Aged pensioners will get a one-off $750 payment as part of the Federal Government's stimulus package announced today.
The payment will start to flow into bank accounts from March 31 and will be made to around 6.5 million pensioners, social security, veteran and other income support recipients said Prime Minister Scott Morrison.
The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be only one payment per eligible recipient.
Over 90 per cent of payments are expected to be made by mid-April.
The payments will cost a total of $4.8 billion and are part of the Government's $17.6 billion stimulus package to shore up the Australian economy as the world deals with the significant challenges posed by the spread of the coronavirus (COVID-19).
The Prime Minister said up to 6.5 million individuals and 3.5 million businesses would be directly supported by the package.
Our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly. The economy needs temporary help right now to bounce back better so the livelihoods of all Australians are protected.
"Just as we have acted decisively to protect the health of the Australian people, based on the best evidence and medical advice, our support package responds to the economic challenges presented by this pandemic in a timely, proportionate and targeted way.
"Our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly.
"The economy needs temporary help right now to bounce back better so the livelihoods of all Australians are protected."
Deeming rates cut
Some retirees with savings will also benefit from a further Government announcement of cuts to the deeming rates from 1 per cent to 0.5 per cent at the lowest level on savings of $51,800 or less ($86,200 couple) and 3 per cent to 2.5 per cent for savings over these amounts.
The cuts follow the Reserve Bank's slashing of interest rates last week from 0.75 per cent to a record low of 0.5 per cent. It was the fourth cut within a year and put increased pressure on those retirees dependent on bank interest to supplement pension payments.
Minister for Families and Social Services Anne Ruston said this was an important change for the 565,000 age pensioners and 323,000 other payment recipients with financial assets who were affected by deeming rates.
She said under the new rates payment recipients whose income is assessed using deeming could receive up to $62 a fortnight for couples, $1612 extra a year, and up to $50 a fortnight for singles, $1300 a year.
On average, affected age pensioners would receive an additional $8.42 a fortnight, $219 a year. The extra money will start flowing through into people's bank accounts from May 1.
Seniors and welfare groups have welcomed the one-off stimulus payment with Paul Versteege from Combined Pensioners and Superannuants Association saying it was "a welcome boost to the budgets of pensioners and people on unemployment benefits".
However he was less enthusiastic about the deeming rate cuts saying they would not benefit the vast majority of people who have deemed income.
"The number quoted by the Government of 900,000 people who have their income deemed includes hundreds of thousands of people who don't lose pension as a result of deeming now and obviously their situation will not improve as a result of today's deeming rate drop.
"Just like the last time when deeming rates were dropped, only those with substantial assets (paid under the income test) may benefit. To benefit at all, a single pensioner needs $185,000 in financial assets and a couple need $324,000 minimum to benefit," Mr Versteege said.
The Australian Council of Social Service also welcomed the one-off payment but also called for an increase to the Newstart Allowance.
"Increasing Newstart is one of the best ways to provide immediate economic stimulus where it is needed most. It will be spent rapidly, injecting much needed dollars into the economy to keep small businesses open," said chief executive Cassandra Goldie.
With increasing unemployment expected, increasing Newstart would also support economic recovery over the medium term by creating jobs.
"With increasing unemployment expected, increasing Newstart would also support economic recovery over the medium term by creating jobs.
"Over the longer term, it would right the long-standing wrong of the payment being left to stagnate for 26 years without a real increase, trapping people in poverty."
National Seniors Australia also welcomed the announcement of deeming rate cuts but said it was not enough.
Chief Advocate Ian Henschke says the new rate was still "balancing the budget on the backs of pensioners".
"While any cut in the deeming rate is welcome, the government is still deeming pensioners to be earning 2.5% on investments in excess of $51,800," he said.
"No bank is offering anywhere near 2.5% on their term deposits, in fact the Commonwealth Bank has a 'special offer' of 1.2% on its term deposit, not even half of what the government deems is the return."
Two dollars a day
Mr Henschke said older Australians would appreciate the $750 stimulus payment.
"We also acknowledge that this money is going to those on Newstart and those on a carer's allowance so that's a welcome move.
"But when you look at it long term, given it's a one off, it equates to $2 per day over a year.
"This and the announced adjustment to deeming rates, highlights yet again why we need broader reform of the retirement income system."