Pensioner groups have ramped-up their attack on the Budget, slamming the Commission of Audit head, Tony Shephard’s, claim that narrow interests have hijacked debate and the reform agenda. From The Australian:
Council on the Ageing Australia chief executive Ian Yates said he wouldn’t regard “several million pensioners as a narrow interest”.
“There’s a one-year freeze on politicians’ pay and a three-year tax on high-income earners but pensions are being cut from 2017 significantly” through reduced indexation, Mr Yates said.
“We’re talking about pensioners who have $20,000 a year and they will have to pay more to go to the doctor, more to get their medicines.
“I don’t call that fair or equitable.”
Quite frankly, I do not buy the Council of Ageing’s criticism – not one bit. The fact of the matter is that the large scale retirement of the baby boomer generation means that there will be a shrinking pool of workers supporting a growing army of retired and aged people. This will cause the tax take to shrink just as aged-related spending is rising (see below charts).
How can the Council honestly justify increasing the real value of pensions for the bulging cohort of retiring baby boomers, as occurs under the current indexing arrangements, when there will be relatively fewer taxpaying workers to support them? And does it seriously believe that it is fair to continually increase the tax burden on the working-aged population, just so pensioners can maintain income growth well above the general level of inflation?
To highlight my point, the current indexing arrangements increase the Aged Pension twice a year by the greater of male average earnings growth or the pensioner cost of living allowance. This has seen the Aged Pension increase by 25% over the past 4.5 years – well above the 13% increase in the CPI or the 14% increase in pensioner cost of living. I very much doubt many in the workforce have been so lucky!
All the Government has endeavored to do in the Budget is index the Pension to CPI instead, so that it grows in-line with overall prices and does not increase (or fall) in real terms. How is this unreasonable?
As for complaints about rising medical costs, it is important to point out that the Budget contained safeguards for people holding health care cards (which includes those on the pension), namely:
- The $7 GP co-payment would only apply for the first ten visits each year; and
- Co-payments for PBS medicines would increase by only $0.80 (from $6.10 to $6.90) in 2015, versus $5.00 (from $37.70 to $42.70) for general patients.
Put simply, pensioners, like everyone else, must pull their weight in order to restore the Budget back to long-run health. They cannot expect to have their benefits continue to increase in real terms, paid for by rising taxes on the shrinking working-aged population.
