SENATOR THE HON ANNE RUSTON

MINISTER FOR FAMILIES AND SOCIAL SERVICES

MANAGER OF GOVERNMENT BUSINESS IN THE SENATOR

DOORSTOP TRANSCRIPT

DOORSTOP TRANSCRIPT - DEEMING RATES CUT

Sunday, 14 July 2019

Topics: Cut to pension deeming rates to boost payments for around one million Australians.

E&OE……………………………………

‍Minister Ruston: Thank you very much for coming out this morning. Today the Morrison Government wants to advise the approximately one million people who are affected by deeming rates that we are intending to drop the deeming rates for both the upper and the lower threshold starting on the first of July. When I was first appointed as the Minister for Families and Social Services one of the first things that I did, was ask my Department to provide me with advice in relation to deeming rates. I have now received that advice and considered it and on the basis of that advice I believe it’s appropriate for us to drop both the upper and the lower deeming rates so that we can continue to reflect, in the deeming rates, the rates of return that people are receiving on their financial assets. So, as of today, we are announcing that on 1 July we will be dropping the upper threshold deeming rate from 3.25 per cent to 3 per cent, and the lower deeming rate from 1.75 per cent to 1 per cent. So what that actually means for people who are affected by this is for singles up to $800 a year will be the increase of amount money in their pocket through their fortnightly payments; and for couples over $1000 over a year, will see be increased in their fortnightly payments. But from the end of September, people who are deemed at the moment will start seeing these payments coming into their fortnightly payments but they will be backdated to 1 July so that they will get the full benefit of a 12 month period of the reduced deeming rate.

‍Journalist: Why was it important to make this change?

‍Minister Ruston: Well, what the deeming rate actually does is it's an estimation of the kinds of returns that a person should receive from financial assets. And what we wanted to do was to continue to make it reflect, the deeming rate reflect, actually what the real returns in the marketplace were.

‍Journalist: But did you find that pensioners we're really struggling with the sort of pressures as interest rates went down?

‍Minister Ruston: Well look, certainly one of the things that came to my attention soon after I was appointed the Minister a couple of months ago were that pensioners were saying that they believed that the rates of return that were deemed were higher than they were experiencing and sought for some relief, and that's exactly what we’ve done today.

‍Journalist: So will it, will it continue to be sort of monitored in the future? Will it be linked to the cash rate or will there be further changes to resist, sort of…

‍Minister Ruston: Certainly we do constantly monitor any of these issues about impacts on older Australians particularly. But one of the things that I would say is that the returns on investments, on financial investments, are not directly linked to the cash rate. It is one of the things that impacts on the returns that people get. But returns can range quite significantly from very, very low returns on at call accounts right up to some of the higher returns that we're seeing on some of the ASX stock returns of in excess of 4 per cent; superannuation returns are continuing to return well over 5 per cent. So we look at a suite of assets, financial assets, and determine what is the likely return on the kinds of suites of assets that people are holding, and determine the rate on the basis of that.

‍Journalist: And do you have any figures on people who are receiving the upper rate? What proportion of shares versus other investments like cash, or, you know?‍

Minister Ruston: Well, one of the things that we did find in the research when I looked at it was that people who have lower amounts of cash assets tend to hold them in assets that a more liquid and easier access, so that's why we have these two deeming rates. The lower one, which is now down at 1 per cent, reflects the fact that people who have lower amounts are more likely to keep them in accounts that have lower returns. Whereas people who have got substantially more in the way of financial assets tend to hold them in the higher return instruments such as superannuation or ASX stocks, and hence the reason why we have the two different rates.

‍Journalist: How are you going to pay for this change?

‍Minister Ruston: Well, the Treasurer has indicated that it won't affect the surplus that's projected for 2019-20. But it is something that we believed was an appropriate action to be taken, and so the money will be made available.

‍Journalist: And Labor says you're kind of making money off pensioners. Do you feel like you're doing that?

‍Minister Ruston: Well look, I would like to say that I don't want to be lectured by the Labor Party that took a $45 billion tax on older Australians to the election. We still don't know what the Labor Party's position is on deeming. All they've done this morning is come out and said that we haven't apparently gone far enough. The Shadow Minister for Social Services has come out and said that while she thought deeming rates should be reduced she wasn't quite sure by how much. We have reduced deeming rates and we believe that we've done it in a fair that reflects the market returns that people could expect to get for their financial assets.

‍Journalist: What do make of the criticism from some in the sector that it's taken too long, given its four years since this has been adjusted?

‍Minister Ruston: I’ve been the Minister for Social Services for two months. The issue was not a matter that had been brought to my attention or I was aware of prior to that. It certainly was brought to my attention soon after the election and I've taken very prompt action.

‍Journalist: But you have been in Government for, you know, this is your third term in Government?

‍Minister Ruston: Look, one of the things that needs to be reiterated is the fact that the cash rate is only one component of what determines what people are likely to receive in returns for their finance assets. And so, in having the review that I have just recently undertaken it has become apparent, particularly in the wake of the two recent drops by the RBA on the cash rate, that it is timely for us to reduce these two rates. So, it's about making sure that we continue to reflect in our deeming rates what people actually are receiving for returns.

‍Journalist: And could you just explain again what is the reason for only dropping the upper limit by a quarter, as opposed to the bigger drop of the lower rate?

‍Minister Ruston: Well obviously everybody is impacted on by the lower rate, so it doesn't matter whether you've got a large amount of financial assets or a small amount, everybody will get the benefit of the high drop and the lower rate. But some of the financial returns that we're seeing on things like superannuation have actually been performing extremely well over the last 12 months, the ASX stocks, especially the ASX 200, have been performing very well as well. So, when we had a look at the suite of products that people were holding and the fact that people with higher amounts were actually holding a lot more of their assets in these higher return stocks, that's what enabled us to determine the rate for the upper one as opposed to the much greater reduction in the lower one.

‍Journalist: What impact do you think this will have on the lives of those who do see the full cut?

‍Minister Ruston: Well, I mean obviously it's more money in their pockets; it's more money in their pockets every fortnight. So that is a good thing. I mean, we all like to have more money in our pockets.

‍Journalist: And with an aging population it's important to manage how far you do go with these, sort of, triggers? The age pension - how much it contributes to the Budget is obviously huge. It's important to measure?

‍Minister Ruston: Yeah look, it is important, but what I would say is this is a measure that was brought in a number of years ago to make it easier and more streamline for people who were actually impacted on by the returns they got from their financial assets to stop them having to constantly update their information with Centrelink every time they got a dividend or a share return or got some interest on a particular asset. So instead of constantly having to go back, we just deem that it's a rate, so they don't have to constantly keep going back, but it also gives them the certainty and stability that every fortnight that the amount of money that they’re receiving from their part pension will stay the same. So, this is not so much a measure as a tool that was put into the marketplace to simplify things for people who were part pension recipients.

‍Journalist: And just to confirm, so this is locked in and there's no plans yet to return to it – but you would just monitor it over time?

‍Minister Ruston: Well look, in any policy development that relates to any area in my portfolio is something that I will constantly be monitoring. We think that what we've done today is a very good reflection of what's happening in the marketplace at the moment. But obviously the marketplace is constantly moving and we will continue to monitor it on that basis.

‍Journalist: Anything else you want to say?

‍Minister Ruston: No, thanks very much.

ENDS