Many people who rely on the income support system for a basic
acceptable standard of living say that they are finding it harder to make ends
meet.
The Senate Standing Committee on Community Affairs has drawn
attention to the financial circumstances of older Australians with few assets
who do not own their own home, particularly singles, private renters, and those
with a limited capacity to work and/or save for retirement. Many of these people
have a long-term reliance on the income support system. The committee recommended
the Government review the suitability of the base pension levels through economic
analyses of amounts required to achieve at least a modest standard of living
for retired Australians.
The Government recently introduced a number of changes including
one off payments to seniors and carers and an increase in the Utilities Allowance
from $107 to $500 and its extension to disability support pensioners and carers
in recognition of some of the pressures identified in the Senate Committee report.
Terms of reference
The Pension Review Background Paper provides information to
help people understand how well the income support system works for those who
rely on it. It addresses the Review’s three key terms of reference
Principles of the social security system
The social security system redistributes Government revenue
collected in the tax system to individuals and families to increase the wellbeing
of the Australian population. It is part of a broader social protection system
that includes direct expenditure on services and infrastructure (such as health,
education and community services), the superannuation system—which complements
the Age Pension in Australia’s retirement income system—and payments,
services and investment to promote the efficient and effective functioning of
the Australian economy which underpins individual and national wellbeing.
To work effectively, in addition to supporting a basic acceptable
standard of living, taking into account prevailing community standards, the
income support system has to:
* give greater assistance to those with additional costs either
through transfer payments or services;
* target payments to those not able to fully support themselves;
* promote participation and self-provision through services, incentives to work
and save, and obligations; and
* be sustainable.
Key Facts
Around 4.6 million Australians receive an income support payment
of some kind from the Australian Government in the form of a pension or allowance
(27 per cent of the population aged 15 years and over):
* in 2006–07, Australian Government expenditure on the
income support system was $71.6 billion, or around 6.8 per cent of GDP
* 77 per cent of Australians over the age of 65 receive income support, and
17 per cent of Australians aged 16–64 years
* 59 per cent of income support recipients are women, and 58 per cent are single.
Australia’s population is ageing: 13 per cent of Australians
are over 65 years now, growing to 25 per cent by 2047.
Even with the maturing of the superannuation system the proportion
of retired Australians who receive the Age Pension will only decline slightly
although many more will receive a part-pension in addition to their private
income rather than relying upon the pension alone.
Many pensioners rely on income support for long periods. The
average total time on income support of current Age Pensioners is 13.1 years.
For Disability Support Pensioners, it is 10.8 years and for Carer Payment recipients
it is 7.6 years. In most cases, these pensioners have moved on to their current
payment from another income support payment.
Pension rates have grown by more than 2 per cent a year above
inflation over the last decade, which is slower than average households (3 per
cent), but higher than low wage earners (1 per cent).
The single rate of pension is 60 per cent of the combined couple
rate, lower than the average for major OECD countries (63 per cent).
Most pensioners have low incomes: over half have less than $20
a week of private income, but some have higher incomes; 5 per cent have private
incomes of over $400 a week.
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the report
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