Prime Minister Scott Morrison is scrambling to avoid being tagged with a massive breach of trust by senior Australians – the very people who played a significant part in his surprise election win.
Mr Morrison convinced thousands of older Australians the biggest threat to their financial security was the Bill Shorten-led Labor Party.
In that he was aided and abetted by Labor’s botched selling of its proposed crackdown on dividend imputation rebates.
Then shadow treasurer Chris Bowen’s off-handed “if you don’t like our policy, don’t vote for it” was piece of hubris that denied Labor any benefit of the doubt as far as many voters were concerned.
It wasn’t hard for the Liberals to worry self-funded retirees and part- pensioners that Labor was coming after them with a “retirement tax”.
That was supplemented by a highly effective and dishonest social media “death tax” scare.
Now after the election, two interest rate cuts have shone a harsh spotlight on a piece of budget fiddling that goes all the way back to 2010.
As The New Daily reported on Monday, Nationals Seniors Australia advocate Ian Henschke says leaving deeming rates unchanged was a way the Labor government helped pay for a big increase in the pension.
A practice the Liberals have aped for an estimated saving to the budget of $1 billion. For Mr Henschke it’s a de facto retirement tax.
The deeming rate is integral to the government’s income test when it estimates seniors’ investment incomes. The part pension is adjusted accordingly.
In Parliament’s first and only Question Time since the election, the PM refused to say what the cost to the average pensioner has been.
Labor leader Anthony Albanese noted in framing his question that “the government has refused to adjust deeming rates since March 2015, despite interest rates being cut five times”.
Mr Morrison noted he was the last Social Services Minister to adjust the rate and said he has encouraged the new minister Senator Anne Ruston to “bring forward a submission to the expenditure review committee of cabinet to review the rates once again”.
One newly re-elected Liberal MP says there is no doubt “pensioners and older Australians expect something from Mr Morrison. He said he’d look after them – well now he will have to deliver”.
Increasingly though, it looks like winning the election was the easy part. The prime minister hedged his assurances by saying the review will be done “responsibly and in accordance with the government’s overall fiscal strategy”.
That fiscal strategy definitely demands the government delivers a budget surplus next year.
Meeting this target in slowing economic circumstances almost certainly means tying the deeming rate to the 1 per cent interest rate is not on.
The budget faces strong strains from the enthusiastic response to the tax cuts. More than 600,000 taxpayers have already rushed to claim their $1080 tax rebate, according to the Treasurer Josh Frydenberg, which coincidentally matches the 600,000 pensioners eligible for a fairer deeming rate.
Mr Frydenberg on Monday pointed out not all aged pensioners are affected.
He says about a quarter is and “secondly deeming rates apply to a suite of financial assets, not just money in a bank account”.
Senator Ruston is doing detailed research which will be looking at the average returns investors have been getting from super funds, shareholdings and managed funds.
It’s a political minefield because it is not only aged pensioners involved but also veterans, carers and disability support pensioners. And that’s why it is so expensive.
Labor’s Linda Burney accuses the government of hypocrisy for demanding that the banks pass on to mortgage holders “the full rate cut yet they have an inflated deeming rate of 3.25 per cent which is just not fair.”
Senator Ruston says her decision is imminent.
No one in government, especially the prime minister, wants the issue to fester a moment longer than necessary.
Paul Bongiorno AM is a veteran of the Canberra Press Gallery, with 40 years’ experience covering Australian politics