Fairfax’s Peter Martin has produced an interesting article today on the extraordinary gap that has developed between the aged pension and the Newstart allowance for unemployed workers:
The age pension is approaching $20,000. The latest increase, to $19,916, opens up the widest gap yet between the single pension and the single Newstart unemployment allowance of $13,273…
Once close to each other, the pension and Newstart began to diverge in 1991 when the government pegged the single pension to 25 per cent of male total average weekly earnings and left unemployment benefits pegged to the consumer price index. The gap widened again in 2009 when the Rudd government lifted the peg for the pension from 25 per cent of male earnings to 27.7 per cent…
The 2010 Henry tax review found that if the existing arrangements continued, by 2040 a single pensioner would be paid “more than twice as much as a single unemployed person”.
The dichotomy that has developed between the aged pension and other forms of welfare was highlighted in a recent report by the Grattan Institute, which argued that the only part of the tax and welfare system that is not well targeted is for old people. Their view was supported by researchers from Curtin University, who last year found that welfare policies across the period 1984 to 2010 overwhelmingly favoured the elderly at the expense of the young.
The growing generosity of the aged pension is making a mockery of the Government’s bluster over “ending the age of entitlement”.
To date, the Government has commenced a review to cut-back welfare benefits for the unemployed and disabled via changes to the Newstart and Disability Support pensions – reforms that would adversely affect the poorest members of the community.
At the same time, it has remained largely silent on the need to reform the aged pension and superannuation system, despite these being some of the biggest and fastest growing areas of Budget expenditure.
If the Government’s “ending the age of entitlement” is to succeed, rather than being just another example of class warfare, it will need to place the retirement system front-and-centre, incorporating the growing army of wealthier older Australians drawing unreasonable tax concessions and benefits.
A sensible place to start would be to consider the following reforms:
- Increasing the eligibility age for the Aged Pension to 70 years (from 65 currently and 67 from 2023);
- Increasing the access age to superannuation (from 60 years currently) so that it more closely matches the pension access age;
- Reducing the ability to draw superannuation as a lump-sum;
- Providing everyone with the same superannuation concession (e.g. 15%); and
- Including one’s owner-occupied home (or part thereof) in the assets test for the Aged Pension and/or reducing the eligibility thresholds for income and financial assets, so that welfare flows only to those in genuine need.
