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$1,300 potential saving for nearly a million Aussies on Centrelink

·News Editor
·2-min read
Centrelink logo and Australian money notes and coins.
Nearly a million Centrelink recipients will have more financial certainty, the Government says. (Source: AAP/Getty)

The Government is promising extra financial certainty for nearly a million vulnerable Australians in the wake of the first official interest rate rise in more than a decade.

On Wednesday, Prime Minister Scott Morrison announced his government would put a freeze on how it calculated the expected income of pensioners and retirees from their assets.

Known as the deeming rate, it is how the Government assumes the rate of return on financial investments like shares, super accounts and bank deposits when it comes to social security income tests.

By freezing it, the Government claims it could save roughly 900,000 older Australians as much as $1,300 a year in payments they might otherwise lose due to the changing rate environment.

However it is unclear how it came to that number.

An older male Centrelink recipient looks at his phone.
Nearly 900,000 older Australians receiving Centrelink payments are impacted by the slated move. (Source: Getty)

While some assets, such as shares, will be hurt by rising rates, others like term deposits and cash deposits will benefit by earning more interest.

"This is another shield to help protect Australians from the cost-of-living pressures people could feel from an increase in interest rates," Morrison said.

"In addition to our indexation of social security payments, we will guarantee the rate of income for people who could otherwise see their social security income drop because of the increase in interest rates."

According to the PM, about 450,000 age pensioners and 440,000 other payment recipients will enjoy increased certainty for the next two years through their Centrelink payments.

Labor has promised to do the same.

The lower deeming rate is therefore set to remain at 0.25 per cent, while the upper deeming rate will stay at 2.25 per cent.

For example, if you're single, the first $53,600 of your financial assets has the deemed rate of 0.25 per cent applied. Anything over $53,600 is deemed to earn 2.25 per cent.

Minister for Families and Social Services Anne Ruston said it was about backing in retirees.

"We are absolutely committed to backing in our older Australians to enjoy a happy and healthy retirement."

The Reserve Bank of Australia raised the official cash interest rate from a historic low of 0.1 per cent to 0.35 per cent – the first rate rise since 2010 – ahead of the May 21 federal election.

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