The “welfare blowout” is grey gouging

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By Leith van Onselen

Earlier this week, I argued that for the Government’s so-called crack-down on welfare payments to be credible, it must include the retirement and pension system, which is one of the biggest and fastest growing areas of Budget expenditure (see next chart).

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The Government later confirmed that its review of the welfare system would only focus on the Newstart and disability pensions, whilst ignoring retirees receiving government support.

Today, a bunch of reports are out confirming my view that it is the aged, not working-aged Australians, that are causing the increase in welfare spending.

The first, from Toni Wren, debunks Social Services minister, Kevin Andrews’, claim that there has been unsustainable welfare “blowouts”, whist also showing that it is the aged that are primarily responsible for the increases in welfare spending over the past decade:

The figures Minister Andrews were referring to show that just over 5 million Australians were dependent on income support as at June 2012.

The minister then concluded that this number was a “blowout” compared to a decade earlier.

A closer examination finds the total number has gone up by 4 per cent over the decade…

ABS demographic statistics tell us our nation’s population grew by 15 per cent over the same period. So welfare numbers increased 4 per cent while the population increased 15 per cent.

Actually, that means welfare numbers went down as a proportion of the population over the decade, so where is the blowout?..

In June last year, the largest group were age pensioners – nearly 2.3 million recipients – an increase of 26 per cent over the last decade. This is, of course, due to the ageing of the population, but also due to the relaxation in the income and asset tests undertaken by the Howard government, which entitled more people to a part-pension (and then the flow-through when the former Labor government increased the weekly rate by $30).

Minister Andrews has ruled out any changes to the age pension in the review currently under way. But he did say the government was examining the Disability Support Pension. In June last year, there were just under 830,000 people reliant on this payment – just over a third of the total number of age pensioners.

A similar view has been taken by The Guardian’s Greg Jericho, who argues that the the welfare debate scapegoats the unemployed and disabled and ignores the rising number of Australians on the age pension:

…the percentage of the population on welfare has fallen significantly over the past decade. In 2002 it wasn’t one in five on welfare, it was one in four. Since 2008, rather than an unsustainable growth, the percentage of those on welfare has risen from 21.6% to 22.1%.

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And if we look at the “dramatic” increase since 2007, a rather different picture emerges than one Andrews would suggest wherein the major problem is the growth of people on disability support pensions (DSP) and Newstart:

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Seventy-one percent of the increase in welfare payments from 2007 to 2012 was in age pension payments. Rather oddly, this is the one payment area which Andrews is ruling out being considered in the review chaired by Patrick McClure…

Twenty years ago there were almost six people in the labour force for every person on the age pension. Now it is down to 5.3 people per pensioner and the trend is heading further down.

The welfare problem is by and large an ageing population problem. And it is a problem that will be much better served with a bit more context and a lot less of political parties blaming each other, the unemployed or those on disability pensions.

As noted by Toni Wren above, one of the reasons for the blow-out in aged pension costs is the relaxation in the income and asset tests undertaken by the Howard Government, as well as the $30 weekly increase in the pension granted by the former Labor Government. According to Curtin University’s Alan Tapper, Alan Fenna and John Phillimore, these changes led to a marked increase in benefits paid to the aged:

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What stands out is the recent surge in net benefits, which took place mostly under Coalition government. Critics might argue that in this period the long Australian tradition of relative restraint on expenditure on the elderly, under both Labor and Coalition, was here abandoned…

Perhaps most alarmingly, the Curtin University study also found that the bulk of assistance provided to the elderly is not based on need, but purely aged-based, with elderly Australians tending to be quite well-off when compared against younger Australians:

We might suppose that increasing support for the elderly is an expression of increased recognition of need. To test this claim we need to be able to rank ‘neediness’. This can be partly done in terms of ‘equivalent final incomes’… Table 6 shows the equivalent final incomes of the elderly and all households. Note that this table exaggerates the increase in EFI between the two surveys, because here the EFI for 2003–04 has not been adjusted by the CPI. The point of the comparison is not the relative change between 2003–04 and 2009–10 within each group, but the gains and losses of the different groups relative to each other in this period.

ScreenHunter_109 Aug. 01 08.13

…the most interesting comparison is that with all households. Rapid gains to the elderly in this period have brought them close to the EFI for all households. The gap in 2003–04 stood at about 21 per cent (based on an estimate that the EFI for all elderly households was about 505). In 2009–10 it had fallen to only about five or six per cent (estimating that the elderly EFI was about 960)…

As Table 7 shows, wealthier households are older households. Net worth peaks at around age 60. A sharper picture is obtained if we take household size into account using equivalence scales. Here we have used the square root of household size (a method that approximates quite closely to the ‘OECD modified’ scale used by the ABS to calculate equivalent final incomes). The resulting ‘equivalent net worth’ indicates that even households aged 75 and over are one-third better off than the mean for all households, while households in the 65–74 age group are 60 per cent better off than the mean…

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Given that equivalent final incomes for the elderly are now close to the average for all households, and that the net-worth distribution is skewed in favour of older households, we can reasonably infer that an integrated measure would show that households headed by persons 65 and over are better off than the average for all households under that age.

If all this is right, the Australian system of social transfers to the elderly is much more than a safety net. Viewed in ‘lifecycle’ terms, it shifts resources from the income-rich but asset-poor stages of life to the asset-rich but income-poor stage. Viewed in terms of the ‘vertical’ dimension, it is a system of upwards redistribution from the less well off to the better off…

It is inappropriate for the Coalition to only focus welfare cuts on the working-aged population, whilst ignoring the swathes of wealthy retirees receiving government support. Such an approach is not only inequitable and inconsistent, but also places the Budget in a precarious position as the population ages.

Instead, in addition to overhauling Australia’s superannuation system so that tax concessions are more evenly spread and balances are not exhausted too quickly, means testing of the aged pension must be tightened to ensure that it goes only to those retirees most in need (see here).

Otherwise, the shrinking working-aged population will be left to bear the brunt of Budget expenditure cuts at the same time as it incurs the cost of supporting its relatively well-off parents.

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  1. What wouldn’t hurt is to toughen up on age prejudice. There are a lot of greys out there who want to work. Apparently the place where age prejudice is most prevalent is Canberra government….
    I had what was called a public school education in the UK (my parents paid) and did physics, chemistry & geology at uni. At the risk of some criticism on this board I can tell you that the standard of literacy and especially maths here among younger people makes them unable to compete with a lot of those forcibly unemployed codgers.

    • I suspect you’re probably right but less from a planned and more from an incidental perspective.

      A major source of employment for the Commonwealth Government is its graduate programs. Even with hiring freezes or whatever, they still run graduate programs and they still get fresh doses of young people each year that way. I’ve seen graduate programs accept people even in their 60s, but generally speaking most people with prior work experience and an education won’t want to go back to a wage of around $45-50k as a graduate. Overwhelmingly graduates are people in their young 20s.

      For higher level positions (actually all positions) the position must be advertised externally in order to be filled permanently, which does give access to anyone (of any age) to apply. However the public service recruitment process is quite different to private sectors, and I suspect many simply do not know how to compete against the public service veterans (who, as well as understanding the ILS and the process of public service recruitment, write the kind of speak assessed in these positions on a daily basis). Thus I suspect internal applicants have a strong edge in filling high level worker / management level positions.

      The senior management levels work differently again. Often they are filled by high level industry managers and the like as they understand ‘the real world’. For instance I’ve worked under a Secretary who was first recruited to the public service well into his 50s. But as a percentage of workforce these are a small number of people.

      All in all, I’d say the public service does have a lot of older people who have simply been around for donkeys years and never left, but I doubt it recruits much fresh blood from older generations as most public servants actually start at the bottom.

      Maybe someone with stats will prove me entirely wrong, but that’s my perception anyway 🙂

  2. As the dependency ratio tends to increase then so will there be more opportunities for older people to stay in the workforce and to reduce youth unemployment.

    There will be an increasing pool of 50 to 65 year olds who will become more attractive to employers than they are now. Many might work for blocks of the year, or part time and so be largely or partly self supporting. Many might have a year off at 60 then come back and resuem work for another few years.

    There will be plenty of jobs in aged care, or opportunities to volunteer in aged care and hospitals. The older wealthy who need support and will pay the older healthy to look after some of there needs if the younger peole are all employed becasue of the growth in the elderly demographic.

    Young people who go to study without clear prospects of career and wage enhancement might decide to take a job rather than ending up with a HECS/HELP debt.

    Continuing automation, robotics and computerisation will reduce the need for in some areas, freeing up people for careers in areas of support to the elderly.

    While these ratio’s look terrible when projected, how accurate have even 5 year projections of anything been?

    Society and the economy will change over the period and change all the projections.

    Politics will also change. Remeber the age for pension eligibility has already been increased to 67 by a former Labor government.

    • “While these ratio’s look terrible when projected, how accurate have even 5 year projections of anything been?”

      Unlike the mystics of economics, demographics are very accurately projections. People live, age and will die.

  3. No political party will ever make the necessary adjustments to aged pension payment methodology nor entitlement. The noise will be too loud. They won’t make required fixes to super system either. Kick the can down the road…………

    • I suspect you are correct, however kicking the can down the road is only serving to further increase the motivations for emigration of our 25 to 35 year old professionals, who would rather just leave this mess behind.
      Emigration is already at an historical high and trending up.

    • No political party will ever make the necessary adjustments to aged pension payment methodology nor entitlement

      …. for the next 15-20 years.

    • Not unless younger generations take their inspiration from elsewhere, less conservative.

      There are rumblings coming from German youth and younger generations of workers, and elsewhere in EU, about the burden of supporting older generations without having future access to the same level of services and benefits themselves.

      Ageing politicians and governments (identifying with older native constituency) must be a bit nervous about all these younger generations of all socioeconomic classes who through EU mobility can compare national systems, while acquiring skills such as other languages, and importantly, empowered with confidence from the school of life.

  4. Now hold on UE,
    At the age of 64 as I approach the finish line without having the benefit of First home buyer grant ,negative gearing, parenting allowances parts A & B,low income support payments or any other of the raft of social support payments , you are advocating cut backs to the pension , which is tantalizingly close to my out stretched shaking hand as I stumble the final yards on metalic knees . God forbid!

    Have you no shame?

    • I do not think Leith is calling for any pension cuts, only a more robust asset test for the pension.
      Can I ask, when you bought your home and how much it is worth now?

    • That pension you feel entitled to claim won’t be paid out of the taxes you paid during your working life. There isn’t a bank account at the Treasury that your taxes were paid into that you can magically start drawing on when you turn 65. And in case you hadn’t noticed, your generation has been running the show for two decades, and all those taxes you love to talk about having paid are gone. Your generation has spent the lot, and then some. Your pension will now come off the backs of those working and paying taxes at the time you receive it. What you have or haven’t received from the government during your working life is irrelevant now. Sorry, but it just is.

      Have you no respect?

      • MRD1980 your tag leads me to believe that you are to young to remember the famous case of Prime Minister Billy MacMahon ,millionair, who on retiring claimed the old age pension on the grounds that he ,having paid his taxes , was entitled to it.
        When income tax was instituted during (I think) WW1a certain% (9%) was specifically levied to pay the old age pension.As far as I am aware this has not been repealed.
        The taxes that I have paid in my working life went to pay the OAP’s who went before me & so it goes.Get used to it. It’s your turn now.

      • @bolstrood

        Get used to it. It’s your turn now.

        Lets accept your argument for a moment. Now the pension system was enacted at a time when the population pyramids were just that and not inverted. The cost of providing a pension per worker was a fraction of what it is now. Moreover the life expectancy of a retiree was much less and the associated medical costs were much lower as well.

        In the mean time, as the boomer’s went through the system, they reduced tax rates and incentivised house price etc etc. No levy in there now for the pension system.

        The pension system as it stands is a security net and in all likely hood has been such for your entire working life. YOU HAVE NO RIGHT OF ENTITLEMENT TO A PENSION BECAUSE YOU PAID TAXES!. No magic pile in the treasury

        “My house is my biggest asset” – Well in that case use it as an asset.

        In any case I am happy to pay you pension if it means that all housing owned by pensioners will be sold at half market value once they don’t need it. Hows that for fair?

      • When income tax was instituted during (I think) WW1a certain% (9%) was specifically levied to pay the old age pension.As far as I am aware this has not been repealed.

        The Howard government stripped it (9%) out between 1998 – 2007.

        It’s gone, so it’s not our turn anymore.

        Get used to it.

    • Ta bolstrood.

      You are a great example of the deep sense of entitlement that prevails in your generation.

      The “how dare you consider reducing my pension I deserve it” attitude is palpable.

      Why do you deserve it?

      • Never mind bolstrood…I appreciate your humour!

        I repeat my stance….this article is aimed at a topic and is fair enough. However turning everything into a generation war argument leads us down wrong paths. It’s a war of productive vs non-productive. It should be a war on all entitlement thinking. I’ll leave it at that for the moment.

        This Seniors card thing really pisses me off. Now first I’m 64 soon to be 65. However being continuously asked if I have a Seniors card to get discount is insulting! FFS I LOOK bloody 49!!!!!!!!

        Now I walk into a local fruit shop at about 5.45 pm is a great example..pick up a few things then I go up to the counter. I’m served by the owner of the shop who has been there working her arse off since 6 am! She adds up the total then asks me if I have a Seniors card for a discount. Strewth! She is the one having to work 13 hours a day to make a go of things. I don’t! In agreement with most here is the argument that i get a discount. That money comes from somewhere. Why the hell should a young family with kids pay extra so i can have a Seniors Card discount.
        Get rid of the bloody things…..I’m sick of people implyin that I look OLD!

      • I’m over the age confusion thing to flawse. I’m 46 at he moment, 21 on a Friday night and 87 on a Saturday.

      • Yes wing 🙂 Sometimes i feel 92! Possibly because the definition of a happy death used to be to be shot in bed at the age of 92 with another man’s 26 year old wife!

        Dunno! Despite the supposed so many benefits outlined by others here there is not much plus side to this getting old particularly when the body hurts like mine!

      • bolstroodMEMBER

        scottmuz, I have been a manual worker all my working life.I am 64 YO

        I own 1house in a regional town which I have paid off , I have lived in it for 17years & wish to remain in it until I kick off.
        Compulsary super came in when I was 41 years old (1991).this has not allowed me to put away anything like enough super to fund a retirement.I have very modest savings.

        The pension will be essential for me in retirement.I am not in physical shape to earn with my skill set.the idea of cutting the OAP is from my stand point is moving the goal posts.

        If these changes are to come let it start from when those who started working in 1991 each retirement age . They at least have had a whole working life to secure their retirement.

    • That massive capital gain that piled into your housing value, you didn’t earn, nor did you take out the equivalent real value home loan to pay for it.

      You’re been a bigger winner out of the system than any FHBG or family tax A/B recipient.

      Have YOU no shame?

      • Why don’t you downsize your house instead of drawing a pension?
        “Because that would diminish my wealth!”
        You can’t take it with you, so why does that matter?
        “I need to bequeath it to my kids, to help them out.”
        Why do they need so much assistance?
        “So they can buy a decent house – they’re expensive, you know!”
        Why are they so expensive?
        “Because retirees refuse to downsize and release their big houses onto the market!”

        Round and round we go, weeee…..

      • Not this argument again….

        How, exactly, is he a “winner”? Becuase the value of an “asset” that returns him zero income has appreciated? OK. So what is he to do? Sell said overpriced asset and… buy another overpriced asset (plus have to donate stamp duty to the government)? People criticise the baby boomers as the “Me-generation”, but seems there’s plenty of “Mine, mine, mine” to go around.

        This forum has started to degenrate into the generational warfare forum, which is a shame, because there’s a lot of great (and thought provoking) content on here.

      • Mr Walker,

        If someone paid 2.5x annual average salary for a house on a quarter-acre in nineteen-diggitty-two and that property is now worth 15x to 20x the average salary, they’re a winner.

        Even if that person doesn’t sell to realise the gains, they are sitting on a quarter-acre in an established area with only one or two residents, while the rest of us squeeze a couple plus 2.3 kids onto 300sqm on the fringe. Still winning.

      • DMc

        I disagree. Nominally, they might be a winner, but in reality, it’s not an income producing asset, so it’s irrelevant to them being able to fund their life.

        But OK, for the sake of the argument, say we have an OAP sitting on an $1M house they bought 40 years ago, and they’re forced to sell because it’s arbitrarily been deemed that they’re winning like Charlie Sheen.

        I assume that in the underlying argument we would in fact like the OAPs to live somewhere, and that we’re not happy to just turf them on to the streets. So, they sell. Where do they move to? Out on the finges of civilisation? Practically, infrastructure out there is shit. But, screw ’em, they’re old and “winning”. Socially, you’re moving them away from their friends and their social lives. Given the lack of infrastrucutre, even the occasional social indulgence is going to be a royal PITA now.

        So you’ve uprooted people from their lives, the vast majority of whom aren’t sitting on a -vely geard portfolio of houses, and probably are existing on a subsistence level pension, out to the fringes, to try and eke out a similar living on the remains of what they’ve sold their house for, and for what? You’re deluding yourself if it’s going to free up housing for anyone. Logic tells us that their will be an increase in demand for the lower end of the housing market, and for the upper end, cashed up property speculators are going to go bargain hunting, and price the FHBs right out of the market that’s now going to get squeezed at both ends, so the gains from them selling their house are going to be reduced anyway. The only winners will be government (via stamp duties), developers and RE agents. Not to mention that the squeeze may be such that by the time they exhaust their new cash, prices have increased to the point they’re now “winning” again, and we start the process all over…..

        I’m not sure I’d be happy to live in a country where we effectively force old people out of their houses and efectively marginalise them.

        I’m all for welfare reform, but there are many, many more opportunities to trim the fat without going to the extrems of forcing people to sell their family homes. Welfare is a target rich environment indeed. Let’s bash hell out of middle class welfare recipients instead. I can really go for that. There’s zero reason why anyone earning anything more than the average wage should ever get a cent from the government.

      • Mr Walker
        I do not think anyone is saying that they should sell up. What I am saying is that a Centrelink Reverse Mortgage should be provided instead of the pension, when counting the value above $750k into the asset test for the pension.
        No one needs to be forced to sell up. Got it?

      • No pensioner should have to downsize at all. It is fair to count the value above $750,000 into the asset test for pensions and to provide Centrelink Reverse Mortgages, with a negative equity guarantee, to those who are asset rich and cash poor. They certainly do not deserve a full pension and it definitely is not fair to expect the current workers of the day to pay a pension to someone living in a $5 million home, with $1 million in cash. Mad as batpoo!

        We also need a death tax of 25% for any amount over $1 million dollars. Rural and on-going business assets excluded.

      • You don’t have to be getting an income to be “winning” from the land ownership. They are “winning” from the utility of living on a large block. The fact that they value this utility less than others do, yet continue to use that resource, is the problem.

        “Where do they move to? Out on the finges of civilisation? Practically, infrastructure out there is shit.”
        So the fringe is good enough for FHBs but not retirees? The people that have to commute to work should be forced to live further from the CBD because the prime land is being squatted on by the elderly? Poor infrastructure areas are where we want our kids growing up?

        They don’t have to move to the fringe anyway – they can downsize in the same area. Oh what, not enough apartments? You mean the lack of developments, which they opposed for years, is now biting them on the arse? Cry me a river.

        You’re right that investors will buy the houses. They will then split the lots and build two family homes in place of the one, housing eight or nine people where two resided previously. Sounds perfect to me.

        If downsizing is really THAT unpalatable, there are other options that aren’t a welfare drain:
        (1) Reverse mortgage.
        (2) Accrue a debt to Centrelink (through a system that doesn’t yet exist), repayable from your estate.

      • @bolstrood,
        “we do not chose the times we live in, we can only make the best of it”

        That’s quite true. But boomers were not born in 2014, they were born in 1950-ish and have had several decades of opportunity to craft society so that 2014 could be a fair and equitable time. Unfortunately, they did not do this. They spent those decades hoarding resources and rewarding any politician that promised a free lunch, ignoring the impact on the next generation or two. Now they complain when there is any suggestion that they should carry some of the burden of the situation they created.

        Have I any shame? Yes, I am shameful that my forebears are so ignorant of the inequitable situation they have created, and that they selfishly want to avoid the consequences they have created for themselves.

      • DMc…and those boomers are different to the current younger generations how?
        “They spent those decades hoarding resources and rewarding any politician that promised a free lunch, ignoring the impact on the next generation or two. ”

        Nobody but a couple of silly old bastards like old Flawse, who don’t know what’s good for them, and a couple of blokes like pfh et al, want real reform that might really result in the current generation, whoever they are, paying it’s own way. That’s modern society.
        If we want to change we really seriously have to start with advertising. We have to stop promising people eternal happiness from the latest petrochemical perfume crap they can spray around their house or the latest super sleek SUV that automatically bringsd them beautiful partners and an ideal life!
        Sorry but it’s all a lost cause.

        P.S. Showing my age! But sure as hell money was better spent on nice houses than ugly tattoos! Sorry to all those insulted…I’m just pissed off!

      • flawse,
        I get that you’re angry but at whom? The people that say boomers must play their part in an overall belt tightening, or those like Mr Walker that seem to think they should be exempt?
        I agree the younger generation won’t be any different by choice but the boomers went through their working lives in probably the most prosperous era ever or that we’ll see for a long long time. That prosperity allowed an unsustainable largesse from successive governments, the policies of which are still here and the hangover of which we are seeing the beginnings of now, right when age welfare and health care costs are about to skyrocket. As result, the younger generation simply won’t have the opportunity for wealth accumulation through favourable fiscal settings and taxation like the boomers had, nor through capital appreciation. The screws have already started tightening and Hockey has called the end of the age of entitlement. Apparently retirees didn’t get the message.

      • DMc I agree with you entirely! I’m angry at the waste and sheer self-indulgence of my generation generally..However there were many who were not a part of that. Ordinary people who lead ordinary lives. You’re right however in that the majority have been super-indulgent.
        The reason younger people have so fewer choices is that we saddled you with debt rather than saving and investing in productive assets. Unfortunately modern economics has justified all the debt and seeks to load everyone up with more.
        Debt isn’t just some money number. If you chase the money down the rabbit hole you’ll find debt is the over-use of the world’s finite resources.
        There’s not much future for anyone in doing that and yet it is mostly what is propose3d with the promotion of inflation and negative real after tax interest rates rates.
        There’s no choice here…or there won’t be soon enough.

      • GunnamattaMEMBER

        Good discussion gents

        I am with flawse on this – we cant simply blame a generation as such. I know I can refer to boomers and their downsides as much as the next guy but they arent all the same, and I know too many who have simply paid off their abode and dont own investment properties and arent highly leveraged.

        The other side of that point though is that younger generations are being blamed (such as it is) in toto because they will be all lumbered with a rogered economy and they will all be getting the living daylights taxed out of them to fund welfare for older people.

        and if you have a peek at the AUD this eve you may just be able to hear some cloacas puckering in the distance. I now I am pessimistic, but I am getting a whiff of carnage coming down the timeline.

      • To my mind, assigning blame is pointless anyway. It just gets me riled up when wealthy retirees put their hand out like the good times are still rolling because they “deserve it” or are “entitled to it”, especially since they’ve enjoyed an easier ride than the next generation could ever hope for. More more more, me me me. More pension, more tax concessions, more free services.

        Non-wealthy retirees deserve assistance, retirees sitting on multi-million dollar properties do not.

  5. this denotes that the aged have control over the situation, they dont. the only reason they benefit as they do is because government is vote buying from them.

    this is a problem of government gouging the young and future generations for their own short term political gains, why try and play off what is a failure of government as a generation battle.

    go back to sound money and outlaw deficit spending by governments problem solved.

      • Indeed.

        When we look at where we are now economically, pre-boomers, boomers, and gen Xers are in it up to their/our necks.

        The youngest of the X-ers have been voting for eleven years, a period in which, had the economy been run differently (think Howard/Costello/Rudd handouts), we would be far better prepared for what is facing us.

        The government should at least put the pension on the table for discussion.

      • Well we do not let under 18’s vote due to lack of ability to see the big picture, so why not exclude the over 90’s for the same reason?

        The voting age should be reduced to 16, to compensate for the growing aged bloc and voting over the age of 80, perhaps should be voluntary.

      • There is merit in this, perhaps a triennial test of some sort analogous to a regular driving licence checkup after ninety.

        Having said that, I know plenty of younger people who are dopey, so maybe some universal test should be applied – whoever fails, whatever their age, loses the vote. Not sure what sort of test can be applied though. Also, would we trust the politicians not to game the system?

        Perhaps not such a good idea at all.

      • HH I like the idea, but it could never happen sadly. No party would support it.

        I am concerned that unless the younger cohorts start to realise how they are being screwed and demand changes via the political process, we will see some sort of nasty societal conflict (e.g. the London riots but on a larger scale).

        Hence the importance of us all trying to make the younger cohorts aware of the problem.

      • Willy nilly – having a sixteen year old (and his mates) in the house I can pretty much guarantee if able to vote we would see the rise of the Legalise Cannibis (and other stuff) party with stiff competition from Sex Party.

        All citizens 18+ should continue to be entitled to vote. This anti-the old stuff is getting ridiculous.

      • its naive to think a change in voting patterns would have left us in a position any different than we are currently in.

        the two party paradigm is a farce and the differences between the major parties in aus are elementary, the elected officials are not the ones making decisions and writing policy, they are just PR managers for those that do.

      • 3d1K
        Mmmmm…. perhaps your personal experience of the 16 year olds you know is just that.
        I have talked to many 16 and 17 year olds who are far more socially and politically aware than more 60 year olds I meet. Once again, just my personal experiences….

      • I can pretty much guarantee if able to vote we would see the rise of the Legalise Cannibis (and other stuff) party with stiff competition from Sex Party.

        You say this like it’s a bad thing.

      • Easily solved with a couple of questions at the top of the ballot for it to be valid.

        1) What day of the week is it?
        2) Who is the current Prime Minister?

  6. Apart form the fiscal challenges we face due to the unprecedented ageing of the nation, perhaps the more important issue is the social change that will also result. It is projected that our lone occupants will rise from its current 24% to 28%% of all homes and to me that is a social disaster.

    Family Assist Part S (carrots and sticks), would allow a sole pensioner be able to sell up their PPOR and the proceeds remain asset test free for the pension test, if they live with another ‘family’ and put a majority of their investments into Govt Bonds or an approved govt savings account. The rent the ‘family’ receives would be tax free and the ‘family’ would as get a $5k govt grant, to help house the pensioner.

    At the same time a Land Tax needs to be introduced to create the ‘stick’.

    The ‘family’ could be young FHB and need not have a direct family relationship with the pensioner.
    It will be a bad reflection on our society if we allow 28% of our homes to end up as lone occupants. Now at approx 24%. Ageing in place will be a social disaster. Isolation and loneliness is state we should find unacceptable for an advanced society.

    From the ABS link on the above thread, Figure 7.48 shocks me…..[email protected]/0/916F96F929978825CA25773700169C65?opendocument

    We certainly have the spare bedrooms for Family Assist Part S

    Also two unusual events are in parallel.
    1. The ageing of the nations and,
    2. the looming death bust that follows 80 years after the baby boom.
    The death bust (80 years after the baby boom) must be factored into any demographic arguments and our natural growth is downhill from here on in.

  7. Scottmuz deserve does not enter into it.
    I paid my tax & embedded in the tax law a certain % of my income tax was levied to pay my pension.
    See previous post above

    What will be interesting is after we BBers have passed thru , what will you do with all the left over real estate.
    Could be quite a lot of it surplus to requirements.

    • I paid my tax & embedded in the tax law a certain % of my income tax was levied to pay my pension.

      Prove it. Which part of you taxes goes to your pension?

      Also while you’re at it, would you mind calculating how much in taxes you paid and how much in pensions and assistance you will receive?

    • “I paid my tax & embedded in the tax law a certain % of my income tax was levied to pay my pension.”
      Therefore the capital gains you never got taxed for must be taken into consideration with your pension that being your PPoR which is what people are advocating as the main thrust of the reform. I think we’re getting off topic nobody is debating people shouldn’t get a pension but the lack of funds to keep the govn running means we shouldn’t be paying people who clearly don’t need it either, whether that be people who refuse to look for a job or pensioners with a 1m PPoR

    • The current system of welfare entitlements is unsustainable. The greatest single contributor to this is an ageing population and increased life expectancy.

      That’s pretty much the starting point.

      Whether or not generation A, B or C got more or less than generation D, E or F is not really the point.

      The idea that the Age Pension is a sacred right is ridiculous. In terms of rates of payment, for many (those with no other assets or sources of income support) the current pension system may seem tough, but equally there are MANY (particularly those that own their own home) who have never had it better.

      I’m not saying we should necessarily cut the pension, but it should certainly be reviewed and if a reduction is recommended, so it should be.

      What are our alternatives? Keep spending for the sake of this and maybe next generation of retirees, then cut the lot?

      Personally I think a better alternative would be to introduce hefty asset transfer taxes plus an aggregation of all government support payments made over your lifetime, with the government paid as a creditor upon disposal of any asset (or administration of probate at death).

      • bolstroodMEMBER

        From todays comments there is a lot of feeling about pensions & housing & how there is no longer enough money in the Govt. coffers pay for a Fair society.
        While we all sit about thinking of how to divide our (joe citizens) slice of ever diminishing pie, the real culprits, the very few fabulously wealthy & International Corporations who pay little or no tax while accruing more & more of the worlds wealth go their merry way.
        Thru manipulation of their media ownership they delude us into false social divisions ,like gen x y z & Boomer & set us at each others throats . Divide and rule. If these real bludgers were to pay their share there would be enough money in the Public accounts to provide for all our social needs.
        It is self evident that our political system has been hijacked by the Multi National Corporations & their fellow travellers.We either take our government back or continue this spiral into punery

      • bolstood
        Generational Theory, part of sociology, is hardly a media conspiracy.
        The only time I hear the ‘ageism’ call is when the so called entitlement rights of the asset rich/cash poor are in question.

      • Willy…I hope you know I respect your posts – they’re great!…but..”Generational Theory, part of sociology, is hardly a media conspiracy.”
        No but it sounds like yet more modern academic bullshit that misses the point. The debate should be about productivity. The Boomers, of whom I am one, were only able to mess up (being polite) our nation was because nobody, well nobody of substance, ever called into question the stupidity of what was being done to the economy of this land. There should now be plenty for everyone. Now Boomers were the ones who gamed the rules and decided they would destroy future generations in order to live above their means. Yet younger generations are now doing EXACTLY that for themselves. Anyone who disagrees in academic circles or in discussion areas like MB is basically taken out behind the woodshed and given a flogging.
        It seems the whole of university academia, socilology and economics, is preaching this stupid ‘blame it on the older generation’ BS while at the same time teaching some stupid version of economics and sociology that says we are entitled to even more than the boomers awarded themselves. It’s got to stop!
        The debate here is good but let’s start framing it properly so that what we discuss actually does something about stopping the rot!
        The constant degeneration into inter-generational ugliness does nothing for us.

      • flawse
        Noted and pondered upon. Having just watched the full 1995 video I posted below, I think you are quite correct.
        Ageing starts from the first day of life and the aged are not problem, they are the solution.
        I hope we get to have more open debate about how we reshape our society, as an aged nation is permanent and the process of increased longevity will more than likely only happen once in the history of mankind. That time is now.

        Thanks for your pulling me and the argument into line…..

      • Willy I guess i seem to argue my points strongly enough and I do think about stuff a lot. However I am under no illusion that I’m 100% right on any subject. So my thoughts are offered as just an offering of thought. Not sure I’m up to setting anyone straight! 🙂

  8. ceteris paribusMEMBER

    Some caution is needed on this generally correct conclusion that the aged is welfare gouging. In average net worth terms, it is true that it looks like the older cohort looks is overgrazing at the expense of others. But to assume that, may be throwing the baby out with the bathwater.

    Averages can hide a multitude of sins. Dig deeper into the ABS tables and take a distributional look at the quintiles of wealth. A familiar picture emerges. By comparison, the bottom 60 % are comparatively worth a pittance, especially given
    It is reasonable to assume that over a lifetime’s work people should have accumulated a modest cache of goods.

    By exactly the same token, the very, very modest situation of the bottom 60% highlights the incredible wealth of the top 40%- the countervailing group which makes up the other component of the healthy overall mean.

    This distributional perspective, rather than a single average net worth figure, provides a critically important indicator against which public policy initiatives in terms of retirement welfare income should be measured.

    Rudd was 100% right in raising the level of the full pension for the bottom 30-40% of aged pensioners. they were doing it very tough after a lifetime of taxes.

    Costello’s decision was far more debatablet in his dramatic easing of the means test for the aged pension, especially when it is considered against his largesse in respect to super arrangements.

    Now don’t read me wrong. I fully agree that the aged, AS A GROUP, get a far better deal than young taxpayers and reform is needed. But the older cohort is not an homogenous monolith. Within it, there is entirely another story to be told. Consequently, an reform needs to be carefully tailored.

    • I think my comment immediately below, which I was probably typing as you typed yours, has the same gist presented in a different way – and good on you for digging out the ABS published distributions.

      I am surprised this isn’t more prominent in the Curtin research if they considered it at all.

    • Good points. The boomers have vast differences in wealth. However it is clear that 80% of the 5.3 million boomers will need a part or full pension.

      • Willy a P.S. You young blokes think you are a bit anti…you wanna be an old boomer who has tried to fight the stupidity his whole life in various ways….confiscate their expensive Sydney houses! They got em by ripping off good hard-working people all over the country. The divide between the generations is not as bitter as the divide between the productive of the nation who have been ripped off and the parasites through the last six decades.
        Again…apologies to any offended..I’m pissed off!

      • Willy take that bloke in HnH’s photo…just looking at the prick gets my hackles up! What’s the picture of
        1) A smug retired lawyer with a house on the harbour and a boat whose never had a physical working injury his whole life
        2) A broken down old farmer, tradie or labourer who can hardly get around for the pain his body gives him!
        Pain can really sharpen one’s resentments!!! 🙂

      • Yes. I agree. The aged are certainly not just one person.

        Ps. Are you talking about my photo from way back when…lol. Lots more grey hairs all over my body these days 🙂

  9. A worrying set of figures, to be sure.

    However, the statistical sceptic in me wonders; is it possible that an increasing proportion of elderly fall into one of the following three categories:
    1) still employed or running a business, with significant income (not receiving pension)
    2) wealthy retirees who do not receive a pension
    3) retired with low wealth and receive a pension
    with the increases in those categories offset by a fall in a fourth category;
    4) retired with moderate wealth, not receiving pension

    So, statistically it is possible that, “increasing support for the elderly is an expression of increased recognition of need,” (cat.3) AND the average EFI for the wealthy is increasing (cat.1&2). The two are not mutually exclusive.

    It could even be that the total wealth in categories one and two has increased, but not the number of people, while the number of people in category 3 has increased, resulting in greater need and higher average EFI.

    To answer the question we would need to assess the EFI of only the pension recipients (not all elderly); I don’t know if there is data available to do this.

    • Depends on your definition of wealthy and moderately wealthy.

      A couple with a house and 1M in assets still get something.

      • Yes, there is a fifth category I didn’t mention: Wealthy enough to not need a pension but receiving one anyway.

        The Curtin research seems to conclude that this category is increasing. From the data presented that’s not necessarily true.

      • ff

        I know a guy in Centrelink.

        I asked (2 years ago) why someone with a house worth $1m should still get a pension.

        He said, it isn’t fair to deny them a pension because it wasn’t their fault the house value rose over time.

      • Esco
        For my thinking it is the boomers fault that house prices rose and that those rises were seen as a good thing for an advanced society. They are 100% at fault.

      • willy

        Just paraphrasing what I heard.

        I wonder if that’s the internal line they espouse.


        But don’t get me wrong – I’m 41 and not yet vested…

        We’ve discussed previously that we want a lower real wage, to become more competitive. It would only seam reasonable to have some of those benefits (aside from fuller employment) accrue to us the worker when we (god willing) become pensioners.

        As said by at least one here (apologies for not quoting your name), we’re really arguing about the quantum of pension…. and quite possibly the timing of that pension.

      • @Escobar Well say I agree with that. But what about the couple with a house and 1M? They can still get part pensions.

        What about those who abuse the system by bequeathing or using trusts etc?

        Another problem with the example you have stated is that the housing assets test are much looser than liquid asset test. How many are not moving for fear of losing their pensions?

  10. But isn’t the AOP an economic stimulat? We read everyday that “Nothing’s reached Main Street!”, but here we have disposable income being put into the community at an increasing rate each week. One way or another it’s ‘used’, even if it just retires debt. Yes, there are those who don’t need it, but I’ll bet they spend it!

    • The trouble is when they use the pension instead of releasing the value tied up in their house. In this case the pension is not extra money spent on Main Street, it’s just from a different (tax-payer funded) source.

      • On the pension/housing asset debate I found this brilliant financial Q&A from the paper.
        Sums up all the issues – massive mortgage going into retirement, usign super to pay mortgage, poor financial planning and knowledge, people with $m houses ending up on the pension etc etc. Almost a stereotype.

        Q I retired at 55 in 2009, took $135,000 in lump sum and a $32,000 pa superannuation pension. Sadly, this lump sum is gone (some into shares and the rest to bad budgeting).

        My husband is planning to retire next year after his 65th birthday. As we have a $450,000 mortgage on our home (worth $1.3 million) it seems sensible for him to take as much lump sum as he can and plough this into the mortgage. However, he is also keen to have a decent fortnightly pension. As well, our track record is not great when it comes to handling large amounts of money. I would be grateful for your advice on how best to access his pension when he retires.

        A I think putting the lump sum into the mortgage is a good idea: that will earn you a capital-guaranteed 6 per cent a year (or whatever you are paying on the mortgage) with no fees and no risk. No other investment can match that. If possible, your husband should consider working past his 65th birthday, or you should consider some casual work. Both options will make your money last longer. You have a large equity in your home so you could downsize to release capital in years to come. The other option is to take the pension and use most of it to speed up your mortgage repayments. You need to be getting good advice, because a lump sum paid off the mortgage will be more flexible for aged-pension purposes than a private pension.

        Read more:

  11. It is a real shame that some see the debate about what is fair and what is not fair, as ageism. It is not at all.

  12. Economics 101

    Q) What is the biggest asset of all pension funds?


    Go figure. People who invest in a pension are fools.

    Why not buy a pension property directly, watch it rise in value more than any other asset guaranteed, particularly a pension?

    And eliminate the pension fund manager middle man skimming all your lovely economic rent.

    Why do you think property is the major asset of all pension funds. Doh!

    Simples! That experts cannot see this shows ignorance without bounds.

    • If property such a wonderful investment why doesn’t Meltfund invest in property.

      According to your website all you do is buy mortgages cheap and then resell them to people who have been convinced property is a great investment.

      Are you looking for investors to buy cheap mortgages?

      Or just excited buyers of the mortgages/foreclosed properties you picked up at fire sale prices who are willing to reward you with the 60% margin that you boast about?

      • Pfh

        Yes that is exactly correct. How many times do we have to say it before you will start to hear and see it?

        Are you feeling OK?

      • Very well thanks,

        Thanks for confirming your business model is simply to buy assets as low as possible and sell them as high as possible.

        While your comments on property may give confidence to your buyers that they you should pay you as much as possible for the property interests you do not wish to hold, those comments might be of concern to those selling property interests to you that they are allowing too much profit to slip through their fingers.

        Can you explain again who are these banks that lack the competence to liquidate themselves the property interests they are selling to you. As you make clear, selling property interests can be done cheaply and efficiently by an inhouse team.

        Can you also explain your strategy for preventing competitiors from approaching your sources of low cost property interests and bidding up the price you pay?

        Are you able to identify any properties that you recently sold some interests in?

        Most importantly, have you expanded your operations to Australia or do you intend to?

      • Phf my reading of Meltfund is that if the ‘system’ does not change, if something akin to LVC is not implemented then the practice of flipping houses and property investment building wealth via economic rents will continue.

        Seems to me he has a very good point. I think he’s saying ‘this is how you make make money (and push up property prices, increase wealth for property investors, rinse and repeat)’. All works well until it doesn’t ( bubble burst ) and then those that are more deeply embedded in property pick the carcasses and eventually the cycle resumes.

        Expand this across the spectrum of land derived economic rents. Profits from non productive initiative. Same story. Extend to monopoly rents. Same story. Advice from Meltfund is correct – if you wish to profit exploit the reality of the system.

        If you don’t like the system work toward change. But don’t waste time and energy bleating about minor externalities. Fantasising what-ifs. Only fundamental change re our taxation system and commensurate expectations can lead to not only affordable housing but also a more just economic environment.

        Abolish all taxation except monopoly rents (resource rents excluded! – IMO)

        Just my take on Meltfund.

  13. This might be a silly question but:
    WHY are younger Australians accepting this absurd economy and playing this “rigged” game?

    Are there really no other choices, making this the best game in town?

    If I were 25 again I’d sell-up and get out, go somewhere where I can make real money and plan to come back in 10, 15 or maybe 20 years.
    I’m not sure how difficult it is to get residency / work permits in another country,( for the vast majority of people) all I know its always been easy for me.

    I guess the problem is the same as the “dont buy now” crowd, because if Australia dose not correct than you’ll never be able to afford to return, only difference is that your cash wont fund the whole escapade.

    • GunnamattaMEMBER

      That pretty much encapsulates my view.

      As someone who has made money OS and come back, it appears to me to be the most straightforward response to the lay of the land. I have told my wife to do some study here and chalk up the largest HECS debt (or whatever it is they call it these days) because we will be taking off at some time a few years down the track – I dont think Australia will address a load of issues including real estate affordability for you people, superannuation, but, most importantly, and first and foremost, actually taking an overt and clear step on developing a competitive and robust economy (basically what Hawke Keating et all did a generation ago) and identifying impediments to that.

      How anyone with kids could sit back and watch Australia develop another version of what Keating once referred to as an industrial museum is beyond me. In fact it is worse than that because we wont be bequeathing an industrial museum, we will be bequeathing a tourist destination come retirement home – these require loads of lowly paid menial types and not much else, and I want my kid to aspire to do something a tad more.

    • A casual observation shows me that the older generation are advising their offspring either directly or indirectly ( through the MSM etc) that ‘the rigged game’ IS the only path to riches! ” I tell ya, if I had my time over again, I’d buy 50 houses and sit on ’em. I only got the one back in ’79 when it cost me a fifth of what it would today, cuz my Dad didn’t tell me what I am telling you about getting more. If he had, I’d be sitting pretty. Get out there and buy whilst houses are still cheap, and get as many as you can borrow to get”
      I’ve got in-laws who having worked and speculated in Sydney for 10 odd years, are coming home. ( “It’s getting too expensive to buy and sell do-ups here”) One guess what they are going to do when they get back to Auckland…..

      • Janet, your quote there is absolutely true. Anyone who bought back in ’79 or whatever is rich by default because nobody could have predicted that prices would be where they are now.

        So all this anger by other commenters directed at baby boomers is really quite pointless, and as ceteris paribus says, “the older cohort is not an homogenous monolith”. Sure, if everyone knew that property would go up as much as it has, everyone would have gone into more debt years ago to buy as many properties as possible. It would have been the most sensible thing to do.

        The interesting thing is that now that people are aware of how much property can appreciate in a relatively short time, there are more and more property investors now, hoping to make the same sort of gains. Whether or not their properties go up 10 times in the next 20 years like they have in the past remains to be seen.

        As for asset-rich cashflow poor oldies, maybe there could be some sort of incentive for them to sell up and free up their equity. There are lots of ways this could be done. Maybe they pay less stamp duty on their downsized home or something. There are a lot of single (widowed) people taking up a whole house on a large block.

        But the point that hasn’t been addressed in this forum is the huge immigration rate. Why it is necessary to grow the population so quickly just to prop up house prices is a whole subject in itself that needs to be discussed. If we didn’t have such a rapid population growth, we wouldn’t be discussing this issue, and there wouldn’t be such resentment towards older people. It goes round in an endless circle because then we wouldn’t have this housing bubble so the rich baby boomers wouldn’t be as rich, and so on.

    • – Some don’t have the means to escape. Not everyone is a highly educated worldwide desired professional.
      – Some don’t want to leave, or don’t have the connections to.
      – Some have families and can’t leave (this is the biggest factor I’ve seen)
      – There’s more to life than working. I don’t want to base where I live just for “wealth accumulation”. My country, my home – I should have the freedom to make my own opportunities (even if the oppressive government as a youth doesn’t let me)

      Everyone knows this – the labour force as a whole is quite immoble. Governments exploit this in numerous ways.

  14. If I were 25 again I’d sell-up and get out, go somewhere where I can make real money and plan to come back in 10, 15 or maybe 20 years.

    Like where ?

    That’s the problem – the places to go that aren’t in as bad, or worse, condition than Australia employment-opportunity-wise is a short list. Considering that most people will also be restricted by only being able to speak English and it’s even shorter.

    • @Drsmithy

      Wealth accumulation always requires a two pronged attack.

      Step 1) minimize your expenses
      Step 2) maximize your income

      There are many possible paths to riches but these are the two most essential steps.

      WRT Australia your @#$%ed at step 1) because the only way to achieve step 2) is by living in Sydney /Melb….

      Like Where?
      China, especially western China looks good
      Vietnam, hearing a lot of positive movements there
      Germany, still an industrial powerhouse with a seriously skilled labor force, relatively low cost of living
      Spain, seems like the worst is over
      US especially southwest, housing is cheap, technical jobs a plenty
      Malaysia, could be good but has definite risks
      Brazil maybe
      India especially Bangalore for the techies. lots of good things happening.

      As I’ve said many times Australians need to get an education while at school, Foreign languages are an important part of the skills set that you should be developing weather you plan to live in Aust or elsewhere.

      • Thanks, I’m beginning to formulate my escape plan (still mid-30s, so lots of living to do) and interested in options.

        I’ve tried and failed a few times to learn another language, so places where English is either the main, or a common second, language of business is something of a necessity.

        Southwest US (still have friends in that area from when I was working there) and Germany (have EU citizenship and lived in Zurich for a couple of years, so a decent feel for the culture – plus German is the best I’ve done at a foreign language) are looking pretty high on the list at the moment.

      • I think the smart young that live here are already responding to this.

        You are seeing young live with their parents much longer – crowding in houses. I’m definitely seeing more cars per house on my street over the years. They are doing this to keep the city income whilst minimising their expenditure.

        They save while they earn city incomes while they can, scrimp like their parents never had to.

        The truth is there is better places out there; but there is also worse. The world’s population is increasing and is at record highs – overall as a whole we have to be worse off than decades ago (technology developments have definitely not kept up with population numbers). And as the world runs down its resources at ever increasing rates to maintain the same standard of living with more people it can only get worse for future generations. All the places you list to move to also have their own problems with youth employment generally (unless again you have a skill that is globally valued – and it may not be valued forever).