Treasurer Joe Hockey has again flagged an increase in the eligibility age of the aged pension, citing that increased life expectancy has made current arrangements unsustainable:
Speaking at the start of Saturday’s G20 finance minister’s meeting in Sydney, he said an ageing population and longer life expectancy was common to most of the developed world, not just Australia.
“But we have also got to recognise that there are unique costs associated with that and you have got to ask if the current system is able to cope with that on a sustainable basis,” he said.
Finance Minister Mathias Cormann said life expectancy was 55 when the age pension was introduced, but life expectancy was now 30 years longer.
“That does have implications for our economy and for our capacity to sustainably fund a range of services. If we want to keep spending more, at the end of the day we would have to tax more”.
However, when grilled on the issue over the weekend, senior Liberal frontbencher, Christopher Pyne, claimed that any reform of the age pension system would not be introduced until the second term of the government:
Mr Pyne said a national conversation needed to be had about the sustainability of the age pension.
But the Education Minister said it was his view the Coalition, “shouldn’t be a government of surprises, and that any changes that might be made that weren’t taken to the election should not be introduced until there is another election for a second term of the Abbott government”…
“If there is anything we want to change we will go back to the Australian people in three years time and give them the opportunity to cast judgment on it,” he said.
Fair enough, although the Government does appear inconsistent on welfare. Earlier this year, it launched a review into Newstart and the disability pension, claiming that the costs associated with both programs are unsustainable. Given that the aged pension is one of the largest and fastest growing expenditure items in the Budget, it seems appropriate that it be reviewed alongside those other measures.
As noted Friday, if the Government is serious about reigning-in retirement costs and ensuring the Budget is placed on a sustainable footing, it must also reform Australia’s inequitable and unsustainable superannuation system to ensure that concessions are more evenly spread across the income spectrum (rather than concentrated among higher income earners), as well as limiting retirees’ ability to draw their super as lump sums. The assets test surrounding the aged pension also needs to be tightened, so that wealthy retirees living in expensive homes (currently excluded from means testing) receive less benefits, and benefits flow more to people in genuine need.
Nevertheless, the Coalition should be commended for acknowledging the problem and beginning the discussion on the efficacy and sustainability of retirement policy, which is the first step in any reform process.
