The Australian’s David Crowe has produced an interesting article today highlighting Opposition Leader, Bill Shorten’s, deceit in order to attain the support of the grey vote:
Arguments are being stretched to breaking point as Labor warns of cuts to the pension…
Certain it has the advantage, Labor is taking its warnings about pension cuts out to every electorate…
What emerges is that pensioners are not being hurt in the way they are being told…
At its heart, the Labor approach boils down to this: “He stretched the truth about the carbon tax so we’ll do the same about the pension”…
One of the exaggerated arguments put by the Opposition Leader and Macklin this week is that pensions will be cut by $80 a week over a decade, based on modelling by the Australian Council of Social Service.
It is a powerful scare, but it ignores the actual increase in the pension twice a year…
Pensioners are so startled by the claims, they say they are spitting their false teeth into their lunchtime yoghurt.
Watching the phoney debate over the Aged Pension, and listening to the fury expressed by pensioners over talk-back radio, has been particularly frustrating.
The fact is, the Budget does not cut the pension. Rather, it intends to change the indexation arrangements so that instead of being adjusted upwards twice a year by the greater of male average earnings growth or the pensioner cost of living allowance, it would instead be linked to the consumer price index, so that it would grow in-line with overall prices and would not increase (or fall) in real terms. How is this unreasonable?
What is also lost is the fact that the current indexing arrangements are unsustainable. They have 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!
Moreover, as highlighted by CommSec earlier this week, pensioners have been the main beneficiaries of Budget largesse, enjoying a 65% real (inflation-adjusted) increase in the Aged Pension over the past 40 year, with the Pension also grown at a faster rate than wages, increasing from 25.9% of the average wage in 1974 to 26.7% in 2014 (see next table). Many pensioners have also experienced massive growth in the value of their homes, which are obviously excluded from the assets test.
We must also not forget 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 Shorten 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 he 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?
Put simply, Shorten’s politically motivated stance on the Aged Pension is neither fair to younger generations nor is it in the nation’s best interest. It also completely ignores the very real pressures facing the Budget as the once-in-a-century commodity boom fades and the population ages.
