Political Honesty. Does it exist in Australia? Here is a detailed example of why it doesn’t.
It’s been an interesting time since the budget in May. Actually the interesting time started on 7th may when the new Minister for Social services, Scott Morrison announced a new “fair and balanced” pension system.
At this point and before i go into the detail of the cuts, I would like to remind people what Tony Abbott said before the last Election. In fact on Election Eve.
“No Change to pensions” Instructive to look at the link.
People would have voted for him based on that assurance. So he has introduced changes in his second budget. He does not have a mandate and the Support of the Greens for this broken promise makes them complicit in Political Dishonesty.
On the right hand side of the page are 2 files, duplicated in both PDF and Word format which show the four types of Pensioners. Couples and singles and home and non home owners in those groups.
In any analysis of a table it is imperative that you understand the basis of the generation of the table and also can reproduce those figures.
These tables are extraordinary for this liberal government because they actually give out some detail of the Pensioner population they are describing.
In the body of the press release they don’t mention millionaires getting the pension, but we had been buttered up by a proposal of the Centre for Independent Studies (CIS) which suggested that pensioners with a million dollars of assets actually got the same as someone with “almost nothing”
Another complete dishonest falsehood.
On 17th June, the Prime Minister Tony Abbott repeated this rhetoric in parliament in answer to a Question in Question Time.
That millionaires should not get the pension.
As always the devil is in the detail. Going by the tables described above, the Governments own figures show that there are 34,323 people with assets greater than $900,000. These people are people who have worked their whole life to save up a nest egg and they are made up of Pensioner COUPLES who either own their own home (33260) or do not own their own home (1057). Single Pensioners who either own their own home or don’t own their own home do NOT get a pension at this level.
The Press release also says there are 3.7 million pensioners. In their tables I counted up to 3,518,176, a difference of nearly 200,000 people.
So these people who “do not deserve” a pension are hit hardest. Yet the number with a reduction or pension cut off is 362,523.
Instead of being honest about the facts, the Liberal party has added another 327,000 people to the pain of a reduced pension.
Yet they then say that 170,000 pensioners (4.8% of all pensioners) will have their pension increased by an average of more than $30 per fortnight.
They go onto say
All couples who own their own home with additional assets of less than $451,500 will get a higher pension.
This is not a correct statement. Pensioner couples are allowed assets of $268,500 right now before the taper rate kicks in so that statement should have read.
All couples who own their own home and have assets greater than $268,500 up to $451,500 will get a higher pension.
Those below $268,500 will not get a pension increase at all.
It is impossible with the data given to prove or disprove the statement.
More than 170,000 pensioners with modest assets will have their pensions increased by an average of more than $30 per fortnight
The reason being is that they give the numbers of pensioners in ranges. For example there are 197,580 pensioner couples who own assets between $200,000 and $299,999. Only those above $268,500 assets presently are affected. We are not given that number. In the range $300,000 to $399,999, there are 116,281 who will get more pension. The cut of of $451,500 where no increase is seen is in the middle of the range $400,000 to $499,999, where there are 81,637 pensioner couples.
This tells us that the people most affected by these increases are Home owner couples. These are described as Modest assets.
An asset is only good for the level of return that it can give. The centrelink regime determines which assets are to be counted. So these include, collections, your household goods, your car(s), Caravan, boat and any other property such as a holiday home. As well as Assets which can generate a return such as cash in the bank, shares etc.
The level of return is normally dependant on the risk. The more risk the greater return. Every pensioner I have spoken to wants a low risk investment such as a Bank term deposit, where they know they will get a return and the capital employed will be preserved.
They do not want to do this so that they can count their money like scrooge Mc Duck. They want to preserve it to have an income to live off.
The tables talk about the small percentage of “draw down” of assets required to maintain the income they have been deprived of. All that drawdown will do is to make the capital available for investment less. Another bad result because if people draw down their assets by just $400,000 they will be eligible for a full or part pension again.
You may recall the ACOSS suggestion that Home owning Pensioner couples and singles should have their allowable assets cut to $150,000 and $100,000 respectively and the Taper rate increased to $2 per thousand over the allowable assets. They failed to take account of another of their reports which was about Poverty. They used an internationally accepted measure of 50% and 60% of median income. For a Pensioner couple the Poverty line is $600 per week and for a single $400 per week. (Both use the first measure 50%)
So what I did was take Morrison’s tables and work up a spreadsheet which
(The example is for Home owner couples.) The figures are for the Whole population of Pensioners.
1/ Matched his figures exactly for 2017 with a taper rate of $1.5 ($20 rounding error per annum)
2/ Matched his figures exactly for 2017 with a taper rate of $3.0.
3/ Took 75% of the assets (see discussion of assets above) and put them out at 3% per annum and then added any part pension per annum. Divided this result by 52 to give a weekly income.
4/ compared the weekly income result against the poverty line with the $1.5 taper rate and got figures of approx 41,502 pensioners
5/ Compared the weekly income result against the poverty line with the $3.0 taper rate and got figures of 428,041 pensioners.
6/ tabulated the results.
Conclusions. (again using couple Home owner)
1/ The simplistic $1 million argument is just that simplistic. If that was a problem why not just cut off the Pension at $900,000.
75% of $900,000 is $675,000. Put out at 3% (deeming rate) the return is $20,250 (a risk adverse investment) Add the part pension of $11,465 and you have a total of $31,715 or $609.90 per week. The full pension without the Electricity supplement is $33165.60. This example is using a taper rate of $1.5.
When this is done under the proposed changes the calculation is done without the part pension because it has cut out at $823,000 of assets. So the return is $20,250 at 3%. Or $389 per week. A reduction of $220 per week. AND UNDER THE POVERTY LINE.
These people will have no choice but to live off their capital and then move back onto the pension as it depletes. Even using a figure of 100% of the assets invested (which is not possible) the return is $27,000 per annum and $519 per week income. STILL UNDER THE POVERTY LINE
Just this example explains why the Labor party made the right decision to oppose the Pension changes.
2/ My calculations are conservative. When I did my Poverty line calculation under the existing taper rate, I did not take into account living expenses which the ACOSS report did.
Note: This research deducts housing costs (rent, mortgage payments and rates) from income before calculating the median income on which the poverty lines are based (which reduces the poverty lines) and then deducts each household’s own housing costs from their income (which reduces household incomes) when calculating rates of poverty. The figures quoted above are before housing costs have been deducted. Page 9.
ACOSS said that 15% of Aged pensioners in 2011-12 were in poverty. If this had not moved that figure would be 527,726 before the changes (15% of 3,518,176 persons in Morrison’s tables). My figure was 41,502 persons before the changes and 428,041 after the changes. But I did not remove the ACOSS amounts above. So the chances are that there will be close to 1 million pensioners (actually 914,265 pensioners.) under the poverty line. (If they just used their capital as an investment and didn’t draw down on it).
3/ These changes allow 170,000 people to have more pension but reduce the pension or remove it completely from 362,523 pensioners. The majority of pensioners stay the same.
4/ 62% of pensioners are home owners and it is this group who are affected most by these changes, even though they are the group who have arranged their own accommodation (during their life) by buying a house. Those people who haven’t done that in their lives need to be compensated more because they are allowed more allowable assets before the taper rate kicks in.
5/ A million dollars sounds like a lot of money. But the reality is that it is not. And not all of the assets counted can be used to generate income.
Below is the table I used to generate the overall figures. This comes from one of four spreadsheets.
|Assessable Assets||Age Pension received at current $1.50 taper rate*||Age Pension under rebalanced asset test measure *||Number of pensioners with assessable assets in specified range||Weekly Income from 75% of Assets and Pension @ $1.50 taper rate||Weekly Income from 75% of Assets and Pension@ $3.00 taper rate||Increase/Decrease in weekly income||Number of pensioners affected with reduction in Weekly earnings||Number of pensioners below poverty line 1.5||Number of pensioners below poverty line 3.0||Increase in number below Poverty Line|
|Reduction (increase) in pension income received||Assessable asset range|
|$100,000||$34,923||$34,923||$0||$0 – $99,999||523,361||$714.87||$714.87||$0.00||0||0||0||0|
|$200,000||$34,923||$34,923||$0||$100,000 – $199,999||291,978||$758.13||$758.13||$0.00||0||0||0||0|
|$300,000||$34,865||$34,923||-$59||$200,000 – $299,999||197,580||$800.29||$801.40||$1.12||0||0||0||0|
|$400,000||$30,965||$32,973||-$2,009||$300,000 – $399,999||116,281||$768.56||$807.17||$38.62||0||0||0||0|
|$451,500||$28,956||$28,956||$0||$400,000 – $499,999||81,637||$752.21||$752.21||$0.00||0||0||0||0|
|$600,000||$23,165||$17,373||$5,792||$500,000 – $599,999||59,992||$705.10||$593.71||-$111.38||59992||0||13500||13500|
|$700,000||$19,265||$9,573||$9,692||$600,000 – $699,999||46,640||$673.37||$486.98||-$186.38||46640||0||15750||15750|
|$800,000||$15,365||$1,773||$13,592||$700,000 – $799,999||36,528||$641.63||$380.25||-$261.38||36528||0||18000||18000|
|$900,000||$11,465||$0||$11,465||$800,000 – $899,999||28,358||$609.90||$389.42||-$220.48||28358||0||20250||20250|
|$1,000,000||$7,565||$0||$7,565||$900,000 – $999,999||21,865||$578.17||$432.69||-$145.48||21865||21865||22500||635|
|$1,100,000||$3,665||$0||$3,665||$1,000,000 – $1,099,999||13,401||$546.44||$475.96||-$70.48||13401||13401||24750||11349|
|$1,200,000||$0||$0||$0||$1,100,000 AND GREATER||2,830||$519.23||$519.23||$0.00||0||2830||27000||24170|
|*based on projected pensin rates at 1 January 2017.|