Out of control pension costs a myth

The budget attack on the pension involved both raising the pension age to 70 for everyone born after 1965, as well as cutting the pension rate by tying increases to inflation rather than average earnings from September 2017.

Treasurer Joe Hockey has justified the need for pension cuts by claiming that costs are exploding due to an ageing population. But compared to other rich OECD nations like the US and Japan, Australia’s ageing population is much less advanced because of higher fertility rates and immigration. In 2012 the Netherlands, Switzerland, Norway and Canada all had older populations than Australia. Yet Hockey is introducing the highest pension age in the world.

The claim that an ageing population means a crisis due to less people working to support a larger retired population has been debunked by Swinburne researcher Katharine Betts. She found that despite the increased average age of the population from 1978 to 2013 the proportion of people in the workforce actually grew from 61.7 to 64.2 per cent. And even by 2061 the proportion of people in the labour force will only fall to 44 per cent, which is higher than the figure in 1966 of 42 per cent.

Productivity increases also mean that less workers in the future will be able to produce the same amount of wealth as a larger workforce does today.

Despite the claim about a pensions crisis, the highest increases in welfare spending have occurred in health, not the pension. This is primarily due to new technologies and treatments, not the ageing population. Increasing costs in pension have come as a result of government changes, not an ageing population.

Nor is the pension the only cost in sustaining people in retirement. The government spends almost as much on tax concessions for superannuation, $35 billion a year, as it does on the pension. Within two years’ time the cost of super concessions will overtake those of the pension.

But super concessions are skewed towards high income earners, with the bottom 60 per cent of income earners receiving only 27 per cent of the benefits. So once again the Liberals have chosen to attack workers and the poor by slashing the pension and leave the super concessions the benefit the rich untouched.

By Jasmine Ali and James Supple


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