Social Services Minister, Scott Morrison, must really hate young people. After single handedly squashing rumours yesterday that the Government was considering including one’s principal place of residence in the assets test for the Aged Pension, he has now put forward the ingeniously stupid plan to allow pensioners to sell-off their expensive large homes, pocket the money, but continue to collect the pension. From The AFR:
Scott Morrison said tackling rules that deter people from selling the family home and buying a smaller, cheaper properties “needs further consideration”.
Many age pensioners are reluctant to sell their home because the cash affects their eligibility for the pension under the income test…
Although enabling pensioners to downsize, yet keep the pension would most likely cost the budget money, Mr Morrison argued that enabling retirees to cash in the equity in their homes would be good for the economy because of the extra disposable income it would create.
Clearly Mr Morrison does not believe that “ending the age of entitlement” should extend to wealthier older people. He must also believe that it is equitable for younger people’s taxes to rise inexorably to pay for the bloated entitlements of those who had the good fortune of purchasing their homes cheaply before watching them skyrocket in value, to the detriment of their children and grandchildren, who must now support them in old age.
Morrison’s argument that “enabling retirees to cash in the equity in their homes would be good for the economy because of the extra disposable income it would create” also does not pass the laugh test. Sure, those retirees would be better-off, but their children and grandchildren would be left picking up the tab, leaving them with less disposable income.
As I noted yesterday, genuine and equitable budgetary reform is about sharing the burden of adjustment. However, by creating a special class of citizens exempted from bearing any cuts, Morrison has failed before the Government has even begun on Aged Pension reform, and in the process has once again shifted the burden of repairing the Budget to the younger generations.
If Morrison had any budgetary sense, he should advocate:
- for one’s principal place of residence to be included in the assets test for the Aged Pension at some point into the future (e.g. 1 July 2025), thus allowing current retirees and prospective retirees adequate time to make arrangements; and
- establishing a state sponsored reverse mortgage scheme, which provides asset (house) rich retirees with a regular income stream in exchange for a HECS-style liability that would be recoverable from the person’s estate upon death, or upon sale of the person’s home (whichever comes first).
Under such a plan, pensioners could continue to receive an income as they do now, but with less drain on the Budget and on younger taxpayers.
The Abbott Government’s concerns about fighting “inter-generational theft” through Budget reform will be for naught if it proceeds with Morrison’s plan, which places the welfare of asset rich retirees well above their children and grandchildren.