The Drum, 15 May 2014
“Of course we should celebrate the fact that we are all living longer. It is good news but only if we have a good quality of life and only if our wealth can facilitate ageing with independence and dignity.”
So said Treasurer Joe Hockey in his last major speech before the federal budget, made to an international audience in Washington.
It is notable, then, that the budget Hockey handed down on Tuesday is not structured to address one of the most significant policy challenges which he has outlined. In fact, this budget is distinctly lacking in a structured approach to longevity and ageing. If ‘dignity’ is to be measured in part by a decent standard of living as people age, then this budget falls short.
There are four main measures that purport to address the challenge. As foreshadowed in the lead-up to the budget, the government has lifted the pension eligibility age from 67 in 2023 to 70 in 2035. It will provide a one-off payment of $10,000 to employers that employ someone aged 50 or over who has been on unemployment benefits for six months. From 2017, it will peg pensions to increases in CPI rather than male average full-time weekly earnings, which rise more quickly. The Seniors Supplement, of $876.20 a year for singles and $1,320.80 a year for couples, has been abolished and means testing for the Seniors Health Care Card tightened.
As Per Capita recently observed, an increase to the pension eligibility age is only useful where it is part of a package of measures to keep people in work. Already, people are retiring below the pension eligibility age of 65. Hockey acknowledged this himself in his speech.
The incentive payment to employers is reminiscent of the Gillard Government’s Corporate Champions Program, but without the same focus on helping businesses retain and attract older workers. By linking the payment to people who have been on unemployment benefits, it excludes other groups of older people who may not be on benefits, like women and carers. A payment on its own does not change practices and it does not change mindsets. Nor does it deal with other systemic issues like workplaces geared towards full time work, with little scope to factor in flexible working conditions for an older person with caring responsibilities.
Pegging pension payments to the CPI is a crude measure to decrease pension payments without coming out and saying that this is being done. The existing maximum pension rates provide people with an inadequate standard of living, despite the reforms of the previous government which increased pension rates. The vulnerable in our society who rely on the pension will be further impoverished by this measure.
It is welcome that the government has tightened the eligibility for the Seniors Health Care Card so that it takes into account deemed income from superannuation. The budget also indexes the eligibility threshold for the Health Care Card to CPI. Since 2001 there has been no change to eligibility thresholds for the Health Care Card, meaning that over time, fewer and fewer older Australians qualified. By indexing the income threshold to CPI, the card will become available for more self-funded retirees.
Nothing at all was said or done about superannuation tax concessions. Our existing superannuation system – which ostensibly exists to give all Australians a means to boost their savings and therefore reduce their reliance on the welfare system – benefits the wealthy by taxing them less. This will be at a cost to government in 2016-2017 of $45 billion, which is more than the forecast total age pension spend. Not only this, but vulnerable groups like women, the low-paid and those in insecure work will still have substantially lower savings under a mature system. If Hockey was serious about budget sustainability and directing government payments to the most needy, here was the obvious place to start.
There was nothing at all in the budget on eligibility for the aged pension so it is not paid to wealthy Australians. People with multimillion-dollar residences and some other assets can still claim the age pension. This flies in the face of Hockey’s own language about better-targeted welfare.
Australia needs a modern retirement income system which allows people to plan for increasing longevity. It must require that the wealthy use their wealth to fund longer lives and direct a decent level of welfare assistance to those who need it. It must include investment in lifelong learning schemes, support for people to stay in the workforce longer, and support flexible work practices to enable people to manage care and work as they get older. The government must also look at ways of tackling age-based discrimination, which is most prevalent in the workplace: 68 per cent of all age discrimination complaints in Australia are about employment.
In terms of Australia’s long-term ageing and longevity challenges, this is a policy-lite budget, flush with rhetoric. The Treasurer uses phrases like ‘genuine need’ and a ‘sustainable welfare system that helps the most disadvantaged’. He says that this budget must be about people. Ultimately, the lack of any real measures directed towards equipping Australia for the challenges of longevity belie the truth of this government: they don’t have a plan.
By Emily Millane
