My repeated calls for the Government to seriously tackle Australia’s ballooning retiree entitlements has received a major lift, with the influential Business Council of Australia (BCA) – the backbone of the Government’s Commission of Audit – calling to tighten the age and asset requirements for the aged pension and entitlements of people with large superannuation balances, as well as reigning in family tax benefits. From The AFR:
The Business Council of Australia – whose chairman heads the government’s audit commission – has thrown its support behind calls to wind back welfare to high-income families and wealthy pensioners…
These include the appropriateness of family tax payments to households earning as much as $170,000; ongoing superannuation concessions for well-off older Australians; the need for a higher pension age; and including the family home in the pension assets test…
“If you dilute the entitlements system so much and everyone gets a little bit, the people who need it the most don’t get what’s actually going to make a difference to their lives. At some point you either cut a whole program, or you try to rein in the entitlements of existing programs – they’re the choices governments have to make.”
Clearly the BCA, like me, are very concerned about the sustainability and intergenerational equity of Australia’s social safety net, particularly in light of Australia’s rapidly ageing population.
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As noted today by the AFR’s Chanticleer, taxpayer support provided to wealthier older Australians via payments such as the age pension, Seniors Supplement and Commonwealth seniors’ health card also cuts to the heart of Australia’s distorted economy – namely too much “capital is tied up in houses and there are numerous incentives to direct capital into more housing”.
When the BCA’s comments are viewed alongside Treasurer Hockey’s declaration last week that the current set-up of the aged pension is unsustainable, and failure to reform would be akin to “intergenerational theft”, it appears that Australia might actually see fundamental reform of Australia’s retirement system.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
