No need to raise retirement age to 70

November 29, 2013
There is plenty of money to fund pensions if we stop lowering tax rates.

The Grattan Institute and the Productivity Commission both released reports on November 22 into the affect an ageing population will have on Australia’s economy.

The Grattan Institute proposed that the pension age should be raised to 70, owner-occupiers should not be exempted from the Age Pension asset tests — meaning people could be forced to sell their home when they retire — and GST should be applied to fresh food.

The Productivity Commission suggests access to the Age Pension and retirement should be linked to life expectancy — to continue rising as people live longer.

National Seniors chief executive Michael O’Neil warned raising the pension age without providing jobs will see older Australians merely shifted from one form of welfare to another. Older Australians who presently want to exercise their supposed “right” to work are unable to do so because no one will hire them.

Last year, over 55s represented 20% of those out of work for two years or more and surviving on the inadequate Newstart Allowance.

According to the Australian Human Rights Commission, only 51% of those in the 60-64 age group are participants in the labour force. For those in the 65-69 age group, the participation rate is a mere 24%.

Two-thirds of retirees rely on the age pension. For single age pensioners, the basic payment is $765.40 a fortnight. On present labour force participation rates (which will fall further as unemployment rises) those aged between 65 and 70 would see this payment reduced to $509.50 a fortnight, a loss of $256.

It is in this context that the reports by the Productivity Commission and the Grattan Institute are part of a neoliberal agenda to push costs from society — by taxing the rich — onto individuals, which discriminates against women and the low-paid.

From the start, the neoliberal project was aimed at the restoration of ruling-class power.

Those now aged 65 and over were a party to the social contract that they entered into in good faith with the Commonwealth government. This is the generation who went to work, paid their taxes and raised and educated their children on the understanding that they would receive a small part of their tax contributions to fund a retirement of frugal comfort.

According to the Productivity Commission, the demands of an ageing population would add 6% of GDP to government budgets by 2060. In today’s terms this amounts to $90 billion.

Implicit in its report is the notion that age pensions are no longer affordable, but this is absurd.

There are a number of ways to fund an ageing population. For a start, the tax concessions to superannuation accounts could be abolished. In 2011-12, taxpayers contributed $30.2 billion to the retirement accounts of Australians and this is projected to increase to $44.8 billion in 2015-16.

The wealthiest 10% received 31.8%, the bottom 10% nothing and the bottom half 18.5%. By 2015-16 the taxpayer contribution to private superannuation balances will exceed the annual cost of the age pension.

Then there is the $4.5 billion in taxpayer-funded subsidies to the mining industry. At this annual rate the subsidy will cost $211.5 billion by 2060.

The unsustainable tax cuts that were made in the lead up to the introduction of the GST cost the budget $37 billion last year. Over the past seven years the total is $169 billion. Of this amount, 42%, or $71 billion, went to the top 10% of income earners who received more in tax cuts than the bottom 80%.

At the Australia's Population 2050 conference in Melbourne in 2011, director of the Australia Institute Richard Denniss said: “The latest Inter-generational Report for Australia says by 2050 we will be so rich that at current tax rates government will be swimming in money…

“The scare stuff is put in the part called Costs of Ageing. The admission that these costs are in fact small is to be found tucked away in a section rivetingly titled Methodological Issues…So, you’ve been tricked. There’s plenty of money if we just leave tax rates where they are — or even stop lowering them so often.”

The nonsense of the Productivity Commission brings to mind the comment attributed to Evan Jones, an economist at Sydney University: “Most economic commentary is unmitigated blather. It would be impossible to overstate the absurdity in contemporary economic culture. Black is white. Rubbish is good sense. To try to make sense of it all is to invite mental turmoil.”

It is not the entitlement to welfare payments that should be diluted and done away with, it is the Productivity Commission.

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