Will three per cent minimum wage rise affect pensions?

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Will the three per cent national minimum wage rise handed down yesterday by the Fair Work Commission have any impact on the Age Pension, which has not seen an increase in the base rate since 2008?

About 2.2 million Australian workers will get an extra $21.60 per week from 1 July, when the minimum wage will be lifted to $19.49 per hour, or $740.80 per week for full-time workers. But is that good news for Australia’s almost 2 million full or part age pensioners who currently receive $349 per week each (with supplements) as a couple and $463 as a single?

The Australian Council of Trade Unions (ACTU) had sought a six per cent or $43 a week minimum wage rise while the Australian Chamber of Commerce and Industry (ACCI) argued that the increase should not exceed 1.8 per cent, saying “wage increases that are not supported by higher productivity or higher prices for consumers, are likely to cost jobs”.

Reserve Bank governor Philip Lowe had lobbied for a 3.5 per cent increase, stating that stagnant household incomes were a threat to consumer spending.

“Many people borrowed assuming their incomes would grow at the old rate and they haven’t,” he said.

“They’re having more difficulty, they’ve got less free cash and so they can’t spend, so this is why I’ve put so much emphasis on the need for a pick-up in wage growth.”

The Age Pension is subject to twice-yearly indexations – in March and September – and Treasurer Josh Frydenberg has committed to a review of the entire retirement income system, including superannuation, pensions and taxation.

Indexation is based on two factors: price increases and male weekly earnings.

Payment rates are indexed to the rise in the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI) – whichever is greater.

The CPI measures changes in the prices of a fixed ‘basket’ of goods and services and is updated quarterly. The PBLCI measures the effect of price changes to out-of-pocket living expenses where the main source of income is a government payment. This index is intended to check whether disposable incomes have kept pace with price changes.

After indexation is applied, the payment rate is then benchmarked against a percentage of the Male Total Average Weekly Earnings (MTAWE). The single rate of pension equals 27.7 per cent of the MTAWE and the couple combined rate is equal to 41.76 per cent.

If, once initial indexation is applied, the rate is less than the benchmark of the MTAWE, the payment rate will be lifted to equal the agreed percentage. The benchmarking of pensions to the MTAWE is to ensure pensioners maintain a certain standard of living, relative to the rest of the population.

So, will the minimum wage rise flow through to pensions?

First, the increase applies only to those on a minimum wage – less than 20 per cent of the workforce.

And second, increases of 3.5 per cent and 3.3 per cent respectively in the past two years had little impact on wages across the board and, hence, little impact on the Age Pension.

After last year’s minimum wage rise, this is what some members had to say:

GrayComputing: “It is time for all of us to rant at our MPs and Senators to take action for human decency and a huge stress reduction for pensioners. NO ASSET TEST FOR A PENSION EVER AGAIN! A pension is not welfare.”

SuziJ: “The percentage shouldn’t be just 27.7 per cent, it should be 50 per cent!”

Floss: “The whole system is broken and I very much doubt either side has the will or the brains to fix it, [but] if we don’t we will end up like America – a place I would not like to be.”

GeorgeM: “The OAP should be at least 50 per cent of MTAWE for singles and 75 per cent for couples. We are a resource-rich country which can easily afford it.”

Are you still working and if so, will this have an impact on your weekly budget? Or are you on the Age Pension and hoping there will be a higher increase than usual in September? 

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Written by Janelle Ward

95 Comments

Total Comments: 95
  1. 0
    0

    And the big elephant in the room is the deeming rate ! With the RBA set to slash and burn the banking rate by up to 3 instances this year what will the government do about the 3.25% rate ?

    • 0
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      Right on Spud! The deeming rate is my bugbear and it really should be 2% or less. Have not really got many assets but do have some cash in the bank currently giving me 2.5% fixed for a year. Too old really to get into growth shares, like to have money handy should I need it in future.

    • 0
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      Quite right, both of you. However, to get any improvement, Retirees and Pre-Retirees must act and write to their MPs, Treasurer / PM, and DEMAND the maximum possible, e.g. Universal Age Pension with NO tests other than Age (65 years) and Residency (say 15 years), as the Asset Test, Income Test and Couple Tests are all designed by mean Liberal & Labor Govts to NOT pay pensions as far as possible. While Abbott is going to get over $300,000 per annum pension WITHOUT ANY TESTS – remember he with Hockey designed the change to Asset Tests which Turnbull & Morrison implemented from Jan 2017?

      I am shocked the Retirees and Pre-Retirees, for the 2nd election in a row, let these major parties off the hook and did not vote out the MPs of these major parties. But, with a Review coming up, ALL MUST write to them and put maximum pressure for decent outcomes for Retirees as a priority over Tax Cuts for the Rich and Large Companies.

    • 0
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      Spud, Tony Abbott gets $90,000 raise on backbencher’s salary now he’s a retired PM.

      That’s what the government will do about the 3.25% rate.

      Line its pockets for the continuing Age of Entitlement while the rest have to tighten their belts.

    • 0
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      That’s the way, again kick Tony Abbott in the back side till his nose bleeds, he can cop it as he always has. You’ll have to find somebody else now to blame, and Tony will blissfully walk away into the sunset and enjoy his earned pension. Eat your heart out.

    • 0
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      Polly Esther, Tony Abbott is retired. He should not be entitled to the $90,000 pay rise for current backbencher because he no longer is one.

      This is why the country is in the deficit. I am glad he lost he was a disgrace and embarrassment to Australia.

    • 0
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      Tony Abbott is 61, Polly Esther, and, in my opinion, his “earned” pension is due to corrupt manipulation by shonky pollies in a back room somewhere. Politicians only had to work 8 years for a lifetime pension with multiple business class air fares, gold pass, etc, etc.

    • 0
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      The deeming rate is atrocious and we are unable to get anywhere near what they deem —

      Also, Abbott took CPI off pensioners as soon as he got in power — after the promise of
      NO CUTS TO PENSIONS — and also all the other PROMISES he made AND BROKE EVERYONE OF THEM!
      We need to get the CPI back –with interest!

    • 0
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      Well – his seat punished him, so we can reward him for life… may it be long and fruitful for a change.

    • 0
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      It seems the good people of Australia don’t permit such cretinous behaviour on the part of our politicians… they also caught that poor salesperson Shorten on his inability to sell the simple facts of dividend franking and offer a solid solution.

  2. 0
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    It really enjoys me that there is never any mention of those on the Disabilty Support Pension here and particularly our struggles. There always seems to be a lot said for age pensioners particulary self-funded retirees and/or those with sufficient money to invest and/or own properties. I have no money to invest and do not own any properties or significant assets and I really struggle every day just to live.

    • 0
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      I’m in the same boat until I’m 66.5. I understand that this is really aimed at Age Pensioners, but the DSP & Carer Payments get the same as the Age Pension, yet we are now restricted in the amount of overseas travel we can do in a rolling 12 month period.

      Age Pensioners can spend as much time as they want overseas, but after 6 weeks their payment drops to a base rate, but we on the DSP lose our Pension after 4 weeks, yes, that’s 28 days, which is quite unfair, especially if we want to do an extended trip, like 12 weeks, we’d be without payments for 8 weeks, and then have to go through the indignity of reapplying for the payment, which can take up to 12 weeks to process. Which, if you look at it in terms of the amount of time we’re without our payment, it can be up to 5 months, which is disgusting! We still have to live and pay bills, but Centrelink and, ultimately, the politicians don’t care for those of us on these payments, and will never care, as it doesn’t affect them one bit! Our disability doesn’t go away, just because we’re out of the country for any length of time.

    • 0
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      I didn’t realise that, SuziJ. That must violate the Human Rights Commission policies. Why don’t you put in a complaint.

    • 0
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      Yes, Suzi – I campaigned, when Wee Johnnie was doing a whistle stop in the Eden-Monaro where I lived, for the inclusion of DSP in Utilities Allowance – and won. He pulled that rabbit out of his hat just before HIS election gave him a lesson.

      Part of the deal was the ‘Bureau of Second Class Pensioners’ mock cheque I put out – now the stead erosion of the same Rights as Aged Pensions has begun its inexorable creep back into DSP – as if they are all bludgers and layabouts who only got it because they smoked dope of drank booze etc.

      I was bust, on a walking stick for three years and in one hell of a state, and in the DVA pipeline – DSP I got in a heart beat long before DVA even answered…(grrrrr) …

    • 0
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      Thewizard of oz, did you mean “anoys you” and not “enjoys” as is written in the comment above?.

  3. 0
    0

    I guess we can all hope for a bigger slice of the pie in September but I personally will not hold my breath.
    To make ends meet I am doing any casual work that comes my way such as working on elections and mystery shopping.

    • 0
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      We used to get a bit of cash-in-hand work but all these little perks for the oldies have disappeared. Even driving the courtesy coach for your club is now regulated and one has to fill all these forms in, was told the reason was because of necessary insurance. Mowing the neighbors’ lawns is no longer much fun in the late 70s.

    • 0
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      For no reason I can discern, five days after my normal Pension payment, Centrelink deposited $1 in my account. Woohoo!
      They’ll probably employ a collection agency to get it back next year.

  4. 0
    0

    I can not understand that some people complaint about the short time spend overseas !! I wish that I could go overseas !! I am lucky to survive day by day on the age pension . Due to a massive heart attack 4 yrs ago , I lost everything and now my wife and I just survive on the basic age pension !! I f we were given a little more money we would go out and buy a few things , thus increased gst revenue for the gov .

  5. 0
    0

    So people borrowed on the assumption of future wage increases, how stupid. Banks are also partly to blame for allowing shch an assumption. You borrow on what you get now as nothing is guaranteed tomorrow or next week. Never assume anything. It makes an ASS of U and ME. lol.
    Pensions I doubt will raise above the normal March & September increases under this government as tney will argue the increases are fair & set to the increases to the cost of living. So don’t expect any LNP favours unless you are one of tbe wealthy.
    Deeming rates also won’t come down even though the RBA has indicated possible rate decreases of maybe 2 before year end.

    • 0
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      They wanted to go with the lesser increase as well, remember, and Labor fought against that. So, a bit of a worry now!

    • 0
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      Banks also helped the Chinese (foreigners) with loans to help them grab properties here (beating out competition from locals), and thus created the boom which in turn led to higher loan sizes hence more profits for the Banks. All under the noses of inept Govts, APRA and ACCC.
      Paddington, forget Labor for now, they screwed it up for themselves. We have to deal with reality. Luckily, Abbott, Hockey, Bishops, Pyne, Turnbull, etc, etc are all gone! Write to your MPs, Treasurer / PM, asking, rather demanding, a better deal for Retirees (when you do, don’t selfishly only talk of pensioners) in the Review being planned e.g. an Universal Age Pension.

    • 0
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      GeorgeM, I am not writing to any of them thank you very much. Let’s see what the review turns up. Why single out those names? Look at what you have left! Michaela Cash, vomit, vomit! Sutton and Corman, more vomit! ScoMo who voted against a banking royal commission how many times! Etc, etc!
      Maybe look at people individually not in groups as well!
      SFRs are not all one breed and neither are pensioners!

    • 0
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      Paddington, if you want to waste your time posting / whingeing here, but not take real action writing to people who make decisions, that’s up to you! Why did I mention those names? As I mentioned “Luckily, Abbott, Hockey, Bishops, Pyne, Turnbull, etc, etc are all gone!” – the glass half-full view, as opposed to your glass half-empty approach.
      While I don’t support Libs who have attacked Part-Pensioners as you should know (unforgivable), it is also good we are not ruled now by Shifty Shorten (would pay anything to buy votes using taxpayer money to get the PM job), Tricky Tania (wanted to be like the Greens – Destroy society with her gender ideologies, & destroy the economy and our finances with her extreme climate actions), or Bumbling Bowen (had a key role in losing 3 elections with dud policies – I mentioned last year that he would ensure Labor loses as he didn’t actually want the responsible Treasurer role in Govt & prefers to whinge in opposition). All these 3 remain and will cause ongoing trouble with their policies & influence, with Shorten having the best track record in bringing down leaders!

      I don’t care to talk about individuals as each is different (thus Labor’s targeted approach is wrong as they are usually picking winners and losers). I prefer to consider Retirees as a group, and wish more would do the same, then we would have a really strong voting bloc and influence policies which benefit the group as a whole.

  6. 0
    0

    With this “do nothing” mob still in Government? You have to be joking!

  7. 0
    0

    With this “do nothing” mob still in Government? You have to be joking!

  8. 0
    0

    Perfectly simple and easy, when people have money they spend it, when people don’t have enough money they to have to spend some of it, then run out, they cannot spend as much and that is how economies fall over, if something sensible is not done, so pension pay increase along with workers is a no brainer, just do it!

    • 0
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      Why can we figure that out but Treasurers can’t??

    • 0
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      Treasurers (and other Ministers – 43 Ministers out of 77 seats, BTW) know nothing about their actual portfolio – they merely act as mouth-pieces for their public servants and paid henchpersons…. and are paid a hefty premium for that moron’s task.

      The hard bit is having to filter all that advice through the party machine, sloganising it, lining it up with the party ideology, wrapping it up in party tinsel, and adding spin doctor wrapping…. countless people rely on this work for their daily bread so you can;t just cut it down or out ……. all very Yes Minister …

      What a sight at the dole queue – former spin doctors, slogan writers, speechists, ideological tuners, and party machinists all lined up… it just wouldn’t do!

  9. 0
    0

    The extra $21 is good news for full time workers. Got to have a laugh

    • 0
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      Ne mansion apiece……. how much did you say the pollies collected, and then line up for their tax cut?

      Truly we are the Third World Banana Republic, wherein El Presidente and his Cabinet of family and friends make the rules to suit themselves and impose the rules on everyone else…

      Cue the apologists to say the ‘fair work commission’ is an ‘independent’ body – as ‘independent’ as the body that reviews politician’s pay and perks entitlements…

    • 0
      0

      A packet of cigarettes cost $21.00 so for anyone who smokes I guess they would be happy, maybe on take away MacDonalds for a family so I guess every little bit helps grow the economy but not in the best or heaslthiest way.

  10. 0
    0

    With an increase to income all prices will go up, if the age pension then goes up a couple of dollars everything will again rise in price. It is a no win situation for everyone.

    • 0
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      With the increase twice a year of the age pension the price in the pub goes up also twice a year as well. Coincidence? I think not. Nothing goes up by 5 or 10c anymore either, minimum always 2 bob.

    • 0
      0

      Yes. The Income and Prices Accord doesn’t work because the prices aren’t controlled as well as bottom decile wages.

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