence, both don't apply
and I-think that is appreciated that if you were trying to
bear both in that would not be appropriate, but the situation
is that if their-pension would not be reduced as a result'of
the assets test then they are not affected by this. So it
really means that what you will be substantially getting at
is people with very substantial assets and little income. Thai:
is really the area of those who have substantially been
avoiding the income test.
JOURNALIST: Yes, but aren't they the very same people who have,
as you say, been avoiding in the past and have been avoiding in
the taxation area too? / 4
GRIMES: Can I just add to that that I think what you are
asking was how in a self-declaration system you get people
to comply.
PM: The mechanics of it, I'm sorry.
JOURNALIST: The safeguards of it.
GRIMES: There are two ways. The first way we do it is that
the penalties already in the Social Security Act and we have
got no reason to change them, for people who give false
information the vast majority of people are honest, the
vast majority of people won't be affected anyhdw. The second
one is that obviously there will be a spot check on people who
make outrageous understatements who outrageously understate
their assets. NOw, of course there will be some slippage.
There always is. But as for the people who are already
avoiding it, they are avoiding it by getting into artificial
schemes which provide an income which is termed capital but
not income. They will be picked up and they will also be picked
up in any taxation review. -1.
JOURNALIST: Are farmers going to be hardest hit Prime Minis-ter.
As I understand it curtilage only covers the home paddock. It
means farmers clearing their farms or in retirement would be
0. much higher assets than ordinary pensioners?
Well of course it depends to some extent where it is.
But there will be available to farmers if they so wish to do it
the proposition about the lien. So that if they really are
in a situation where they need the pension they can pursue that
course. And they-will have, as far as the home is concerned,
exactly the same right as-everyone else.
JOUPRIALIST: Prime Minister you~ acknowledged in the Parliament
some responsibility on the part of your Goverxtient for, I think
the word was confusion that has occurred '. 4ith pensioners. 0
That's right because we recognised the problem and we
sought to reintroduce an assets test in some sense like the
previous one which had existed up until 1976 and then as as
certain suggestions were made about particular sorts of difficulties,
for example the holiday home, the package was adapted. But in a
way which meant that you were in a sense quite arbitrarily
differentiating between different lifestyles and different ways
in which people had accumulated assets. And in that situation
you had a few problems.-one of intrinsic inequities between
different sorts of collections of assets and secondly, an
uncertainty as to whether this or that item would be in.
Now I don't think I could have been more straightforward in
sayring well, when wei looked at it and t# 6' listened to people
we did see that there were problems and I don't seek to avoid
that. But I simply say ( to the people of Australia I believe
that they would much prefer to have governments such as ours
which once we've looked at something and see that we have made
a mistake or could do something better, that we're prepared to
acknowledge that and move to something which we believe more
obviously completely meets the requirements of efficiency an.' d
equity. JOURNALIST: Mr Hawke, in this case though hasn't consensus
itself created uncertainty and fear in a sensitive section
of the community? I don't see how you say consensus has created fear.
JOURNALIST: The open debate, open changes, the discussion on
the assets test has been in the media for nearly 12 months,
first put forward in the Budget last year and there's been an
immense amount of debate, admittedly changed, but the debate
hasn't that caused the.-f ear itself;
It's the nature of the interjections into the debate
and I made the point in my speech in the House, as Don did in
delivering the same speech in the Senate.-that there has been
a deliberate attempt to misrepresent and distort the whole
range of this debate, not least in respect of the area of the lien,
as though this was something which was being forced on people ./ 6
P. M. cont.: whereas in fact, as I put to you, only simply you
have to ask yourself the question: are people going to be
better off or not by having that available to exercise if they
wish to do so. Now there has been a gross distortion by thE!
Opposition about this, whereas we've been I believe straightforward.
We' 1ve said there in February, we announced look there are
problems about this, we're going to have another look at it.
I just make the point, if you look at the composition of the
panel, because what the Opposition in the Parliament is sayingno
assets test that this is not right, that pensioners don't
want it. Well I just remind you of the sort of people that
were on the panel apart from if you like the academic leadership
of Professor Gruen and the financial representation of Mr Mark
Johnson of the bank, we have Sir William Keys for returned
servicemen, we have McKenzie of ACOSSh~ and'you have Mr Priest
from the Australian Pensioners Federation,-and you have
Mrs Thurgood of the Civilian Widows' Association. Now what we've
done is to have these people and I believe that they are going
to be able to say fairly effectively whether in a situation
of limited capacities on governments and financial terms, whether
it's .: appropriate to have an assets test or not. So they've
said that and obviously-once you go to an area that concerns
peoples' income and also i. taffects.. their perceptions of their
place in society in their latter years, there are going to
be emotions and I think the great disservice that' รต .. been done
in this debate in this : period is that there has been this
pursuit of perceived political self-interest by trying to show
that there should be no assets test at all. That really is
wrong. JOURNALIST: Prime Minip ter, considering the potential for
political backlash. in dstablishing th-is as a social precedent,
was it worth it.
Of course it's worth it because if the principle is
right then I think you proceed with-it. You talk about po]. itical
backlash. I don't believe that there will be because the
arithmetic of it ultimately is very simple. It should be
understood that the overwhelming majority of pensioners are
not:.-going to be affected. It's a very small proportion'. that
will. Now by introducing equity into it, in respect of that
small proportion, you are going to increase your capacity
as government to do more for the great majority of those who
need help. The arithmetic of it, when understood, will not
involve backlash..
JOURNALIST: Prime Minister you said that the great majority
of people would not be affected. How many do you estimate
will be hit by the test?
Well'I think it's a question best answered by my colleagues
because there are two separate sets within the Social Security
Department and in Veterans' Affairs. Don what's your latest
estimate, I know what I think the answer is. / 7
7.
GRIMES: The panel, you will remember, Suiggested it wassom. ething
like 28,000 on the figures they had that would be affected.
We believe the number affected will be a bit more than that,
but that they will be each individually affected less
maybe 40,000 in Social Security, but probably less than that.
But they will be each individually affected less.
GIETZELT: It would be the estimate of the Department of
Veterans' Affairs-approximately 5,000 will be affected.
That's out of 200,000 veterans. So your percentage is
very very low. And can I perhaps just amplify what the
Prime Minister has just said about backlash. We '' ve had
the figures taken out. When we established the first test
in the Budget my Department in its six State branches had'
1844 complaints or enquiries in the first four days after
that. In respect to the Gruen Report which was published
last week, in the first four days after that we.' ve had
242. So I don't think that backlash is nearly as strong
as perhaps has been suggested.
JOURNALIST: Prime Minister the report made particular
reference to Australia's ethnic and migrant groups and
all sorts of difficulties with refugees with. assets overseas,
people who are living overseas and receiving portability
all those questions. It does say that there hasn't been
time or resources to address the problems. What specifically
are you going to do..
I want to mike a comment about that and because you
get into administrativr areas.-perhaps my colleagues would
like to go to some details. A couple of general comments
I would wish to make firstly, we recognise that there is
a responsibility-upon Government to communicate our position
and the implications of it other than just in the English
language and we will do that. And there is no reason, therefore,
that there will be any-lack of understanding or knowledge of
what is involved. The second point that I would make is -that
the hardship provisions that were involved in the first
test and which. have been endorsed by the Gruenreport will
be available to everyone. And if there are some particular
problems that may apply, whether it's to particular ethnic
groups or others, then those hardship provisions are available.
There will be no way-as a result of the application of the
decisibons of the Government that any particular group will
because of the nature of that group be disadvantaged. But
it may be because there are administrative aspects of this
involved that either Don or Arthur would like to add to that.
GRIMES: The Department of Social Security pays many thousands
of pensions overseas. We have offices overseas-and we administer
an incomes test overseas now. It's not easy but we do so and
we do so quite effectively. The second salutary addition
of an assets test to that, sure adds some complications but not
much. The second thing is that we are negotiating at the moment
with Italy, and once that's settled we will with other countries,
for reciprocal social security agreements. We have*' been
progressing quite rapidly with. that in the last year or so,
so that once that's established, that problem will be much
more easily overcome that it is now.
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GIETZELT: There's no particular area if people are qualified
for the service pension they must be residlents of Australia.
I mean if they go for a six months' trip, of course, there's
no problem, but they must be legally resident in Australia in
order to qualify. So it's not an issue.
JOURNALIST: for a needs based welfare system. Do you think
the introduction of this assets test, coupled with the lump
sum super decision and its mini-budget decision on the
pension is sufficient to give us a needs based welfare system
or additional measures-are necessary and if so what other
additional measures will you be looking at?
I don'. t go to any particular measures but this Government
will be consistently-looking at ways in which we can introduce more
equity into our whole system. And you've got to understand if
you're going to address this question it's not simply a matter
of social welfare and expenditure outlays, it's a question of
taxation as well and we have made it clear in a number of
statements in the Parliament and elsewhere that we will, wita. 1
the commuunity, through EPAC, and in other ways, be looking at
these issues. The business community of Australia has urged
us that we do this, obviously the Australian Council of Trade
Unions has urged that we-do this and community welfare organisations
have urged that we do this. And we will in consultation we . can
do it. But I can't say at this stage what those community
co-operative consultations and examinations will lead to.
JOURNALIST: Prime Minister, given that are-you able to give
guarantees that the assets test will continue for some
considerable time in its present form
Yes.
JOURNALIST: Or are you likely to review it again?
No it will continue. We have indicated that it will
indexed, the threshholds will be indexed, and we believe
that we've invested a lot of time and energy and emotion, if
you like, into this-and we're not now, having introduced it
going to be tampering with it.
JOURNALIST: Mr Hawke you've pointed before to the very
distinguished and representative nature of the Gruen panel.
Wasn't there, therefore, a strong case in adcepting what was
their unanimous recommendation for an all inclusive threshhold.
No, not a case for accepting it. We were not about the
business of handing over the ultimate responsibility of government
to any group and in establishing it we made that-quite clear.
We wanted to be assisted: and I think in our speeches we'd made
it clear that there is involved a very large degree-of acceptance
of what.-the Gruen Committee has done and I think you don't argue
with that. But certainly on the question of the inclusion or
not of the home there are arguments both ways. But I remind you
on that point, that if you read the Gruen committee report closely,
you will see that in coming down as they do for their Option. 2,
as it is in their Report, as against option 3 which excluded the
house up to 150,000, a very large element of their reasoning
was their concern for the position of the non-home owner and
that is a legitimate concern. So we have gone to that in two ways.
P. M. cont...: We've included the home, but said yes we'll 9
recognise their concern, it's a legitimate concern that we have.
There are two ways you'll appreciate in which we've addressed it.
Firstly, that under our scheme for non-home owners there is an
additonal $ 50,000 for both single and married couples at the ' Level
of non-home owner assets that they can have exempt and that's not
to be desctibed as cosmetic because it will be of assistance
in a number of areas. The second is that we've given a
commnitment that in the Budget there will be an increase in
assistance for that category and so I don't think when you
examine it in that light that you can say that we haven't
really substantially accepted the thrust and the concern of the
Gruen Committee. We did have a discussion with them earlier
this week and we explained the situation to them. It will
be for them to make their statements.
JOURNALIST: So Prime Minister, pensioners who pay rent can
expect worthwhile assistance in the August Budget?
PM: Yes.
JOURNALIST: How will non exempt values by established,
Senator Grimes, and will there be Social Security valuers
or will you be accepting the valuation of the Valuer-General's.
Department valuations?
GRIMES: Up to $ 10,000 people can claim the normal content
of the home. Some people will say they haven't got that
amount and they will claim less and that will be largely by
self-declaration. We are certainly not going to go counting
sheets and things like that. No-one is going to go into
houses and do that sort of thing. Over that people will be
asked an assessment of their assets over that. And again it
will be largely self-dleclaration because most people are
honest and are aware of the non-compliance penalties in the
Act and of course there wf'll be spot checks. If valuations
have to be done in general, they will be done by the Taxation
Department valuers.
JOURNALIST: What are the non-compliance penalties?
GRIMES: Oh dear, I will have to get the Social Security Act.
They are substantial substantial fines etc. but they are
there now. We don't have to put them in. They are already
there.
JOURNALIST: Prime Minister, will the exclusion of the family
home remain an enduring principle in any future assets test.
For instance, can you give an assurance that after the next orC
future elections the house will remain an exclusion?
PM: I can only speak for the next about three or four elections.
But that theory, yes.
JOURNALIST: And in the capital gains tax, too, Prime Minister?
PM: The capital gains tax has got nothing to do with it.
JOURNALIST: No, no, but the principle of the exclusion of
the family home?
PM: I'm not addressing myself to that issue in this conference.
The position of the Government in respect of what we will be
putting to the people in the next election whenever Don
decides to call it is that we will put our position very
clearly to the people of Australia and on this occasion we will
know the facts as distinct from having them hidden from us by
the other mob.
JOURNALIST: Prime Minister, you refer to a net saving
of about $ 45 million in the first full year. Can you
tell us what the on-going or recurrent costs of the
scheme will be and also you refer to a net cost of $ 30 million
to start the scheme up after March next year. Can you
tell us who much you will be saving in those few months?
PM: Well, the position is that you are going to have a
very substantial number of people involved in the first
year. It is my understanding, and again my colleague can
talk about this, my understanding is that that-will be reduced
to about roughly, I think, Don, about a quarter of the
establishment number and the actual on-going administrative
costs I think would be in the order of $ 13 million.
GRIMES: The establishment cost is the high cost setting the
thing up, so that in the first year there won't be the savings,
as you say. It is from then on. The savings are of two types.
There are the ones you can quite clearly, as well as you can
in this area, calculate now. The sort of 35 million we are
talking about. But the other saving, whiich is what we are
about really, and which is just not quantifiable is the saving
which will result from the non-proliferation of the schemes
which have existed since 1976, that have proliferated to the
extent, and got pretty cheeky I must say, because in last
Sunday's press on the page with all the controversy about th . e
assets test there was an ad Join our scheme and you can ge~ t
your means test free pi~ ch.
The initial I will have to check the figures the initial.
establishment cost is about 30 million. We will need something
like a staff of about 1500 in Social Security going down to
just over 300 very quickly.
JOURNALIST: Mr. Hawke, I understand Sir * William McMahon ha~ s
endorsed this assets test package. Have you considered enlisting
the support of Australia's number one pensioner in promoting it?
PM: No, I'm endebted to Sir William that once again he has -come
out and indicated the segacity of this Government in matters
economic and social. He is a continuing source of support and
is welcomed, as indeed I would simply hope that his successor
in areas of economic spokesmanship in the Liberal Party, Mr.
Howard, who clearly supports us in this, will follow Sir
William McMahon.
JOURNALIST: Do you expect Sir William to be the first
pensioner to give up his pension?
PM: Well, have you arranged the ceremony?
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JOURNALIST: How will the Government go about selling
the test given the confusion which was generated by the
first test?
PM: In a number of ways. Again, Don and Arthur may wish to
aidd to this. But there will be these sorts of levels and
obviously we will discharge our political responsibility,
speaking about it wherever we can in the Parliament and
public forums. Then, I believe that my colleagues will be
very quickly getting information to the pensioner groups and
our very competent and professional friends in the media, I
am sure, will be doing an excellent job. When these things
together are done, I have no fear about the understanding.
JOURNALIST: While the political process has been on the
assets test and we tend to overlook that the incomes test
does bit quite severely, and given the assets test that will
now apply, there seems to be minimum room to start juggling
income and shifting it over to assets in that case, wouldn't
you say that the incomes test, of itself, will bite very
severely? PM: No.
GRIMES: They both don't apply together.
JOURNALIST: No, but whichever one is the most you pay, the
income so, you'vS cut out what $ 30 and $ 50. Well, let's
face it, that's a pretty 1evere. Someone getting 150 a week
as income, I mean, they Are gonners, aren't they?
GRIMES: Our capacity to improve the ease the severity of
the incomes test and our capacity to increase the base rate of
pensions which is what we are really worried about will be
increased by measures which can prevent the avoidance of such a
test. And this is only one measure to try and get rid of that
sort of
PM: I just want to emphasise the great inequity was that you
h-ad a situation it took two people and you really wanted
assess in terms of welfare, it's better off. You had so many
situations where this one who was very much better off had so0
arranged their assets income wise that they iWere getting the
full pension where a person much less well off was not getting
the pension, or a diminished one and it is that sort of
inequity which increase of the assets -test means.
JOURNALIST: Prime Minister, The Gruen Committee raises or
suggested that fringe benefits be extended to all age persons.
Can you, in fact, refute that suggestion or is that suggestion
still open?
PM: No, we are not including that part of the Gruen Committee ' s
recommendation because the costing of it would not be, in our
judgement, at this stage of our priorities and our economic
constraints, an appropriate priority.
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JOURNALIST: Prime Minister, I expect we will all be
asking the Professor ourselves, but have you spoken to him
about the Government's decision, and does he generally
accept it?
PM: I think it is right that you should ask him. We meta
matter of knowledge to you, we met with the panel on
Tuesday. JOURNALIST: Full panel?
PM: Full panel.
GRIMES: One person was overseas.
PM: The full available panel.
JOURNALIST: YOur decision wasn't taken at that stage,
though, was it?
PM: It was not finalised. It was shaping up. 1. 1