Superannuation Legislation Amendment Bill 2020

Hansard ID: HANSARD-1323879322-112683

Hansard session: Fifty-Seventh Parliament, First Session (57-1)

Superannuation Legislation Amendment Bill 2020

Second Reading Debate

Debate resumed from 16 September 2020.

Mr RYAN PARK (Keira) (12:17):

:51 I lead for Labor in debate in the Legislative Assembly on the Superannuation Legislation Amendment Bill 2020 and, in doing so, represent my colleague the Hon. Walt Secord in the other place. From the outset, we will not be opposing the bill. On 16 September the Treasurer introduced the Superannuation Legislation Amendment Bill 2020. The object of this bill is to amend certain superannuation legislation to prevent superannuation pensions and allowances being reduced because of a fall in consumer prices. Public service retirees' pension payments are linked to movements in the Sydney consumer price index [CPI]. The Treasurer claims that this will affect 67,000 pensioners on the State's defined benefit superannuation scheme. Generally, CPI provisions provide that if the All Groups CPI for Sydney falls by less than 1 per cent, then no adjustment will be made. However, if the fall is 1 per cent or more, the amount of the pension or allowance must be reduced by that percentage. While it does not say so explicitly, this obviously is due to the impact of the economic fallout from the COVID-19 pandemic.

The impact of COVID-19 pandemic on the index is expected to result in a fall of slightly more than 1.04 per cent to the Sydney consumer price index of 0.04 per cent below the threshold. An annual fall in the Sydney consumer price index is almost unprecedented, having only ever happened twice on record: once in 1962 and again in 1997. It is incredible that we are seeing this, but it shows the magnitude of the economic crisis our communities, families within our local communities, individuals and small businesses are experiencing. The effects of COVID-19 on the Sydney consumer price index do not align with the original intention of the superannuation legislation. The Government will claim that it does not want the fee-free child care to negatively impact on former Government employees who are now retirees. To respond to the circumstances, the legislation will amend the negative 1.00 per cent to 1.4 per cent.

The bill will require the amendment of seven superannuation Acts and three regulations, as outlined in schedules 1.2, 1.3, 1.6 and 1.10 to the bill. Most of those Acts and regulations already include provisions that dictate that pensions are only adjusted downwards if the Sydney consumer price index—and this is critical—falls below 1 per cent, in which case the amendment will require replacing 1 per cent with 1.10 per cent. This is the case for the following schemes: the NSW Retirement Benefits Act 1972, the Police Regulation (Superannuation) Act 1906, the State Authorities Superannuation (Ex-Snowy Mountains Hydro-Electric Authority Superannuation Fund Transfer) Regulation 2003, the State Authorities Superannuation (Government Railways Superannuation Scheme Transfer) Regulation 2003, the State Authorities Superannuation (Transitional Provisions) Regulation 1998, the Superannuation Act 1916 and the Transport Employees Retirement Benefits Act 1967.

Two other pieces of superannuation legislation—the Local Government and Other Authorities (Superannuation) Act 1927 and the Public Authorities Superannuation Act 1985—require different treatment because they do not provide for a 1 per cent threshold. Under each of those Acts any fall in the Sydney consumer price index is required to be passed on to pensions, with no minimum consumer price index threshold. Schedules 1.1 and 1.4 to the bill amend the Local Government consumer price index provisions to provide for no adjustment to be made to superannuation pensions if the fall in Sydney consumer price index is less than 1.1 per cent or any other percentage prescribed by the regulation. Schedule 1.5 to the bill provides that further amendments can be made to the regulations associated with the State Authorities Superannuation Act to increase or decrease the consumer price index thresholds that would trigger a reduction in pension payments.

In conclusion, Labor will not oppose the bill. This is another example of the Labor Opposition working closely with the Government to ensure there is a legislative framework in place to support communities, members, residents and small businesses during the COVID-19 pandemic. I take this opportunity to acknowledge my friend and colleague the shadow Treasurer, the Hon. Walt Secord, for his work to support and advocate for small businesses, families and industries right across the board during COVID-19. I know that he has had a number of discussions with the Treasurer and the Treasurer's office, and I thank him for his contribution during what is a very difficult time for our communities.

Ms GABRIELLE UPTON (Vaucluse) (12:22):I support the New South Wales Government's Superannuation Legislation Amendment Bill 2020. I acknowledge that Labor is not contesting this bill in this Chamber. The purpose of the bill is to protect the pensions of New South Wales public service retirees from the impacts of COVID-19. As their pension payments are linked to changes in the Sydney consumer price index [CPI] any changes to the CPI as a consequenceof COVID-19 will mean lower pension payments for them. It has a very real impact. We all know that the COVID-19 pandemic has affected our community in so many ways, including their physical and mental health, and economic wellbeing, which are particularly important for seniors and young people in our community.

:56

I refer to comments made by the member for Dubbo when he acknowledged the impact of COVID‑19 on the sense of wellbeing among young people in our communities. Gratifyingly, with COVID-19 there has been an unprecedented fiscal response from bothState and Federal governments supporting our community on all of those fronts.

The New South Wales Government's response has been strong. It has been represented by a commitment of just under $14 billion to our community. It has taken many forms: $2.4 billion for health services, including support for health workers; just under $3 billion for businesses, including payroll tax relief, $5 billion as an investment in our State's infrastructure; and $250 million for households, including land tax discounts, rent waivers and support for first home buyers. I could go on. It all adds up to a significant investment to help our communities in the many ways in which they have been affected.

That said, this bill is about a specific impact that is an unintended consequence of COVID-19. It is about ensuring that our public service retirees, who have done this State proud in their service of the community, are not victims of an unintended consequence of COVID-19. Specifically, the bill will prevent that happening by ensuring that pensions do not have to be adjusted downwards unless the Sydney CPI falls by 1.1 per cent or more and by allowing the Government to modify that percentage subsequently through regulation in the case that a further change is warranted in the future. That is a sensible provision to ensure a good social consequence while avoiding the need for legislation to again come before the House.

To give some background, the SAS Trustee Corporation [STC] has a legislative requirement to index defined benefit pensions paid to members in the State Superannuation Scheme, the Police Superannuation Scheme and the State Authorities Superannuation Scheme by the annual change in the Sydney all groups CPI. From June 2019 to June 2020 the Sydney CPI fell by 1.04 per cent. That fall was primarily due, ironically, to the Federal Government's decision to offer free child care. That decision by the Federal Government was really welcome during the lockdown period. It was a welcome relief for families doing their best to stay safe and keep working where possible. It was an important measure to support our families, but it did have an unintended consequence, which I will go into in a moment.

Last week, knowing how important child care is to local communities, I was gratified to attend my local preschool. An investment by the State Government of just under $750,000 will go to provide places for the children of 40 additional families beginning next term. That was a great announcement to be a part of. That said, the Federal Government's decision to offer free child care meant the cost of child care fell by 95 per cent in the 2020 June quarter. Removing that cost for households placed significant downward pressure on the Sydney CPI. In fact, it caused a negative change to the Sydney CPI of almost 1.4 per cent. Without that effect, the 1.04 per cent fall in the Sydney CPI would have been a 0.4 per cent increase.

In other words, if the Federal Government had not made child care free, the CPI would have been 1.4 per cent higher than it was for the 2020 financial year and the unintended anomaly we are dealing with here would not have arisen. Understandably, the New South Wales Government is responding to that anomaly. We do not want a change in the cost of living for STC members and we want to maintain the pensions at their current level. If we were to not pass this bill—which has been introduced on an urgent basis—our 67,000 pensioners with an average pension of approximately $48,000 per annum would average a 1 per cent reduction in their pensions. This would cost them nearly $500. To make sure that does not happen, we need to pass the bill in this House.

I will give some background on the importance of the CPI, which underlies the discussion of this bill. The CPI is designed to provide a general measure of price inflation for all Australian households. It only measures the changes in prices faced by private households living in the capital cities of the six States and two Territories. It is designed to measure the percentage change in the price of a basket of goods and services consumed by households. It is calculated and published by the Australian Bureau of Statistics once a quarter. The Sydney CPI is the relevant index used to link the defined benefit pensions of New South Wales public service retirees to movements in the cost of living. The Sydney CPI is constructed in exactly the same way as the national CPI, except that only Sydney prices go into the calculation.

The Sydney CPI is constructed in exactly the same way as the national CPI, except that only Sydney prices go into the calculation. The Sydney CPI is used in the superannuation indexation calculations because it is a better measure of price movements in New South Wales than is the national CPI measure. The total basket is divided into 11 major groups each representing a specific set of commodities, including beverages, alcohol, tobacco, clothing and footwear, housing, furnishings, health, transport, communications, education, recreation, insurance and financial services. The basket of goods does not represent any particular individual consumer or group of consumers. Huge changes in the prices of certain goods and services, while part of the overall CPI calculation, are not goods and services that represent the consumption or cost of living of our retirees.

That brings us back to the need for the bill. The annual fall in the Sydney CPI is almost unprecedented, which is of course because of COVID. It has only ever happened twice on record, in 1962 and 1997. That negative movement of CPI over the year to June 2020 is an anomaly. The child care component of the index is not that significant; it only really represented 1.25 per cent of the total. However, that component had decreased by an extraordinary 95 per cent over the year to June 2020 because of the Federal Government's announcement. The budget impacts of the changes proposed in the bill are not material. They amount to just over $300,000, with the funds coming from the STC's reserves. It will cost the STC approximately $32 million but there will be no incremental increase to contributions to the STC from the Government to gradually reinstate that $32 million.

I reiterate that there is some urgency to passing the bill because the annual adjustment takes effect from the first pension payment in October. Prior to that, the STC must write to its members to advise them of the indexation adjustment that will be applied to pensions for the coming year. I also reiterate that the bill provides additional flexibility for the future by including amendments for the Government to modify the threshold percentage subsequently through regulation, rather than by law, in the very unlikely case that a further change is required in the future.

The State is facing extraordinary circumstances through the COVID pandemic. That is why it is important we have the bill before the House now, and members need to pass it urgently so that the negative unintended consequences of the COVID impact and a Federal Government childcare measure that have impacted the Sydney CPI do not negatively impact the pensions of our 67,000 New South Wales public service retirees. It is another way that the New South Wales Government is rapidly responding to the challenges of COVID-19 to help make sure that all of us, including our retirees, are on track to recover as a community together. I commend the bill to the House.

Ms JODIE HARRISON (Charlestown) (12:32):

:24 I contribute to debate on the Superannuation Legislation Amendment Bill 2020. I echo the points made by member for Keira and shadow health Minister, who led for the Opposition in debate in this Chamber earlier today. I acknowledge that the object of the bill is to amend certain superannuation legislation to prevent superannuation pensions and allowances being reduced because of a fall in consumer prices. That is certainly a worthy objective of the bill. The State Superannuation Scheme was established by the New South Wales Government in 1919 under a Labor Government, through the introduction of the Superannuation Act 1916. Even back in 1919, some 101 years ago, Labor cared about working people and what became of them when their working lives were over. This scheme closed to new members in 1985.

Today there are still 67,000 people in New South Wales living in retirement under the pensions paid out by this scheme. These individuals made contributions to the scheme throughout their working lives as they undertook employment within the public service sector. The State Superannuation Scheme was set up to ensure that transport and railway workers, police officers, council workers, workers on the Snowy Mountains Scheme and other public servants could retire from their service to the community with the financial security that the State's defined superannuation benefits scheme offered. Unlike modern superannuation schemes, which are based on investment returns, the New South Wales State Superannuation Scheme was pegged to the consumer price index for Sydney.

Under the rules of some schemes, if the Sydney consumer price index falls by more than 1 per cent, as it is expected to do in the coming months, pension payments will drop by the same amount. Under the rules of other schemes covered under the legislation, any drop in the Sydney consumer price index—no matter its size—is passed on through a reduction in pension payments, which is equivalent to any drop in the index. The Treasurer has said that the impact of the COVID-19 pandemic on the index is expected to result in a fall of slightly more than 1.04 per cent, bringing it to 0.04 per cent above the threshold that would trigger a matched drop in some pension payments. The Treasurer has attributed the expected fall of the Sydney consumer price index in part to the Government's adoption of free child care.

I acknowledge that the Government adopted Labor's fee‑free preschool policy, which, as shadow Minister for Early Childhood Learning, I commend the Government for adopting. Just as fee-free preschool and early childhood education and care protects the very youngest in our community by allowing continued access to quality early learning experiences in the years before school, Labor recognises that the superannuation legislation amendments currently before the House will protect the pensions of 67,000 elders in our community. The economic impact of COVID‑19 on many people across the State has been devastating, with job losses and business closures, uncertainty and fear. Yet for people of working age there is always the prospect of financial recovery in the coming years as they return to employment or rebuild their businesses.

For the working people who have retired and who rely on pensions from the scheme, there is no prospect of financial recovery down the track. There is no working life ahead of them and, therefore, there is no chance to regain any financial losses that are incurred during the current economic recession. The amendments before the House deal with the design of the superannuation scheme in light of the economic impact of the COVID‑19 pandemic, with particular regard to the Sydney consumer price index. The amendments will ensure that the working people who contributed their earnings to the scheme are protected. Seven superannuation Acts and three regulations require amendment to protect these retired workers and their pensions. Labor has always stood up for working people, Labor has always stood up for fairness for working people and that is why Labor does not oppose the passage of the bill.

Mr JAMES GRIFFIN (Manly) (12:36):

:51 I contribute to debate on the Superannuation Legislation Amendment Bill 2020. The need for the Government to introduce the bill is another reminder of the wide‑reaching impacts of COVID on our citizens. I echo the Treasurer's words about the importance of the bill in protecting the income of our retirees. As the Treasurer has highlighted, in these unprecedented times it has never been more important to ensure that our citizens are provided with protection from the unpredictable impacts of the pandemic. The bill recognises that the recent fall of more than 1 per cent in the Sydney consumer price index [CPI] over the 2020 financial year is a consequence of the impact of COVID. But the fall in the CPI was not caused by cheaper food, cheaper clothes or cheaper prescriptions; it was a one‑off impact of the Federal Government's support of everyday families in the form of free child care.

While that particular relief initiative has been immensely valuable to young families, it provides no real benefit to the 67,000 New South Wales retirees who are caught under the legislation. The bill seeks to amend this. Without the changes, those retirees will suffer a fall in their pensions but they will get no relief at the supermarket, nor will clothes or prescriptions become cheaper. I am sure everyone would agree that this is not fair, and nor is it the intent of the pension scheme legislation, which is why Government has introduced the bill. The bill will ensure that the intention of the legislation is achieved so that retirees are treated fairly. All members need to ensure that the amendments are enacted as quickly as possible. The SAS Trustee Corporation [STC] must inform its members of the change to their pensions in the current month by letter, before implementing the changes in early October. That is why the Government has chosen a very simple but effective mechanism to amend the existing legislation. The change is designed to be as simple as possible to ensure that there are no unforeseen consequences from the amendment.

In most of the legislation listed in schedule 1 to the bill the reference to 1 per cent can be changed simply to 1.1 per cent. Where the reference is not present, the Government will introduce the mechanism that is already present in existing legislation and states the 1 per cent threshold. The Government also has taken the opportunity to include an additional layer of protection to be ready in case a fall in consumer prices occurs again. The amendments to allow the percentage threshold to be increased or decreased by regulations will enable the Government to be ready in the very unlikely event that this effect on superannuation should ever happen again. I also commend the bill to the House.

Mr MARK COURE (Oatley) (12:40):

:04 The Superannuation Legislation Amendment Bill 2020 is very important legislation—probably one of the most important bills that members have seen at this stage of the parliamentary year. Superannuation is something that all the men and women of my electorate love to talk about. This legislation has a legislative requirement to index the defined benefit pensions paid to members in the State Superannuation Scheme [SSS], the Police Superannuation Scheme [PSS] and the State Authorities Superannuation Scheme [SASS] by the annual change in the Sydney All Groups consumer price index [CPI]. From June 2019 to June 2020 the Sydney CPI fell by 1.04 per cent. As a result, under the current legislation, pension payments must be reduced by 1 per cent.

The fall in the Sydney CPI was driven primarily by the Federal Government's decision to offer free child care. Without this effect, the minus 1.04 per cent fall in the Sydney CPI would have been a 0.4 per cent increase. It has been determined that the fall in the Sydney CPI is not representative of changes to the cost of living of State Authorities Superannuation Trustee Corporation [STC] members—an important point—and, as such, it is appropriate to maintain pensions at their current level. Nearly 67,000 pensioners, with an average pension of approximately $48,000 per annum each, will be affected if the legislation is not changed. On average, the 1 per cent reduction in pensions would cost the average pensioner nearly $500. That is a significant cost burden for superannuant pensioners. I am thinking particularly of the pensioners in my electorate of Oatley.

The Australian CPI is designed to provide a general measure of price inflation for all Australian households. In practice, the index is constrained to measure only the changes in prices faced by private households living in the capital cities of the six States and two Territories of Australia.It is designed to measure the percentage change in the price of a basket of goods and services consumed by households, and it is calculated and published each quarter by the Australian Bureau of Statistics [ABS].

The budget impact of these changes is not material—less than $500,000 in the coming year—as the funds will come from the STC's reserves. However, it will cost the STC approximately $32 million, which will be gradually contributed to the STC over a period of many years. Given the importance of the consumer price index in debate on this bill, I will refer to some relevant historical data to provide context.

The Sydney CPI is the relevant index used to link the defined benefit pensions of New South Wales public service retirees to movements in the costofliving.The Sydney CPI is constructed in exactly the same way as is the national CPI, except that for obvious reasons only Sydney prices go into the calculation. The Sydney CPI is used in the superannuation indexation calculations because it is expected to be a better measure of movements in prices in New South Wales than is the national CPI measure for equally obvious reasons.

So, as we have heard from previous speakers both today and previously, the total basket is divided into 11 major groups: food and non‑alcoholic beverages, alcohol and tobacco, clothing, housing, furnishings, health, transport, communication, recreation and culture, insurance and financial services, and education.

In deciding which goods and services to include in the CPI basket and what their weights should be, the ABS has information about how much and what households in Australia spend their income on. Of course, these baskets of goods and services do not represent any particular individual consumer or group of consumers. That is what has brought about the need for this bill. The huge changes in the prices of certain goods and services, while part of the overall CPI calculation, are not goods and services that are representative of the consumption of retirees. The House has heard of the importance of this from previous speakers.

It is important to note that a negative annual CPI movement in Australia is very rare. In previous years, inflation in Australia averaged around 9.9 per cent in the 1970s, 8.5 per cent in the 1980s, 2.7 per cent in the 1990s, and 2.2 per cent in the 2010s. Since the CPI data started to be collected immediately after World War II and prior to 2020, there were only two occasions when the annual CPI movement was negative. Those occasions were in 1962 and 1997. The negative movement of 1.04 per cent in the CPI over the year to June 2020 is clearly an exceptional case—we are in the middle of a pandemic. It is particularly exceptional because it was driven by a handful of individual goods and services that experienced massive falls rather than a general fall in many goods and services, most notably in the offer of free child care.

For those in the Chamber who are members of working families, it is interesting that the childcare component of the index is not that significant, only representing 1.52 per cent of the total. However, it is what it is. It is because of these exceptional circumstances that we are introducing this amending bill, so that these unique movements in the CPI do not have an unintended impact on the pensioners of New South Wales. To the joy of the House, this is something that I could talk about in great detail for many hours. However, I understand that the Government Whip also wants to make a couple of important points, and I do not want to steal his thunder.

Mr Clayton Barr: We are going to be deprived.

Mr MARK COURE:Has the member for Cessnock said something in this debate?

Mr Clayton Barr:

No.

Mr MARK COURE: No, he is just interjecting. I thank the Treasurer for bringing this to the House's attention. [Extension of time]

I thank the three members who are listening in the House. As I said, the bill will ensure that the recent fall in the Sydney CPI does not adversely impact the defined benefit pensions of New South Wales public service retirees, many of whom live in my electorate of Oatley. Some of them have only recently retired, but those on the defined benefit scheme who are part of the old scheme are looking at retiring over the months and years ahead. I thank the Treasurer for bringing this important piece of legislation to the House. I have quite a few more important points to raise that I will leave to the Government Whip to take up with the House as the next speaker.

Mr ADAM CROUCH (Terrigal) (12:49):

:19 I was deeply enthralled by the speech given by the member for Oatley just moments ago. I acknowledge the member for Keira, who spoke on behalf of the Opposition and noted that the Opposition will support the fantastic Superannuation Legislation Amendment Bill 2020. This is a very good piece of legislation. I acknowledge the excellent contributions to this debate made by the members for Vaucluse and Manly, and the Churchillian effort by the member for Oatley, who absolutely deserved the extension of time.

Given the importance of the consumer price index [CPI] in the discussion of this bill it is important to provide some context and historical data relevant to this debate. The member for Vaucluse, the member for Manly, the member for Oatley and the member for Keira have all said the same thing. I will repeat those important points. The Australian CPI is designed to provide a general measure of price inflation for all Australian households. In practice, the index is constrained to measure only the changes in prices faced by private households living in the capital cities of the six States and two Territories. It is designed to measure the percentage change in the price of a basket of goods and services consumed by households, and it is calculated and published by the Australian Bureau of Statistics [ABS] once a quarter. That is an important outline, an overview, of how the CPI works.

I note the Treasurer is present in the Chamber. I will try not to take too long as he is an important and busy man. The Sydney CPI is the relevant index used to link the defined benefit pensions of New South Wales public service retirees to movements in cost of living, as was outlined by the member for Oatley. The Sydney CPI is constructed in exactly the same way as the national CPI, except that only Sydney prices go into the calculation. The Sydney CPI is used in the superannuation indexation calculations because it is expected to be a better measure of movements in prices in New South Wales than is the national CPI measure.

The member for Oatley outlined the basket of goods that I spoke of previously. I will repeat it for the House. Insurance and financial services is just under 6 per cent of the index. Education is 4.3 per cent of that index. Recreation and culture make up almost 13 per cent of that index. Communication is only 2 per cent. Transport is a healthy 10 per cent. Health is 5.8 per cent. Housing is 24 per cent of the index. Furnishings and household equipment are 8.8 per cent of the index. Alcohol and tobacco are 6.9 per cent, and food and non‑alcoholic beverages are about 15.68 per cent. That basket is varied and gives a broad view of the cost of living.

In deciding which goods and services to include in the CPI basket and what their weights should be, the ABS uses information about how much—and on what—households in Australia spend their income. If households spend more of their income on one item, that item will have a larger weight in the CPI. But this basket of goods does not represent any particular individual consumer, or group of consumers. And that is why we need this bill. The huge changes in the prices of certain goods and services, while part of the overall CPI calculation, are not goods and services that are representative of the consumption of retirees. On the Central Coast we have a large number of retirees. It is important to so many people across the Central Coast. I congratulate the Treasurer on bringing this bill to the House. It is important to note that a negative annual CPI movement is very rare in this country. Inflation in Australia averaged around 9 per cent in the 1970s, 8.5 per cent in the 1980s, it dropped to as low as 2.7 per cent in the 1990s, it was around 3 per cent at the turn of the century, and it was 2. 2 per cent around 2010.

Since CPI data started being collected in 1948, the annual CPI movement was negative on only two occasions prior to 2020—in 1962 and 1997. The negative movement of CPI of 1.04 per cent over the year to June 2020 is clearly an exceptional case. It is particularly exceptional because it was driven by a handful of individual goods and services that experienced massive falls, rather than a general fall in many goods and services—most notably by the offer of fee-free child care, which had a massive uptake, especially on the Central Coast, where there are many young families. The Central Coast has an interesting combination of population, very much like your electorate, Mr Temporary Speaker; it has a large number of self‑funded retirees and many young families have moved to the Central Coast because of the lifestyle it offers. There is a very high need for child care on the Central Coast and this has been an important part of what has been happening there. However, this component has decreased by an extraordinary 95 per cent over the year to June 2020, an annual movement that may well be unprecedented for a given component of CPI.

The 95 per cent fall in the 1.52 per cent childcare component had the effect of pulling down the CPI by 1.4 per cent compared to where the CPI would have been if childcare prices had remained stable. Such a sharp fall in a CPI component realistically can only be caused by interventions such as the ones carried out by the Federal Government in response to the COVID-19 pandemic, which is playing out across the nation. I congratulate the Treasurer, Minister Dominello and the Premier on working together to ensure that every economic leader in New South Wales is endeavouring to keep people safe from one end of the borders to the other. On behalf of the Central Coast I assure the Treasurer that these economic stimuli have been a huge benefit for local businesses: More than 13 small businesses on the Central Coast have taken up the $10,000 business grant—that is $13 million going back into the local economy on the coast. But extraordinary times call for extraordinary measures and that is exactly what is happening. I congratulate not only the Treasurer but also Chris Ashton, who has been sitting in the Chamber the entire morning listening to this debate, on their work and diligence in putting this legislation together. This is an excellent piece of legislation and I commend it to the House.

Mr DOMINIC PERROTTET (EppingTreasurer) (12:56):

—:50 In reply: New South Wales has almost 67,000 retired public servants with defined benefit pensions. These pensions are indexed in October each year to changes in the Sydney CPI. The intention of this is to match changes in pensioners' income to changes in their cost of living. But from June 2019 to June 2020 there was a temporary breakdown in this relationship. The Sydney CPI fell while retirees' cost of living rose. The Sydney CPI fell by 1.04 per cent from June 2019 to June 2020, driven primarily by the impact of Federal Government initiatives such as fee-free child care, which drove down the Sydney CPI but had no corresponding impact on retirees' cost of living.

Most of the defined benefit superannuation legislation in New South Wales already has a mechanism to allow pensions to be held constant if the Sydney CPI falls by less than 1 per cent. This bill simply changes the 1 per cent threshold to 1.1 per cent and therefore avoids the need to lower pensions. A few pieces of superannuation legislation do not already have this mechanism. In those cases the mechanism and the 1.1 per cent threshold will be added to the legislation. This will serve to bring consistency to the treatment of different New South Wales superannuation schemes. An amendment will also be added to the legislation to allow the threshold percentage to be changed in the future via regulation.

The bill will result in State Super increasing its pension payments in the 2021 financial year by approximately $32 million. State Super will recoup this money gradually from the Crown by way of an incremental increase in Crown contributions annually until the full funding target date specified in the Fiscal Responsibility Act 2012. There will be virtually no budget impact from this bill, although an accounting impact will be a one-off increase to the Crown's superannuation expense of just over $300,000. I thank the member for Vaucluse, the member for Oatley, the member for Manly, the member for Keira—who indicated Labor will not oppose the bill—the member for Terrigal and the member for Charlestown for their contributions to this debate. I also acknowledge the shadow Treasurer, who received a briefing on this matter earlier on. I commend the bill to the House.

TEMPORARY SPEAKER (Mr Lee Evans):

The question is that this bill be now read a second time.

Motion agreed to.

Third Reading

Mr DOMINIC PERROTTET:

I move:

That this bill be now read a third time.

Motion agreed to.