The federal government has announced it will cut deeming rates for pensioners for the first time since 2015.
The rates are used to estimate how much some pensioners earn on their financial investments, and determine the fortnightly payments they receive.
It assumes pensioner's investments earn a set rate of interest, no matter what they really earn.
Social Services Minister Anne Ruston explains what the changes will mean.
"We will be dropping the upper threshold from 3.25 per cent to 3 per cent and the lower deeming rate from 1.75 per cent to 1 per cent. So what this actually means for people who are affected by this, is for singles up to $800 a year will be the increased amount of money in their pockets through their fortnightly payments and for couples over $1000 over a year will be increased in their fortnightly payments," Social Services Minister Anne Ruston said.
The move comes after the Reserve Bank cut the cash rate to a record low of one per cent (July 2).
Ms Ruston says the deeming rate cuts will come into effect from September, but will be backdated to the first of July.
The changes will affect people on the aged pension, disability support pension, carer payment, the parenting payment, and Newstart.
Ms Ruston says although the move is expected to cost $600 million over the next four years, it won't impact on this year's budget.
But advocates say the much-needed move doesn't go far enough.
However Labor's Social Services spokeswoman Linda Burney says the changes are "far too little and far too late".
A sentiment echoed by National Seniors Australia Chief Advocate, Ian Henschke.
"The government has in affect brought this on because we've been making a lot of noise. National Seniors and others have been saying you've got to bring the deeming rate down, they've finally done it but it is certainly not by the amount that we think is a fair amount," Mr Henschke said.
He says it shouldn't be up to the government to determine how much pensioners earn.
"If the politicians get their wages set by an independent tribunal, why can't they do the same for the pensioners of Australia, for the people on Newstart, for the people that are actually struggling. We need to have an independent body set the rate of deeming, the rate of the pension, the rate of Newstart."
While the government has dismissed this idea, the Greens will refer the issue to a Senate inquiry when parliament resumes next week (July 22).
