Beyond the sound bite, Australian Ageing Agenda

January 21, 2014

It’s the old adage about electoral politics. Governments don’t really put the national interest first. They are too busy campaigning for the next election. They think in three-year blocs rather than the medium and long-term interests of the country.

You might accept that as the unfortunate truth of our political system. But what about the people outside the formal political system who aren’t seeking our vote? What is their excuse for not trying to discuss potential ideas, to entertain the prospect of compromise, to talk to each other?

As has been widely reported, the Productivity Commission’s recent research paper, An Ageing Australia: Preparing for the Future included a recommendation to increase the pension age to 70. Continually increasing life expectancy can only go on for so long before something in the public policy mix has to give. As the commission noted: “Older Australians are characteristically neither inform nor inept. While the pension age is scheduled to gradually increase to 67 years by 2023 for both men and women, an important issue is whether there are grounds to make slow and automatic changes to the eligibility age in line with future life expectancy gains – a position advocated by the OECD.”

Other recommendations included, but were not limited to, releasing asset equity to at least partially fund aged care costs and reforming the health system to increasing productivity across all health providers. These recommendations did not receive much media attention but they should be part of the public conversation.

Increasing the pension age is a policy discussion we have to have. So too is increasing the superannuation preservation age, and the amount which we are contributing to super. Currently we are contributing 9.25 per cent of our income; the government has pushed out the date at which this will increase to 12 per cent from 2019-20 to 2012-22.

It’s a very basic proposition. You live longer: someone has to pay for it.

Is it wrong to ask individuals themselves to contribute to their longer lives through several more years’ work? Especially if it means they are still spending the same proportion of their lives in retirement? If you accept that people should work slightly longer, what might be the exceptions to this rule? If you don’t accept this, then how do you suggest we fund increasing longevity? Raising taxes? Accepting a lower standard of living?

These are the sorts of questions we need to be sitting down at the table and thrashing out. Arguing over. Critically analysing. Then agreeing not to leave the room without a consensus on.

The commission’s paper offers a timely opportunity to begin this process afresh, with a new government in power and a new economic climate upon us. However, in the way these things tend to go, we saw the usual sound bites from people regarding their response to the prospect of having people in their mid-60s work longer.

Unions said it was criminal to expect people to work longer in certain industries like cleaning, childcare and aged care. How can people in their late sixties be expected to continue doing physically demanding work?

Industry groups said lifting the pension age was sensible. Which is to say, they support incentives to work that- if successful – have the effect of increasing private savings and taking pressure off public expenditure. No surprises there.

The Abbott Government said it had no plans to raise the pension age. Labor said it did not support raising the pension age.

The usual soporific cocktail.

To be clear, I am not taking aim at the substance of the arguments which people have made in response to the proposal to increase the pension age. Working longer is one part of a broader policy response, which also needs to take into account things like the ability of older people to find work and entrenched inequalities in the superannuation system.

In my recent report for Per Capita, I argue that another piece in the puzzle for funding a longer life is reconceptualising what it means to retire. Retirement could become a staggered process: blended stages where people scale down their work responsibilities. Another possibility is to further develop the annuities market for products which could, as the Henry Review recommended, be offered by the government.

The issue with the responses to the commission’s paper is the paucity of real thought which is behind them. They are not conducive to arriving at a solution about the best way to fund our ageing population.

The more sophisticated responses to the commission’s paper took into account discrimination which older people face in looking for work, and holding on to their job. Other responses pointed out that raising the pension age without providing jobs would likely see older Australians merely shifted from one form of welfare to another. Others still made the case for increasing the pension age even more quickly and making the superannuation contribution 15 per cent.

These are the sorts of contributions which take the conversation further. They are conversations which can more readily occur outside of parliament, where adversarialism and its electoral politics prevails. This is not to say that politics can’t be advanced in parliament, but that it is beholden on contributors to this debate about the pension age to do the things that can’t be done in the system. Chief among these is to ask: what is the long-term solution which benefits the most people?

All stakeholder groups have their constituencies, in a similar way to political parties. It is natural and expected that they will defend the interests of the people they represent. But defending your members’ long-term interests is not the same thing as having something quick and pithy and adversarial to say. By conservative estimates more than 15 per cent of the population will be over 65 in 2050. They are going to expect solutions, not hot air.