The reversal of Age Pension age policy on the Today show this morning was a triumph of politics over policy. And for once the politics favours older Australians.
So what is behind the decision of Prime Minister Scott Morrison to leave pension entitlement at 67 (by 2023), as legislated by the previous Labor government?
The original plan to move pension entitlement age to 70 was a major measure in then-Treasurer Joe Hockey’s 2014 Budget. Along with changes to the indexation of the Age Pension, it would have seen many older Australians struggle to live a dignified life.
The indexation changes were dropped following major opposition from across the board to the proposed long-term reduction in pension rates. But the ‘zombie’ legislation to increase Age Pension entitlement to 70 years has hung around ever since. The rationale for this increase to 70 was that funding the Age Pension was ‘unaffordable’ and this move would ultimately save the budget more than $3.6 billion over four years.
In the May 2018 Budget Lockup, YourLifeChoices asked then-Treasurer Scott Morrison if this measure would still be brought to Parliament and he affirmed it would. But since then we have seen another Prime Minister bite the dust, five by-elections, none of which the Government won, and punishing polls pointing to a federal election wipeout for the Coalition.
Further polling suggests that Labor Party messaging that the Government is supportive of big business, particularly the banks, at the expense of the ordinary wage-earner and pensioner are cutting through. So, in what appears to be an entirely political move, the new PM has now done a spectacular backflip on a pension age of 70.
So much for the ‘unaffordable’ Age Pension.
And this is where the politics of the situation have forced a correct decision.
Put simply, many Australians aged 65 and over can no longer work. The majority do not retire because they want to, but because they have to. YourLifeChoices research shows this may be due to health conditions or because they may be unable to find and keep a job which pays enough to give them shelter, food and home comforts.
Those whose health prevents them from working may get a Disability Support Pension. But it’s not guaranteed. Those who can’t access such a pension will have to exist on Newstart, which is far too low for anyone, be they a student, single mother or 65-year-old. As most fair-minded social commentators have noted, Newstart should be increased immediately. And it cannot be seen as a gap payment for those aged below 70 if they cannot find work before qualifying for a pension.
Dropping the plan to lift Age Pension age to 70 won’t matter to the 30 per cent of self-funded retirees – the Affluent retirement tribe. They will be ok, come what may. But for the 70 per cent of retirees and pre-retirees who are/or will be on an Age Pension, this will make a huge difference to their retirement planning. In particular, the Cash-Strapped tribes will need every bit of support possible as these retirees – about 15 per cent – are renters, spending more than a third of their income to keep a roof over their heads.
As YourLifeChoices has reported for the past decade or more, the question is not whether the Age Pension is affordable. As a nation, we are the third meanest in the OECD when pension expenditure is expressed as a percentage of GDP – we do not spend much at all. Where we are lavish in our spending is on benefits and concessions to older wealthier citizens – in particular when it comes to superannuation. Such concessions now outweigh the cost of the Age Pension – and it is here that this Government, indeed any government, should direct attention. All Australian retirees deserve a much more level playing field.
What do you think? Is this policy reversal good news? Or a cynical political exercise? Does it matter if you agree with the outcome?
Related articles:
Plan to lift Pension age scrapped
The costs of living longer
Retirement income plan ‘unnerving’
