The deeming rates have finally been cut, but it’s “too little too late”, say critics.
Almost one million Australians will be better off by around $804 a year, after the Government announced a reduction in the deeming rates on Sunday.
The deeming rates will decrease from 1.75 per cent to one per cent for investments up to $52,000 (single pensioners) and $86,000 (couples), and the upper deeming rate will be cut to three per cent (from 3.25 per cent) for amounts over $52,000 (singles) and amounts over $86,000 (couples).
Single pensioners could gain up to $804 extra a year and couples $1053. Eligible Australians will receive the extra money from the end of September – in line with the regular indexation of the pension – but the payments will be backdated to 1 July. The move will cost the Government around $600 million over the next four years.
“We’re strengthening the arm of about one million welfare recipients, including 630,000 pensioners,” Treasurer Josh Frydenberg told the ABC’s Insiders program.
“This is about lowering the deeming rates, which will be good for them.”
While changes to the deeming rates are a welcome reprieve for retirees who have been punished by Reserve Bank of Australia rate cuts, seniors groups and retirees are saying it’s too little too late.
The Opposition’s Social Services spokeswoman, Linda Burney, agrees, arguing that the deeming rate should be more in line with the Reserve Bank interest rate, which is currently at one per cent.
Labor calculated that if the deeming rate came into line with the RBA cuts, single homeowners on a part pension would be up to $63 better off per fortnight or up to $1628 better off a year, with single non-homeowners potentially getting up to $3125 a year. Couple homeowners would have an extra $1850 and couple non-homeowners would be up to $3875 better off.
“This is too little too late, and seniors groups and retiree groups are saying very clearly this morning the way the Government has moved and the amount the Government has moved is simply not good enough,” said Ms Burney.
“The best the Government has been able to do today is make a move of less than 0.25 per cent in the upper rate, and 0.75 per cent in the lower rate.
“The cash rate is one per cent. The Government has not moved on deeming rates for four years, they have made a lot of money on the back of retirees.”
Ms Burney said the Government had used pensioners to boost the budget for the past four years.
“The Liberals and Nationals don’t deserve any congratulations. They have been dragged kicking and screaming to this by pensioner groups and Labor.”
However, Mr Frydenberg defended his call to lower the deeming rates by 0.75 per cent for the lower level and just 0.25 per cent for the upper level.
“What’s important to understand is – it’s not a linear equation between or comparison between the cash rate and the deeming rate, because the deeming rate applies to a whole suite of assets,” he said.
“So, it applies to bank deposits and a term deposit, it could be at 1.75 per cent today, but it could apply to superannuation returns, and that’s averaging around 5.5 per cent – or to yields on ASX 200 stocks, which are averaging about 4.5 per cent.”
Recipients of Disability Support Pensions and Carer Payments and Newstart payments will also be better off, with payments backdated to 1 July and the extra money coming into their bank accounts from the end of September.
Do you think the deeming rate cut is adequate? Should the deeming rates be decided by an independent party?
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