Katina Curtis and Marnie Banger
(Australian Associated Press)
Hundreds of thousands of pensioners will soon discover how much extra money they will receive each fortnight, with the Morrison government weighing imminent changes to the income test.
But Treasurer Josh Frydenberg has nixed suggestions the system could soon be kept at arm’s length of politicians.
Cabinet’s expenditure review committee is now weighing up whether to lower deeming rates, which are used to estimate how much some pensioners are earning on their financial investments.
But Mr Frydenberg rejected calls from peak seniors bodies and MPs to take that process out of the hands of ministers.
“We believe we’ve got a proper process in place and the minister continues to review it as appropriate,” the treasurer told Sky News on Tuesday.
Council on the Ageing chief executive Ian Yates argues the rates should be reviewed every six months against a pre-determined set of benchmarks, similar to how the pension is indexed.
“Why is it that this one component of the pension system, which is deeming rates, is not related to an objective basket of measures that gives us a benchmark to adjust it on?” Mr Yates told AAP.
“It would take the uncertainty for a part-pensioner out of what they’re going to earn.”
Labor says it’s long past time the government acted.
“Scott Morrison and Josh Frydenberg don’t deserve a pat on the back for looking into deeming rates, they deserve a kick in the backside,” shadow treasurer Jim Chalmers told reporters in Brisbane.
He said the too-high rate had “smashed the household budgets of thousands of Australian pensioners”.
The deeming rates were last dropped in 2015 and are as high as 3.25 per cent, depending on individual circumstances.
For those with smaller financial holdings, the rate is 1.75 per cent.
Those changes were worth about $83 a year to more than 770,000 part-pensioners.
Since then, the Reserve Bank of Australia has cut the official cash rate five times to a new record low of one per cent, meaning savings stashed in bank accounts are earning less interest.
But Mr Frydenberg said it didn’t necessarily follow that the deeming rate should also drop by 1.25 points since it applies to a whole range of financial assets.
“It’s not a straight-line equation, it’s not about looking what has the interest rate done and then reducing the deeming rate the same amount,” he told reporters.
“For example if you’ve got shareholdings – I mean, the ASX 200 shares have gone up around 12 per cent over the last 12 months.”
Deeming rates affect about one-in-four pensioners.