National Seniors Australia says the cut to deeming rates in July was not enough and with another interest rate cut expected, it’s time to put an end to this unfairness.
A lower deeming rate would also put extra spending money in the pockets of a million pensioners, boosting Australia’s sluggish economy.
The rates are used to deem the amount of income from investments, including savings.
The more you are deemed to have earned the less pension you get.
As the cash rate has dropped, the higher deeming rate of 3% on savings over $51,800 is now double the typical return on a term deposit.
This is costing pensioners but boosting the government’s budget.
National Seniors Chief Advocate Ian Henschke says when interest rates are cut again, it would increase the unfairness and show the way the government is balancing its budget on the backs of pensioners.
“This is a ballooning budget burden on pensioners, who can least afford it.” he said.
“If interest rates are lowered next Tuesday, it will be the seventh drop since 2015.
“If each one of those cuts were passed on, the higher deeming rate would be 1.75% and not 3%.
“Even then the government would still be making money by deeming pensioners to have earned more from their savings accounts than they actually have.
“This is definitely not a fair go for pensioners who have had a go by saving.” he said.
Mr Henschke says National Seniors will not give up on deeming rates until they are linked to the Reserve Bank’s cash rate.
“Deeming was never meant to be a way of making money out of pensioners.
“It never was under the Hawke, Keating or Howard eras when the deeming rate was always coupled to the RBA cash rate.
“We saw what happened at the last election when we fought to keep politicians’ hands-off franking credits.
“Well we won’t rest until the devil in the deeming detail is dealt with and if that means we have to fight it all the way to the next election then so be it.” Mr Henschke said.