The Adequacy of the Age Pension in Australia

Download the full paper

14 September 2016

by Warwick Smith and David Hetherington

Executive Summary 


The Age Pension in Australia is inadequate.

It fails to provide a decent standard of living for approximately 1.5 million older Australians who rely on it as their main source of income. Some pensioners are taking drastic measures in order to make ends meet – they are turning off hot water in summer, blending food because they can’t afford a dentist and choosing between food and medication.

The financial wellbeing of age pensioners depends a great deal on their specific circumstances including where they live, whether or not they are single, their gender, and, perhaps most significantly, whether or not they own their own home. Home ownership constitutes the single biggest factor contributing to financial hardship among pensioners. Age pensioners who are renting, in particular those who are single, are the worst off. Many of these are women without superannuation or other savings. Urgent measures are required to redress the profound levels of deprivation experienced by this group of pensioners.

A wider range of measures must also be considered to ensure that all older Australians living on the Age Pension can experience a decent standard of living that is commensurate with the relative wealth of this country.


This report examines the adequacy of the Age Pension both qualitatively, through focus groups and town meetings, and quantitatively, through analysis of social survey data. Methodology included quantitative analysis provided by the HILDA (Household Income and Labour Dynamics in Australia) survey which included 9,000 households and 25,000 individuals. This was complemented by qualitative research using focus groups in five cities across four states and several town hall meetings in regional centres.

Pensioners from around the country shared their stories of their lives on the Age Pension. We heard many accounts of financial hardship and deprivation and how some pensioners made ends meet going, for example, to church meetings just for the free food.

This report also looks at the history of the pension and how Australia’s approach to the pension has evolved from a ‘poverty alleviation’ approach to one which more broadly reflects the ideals we want to see in Australia- a ‘social contract’ approach to the pension which seeks to ensure pensioners are not merely scraping by on the poverty line.

The report acknowledges that defining an adequate pension is extremely complex. While we argue that the base rate of the pension is insufficient, we recognise that nominating a monetary amount by which to increase the pension is beyond the scope of this paper. Instead, we propose that an independent tribunal – similar to the Parliamentary Remuneration Tribunal or the Fair Work Australia Expert Panel – be established to determine the base rate in order to provide a fair and decent standard of living in line with community standards and with consideration of the broader fiscal context.


The report identifies a number of measures that could be put in place to alleviate some of the hardship being faced by age pensioners, particularly those who rent and are single, including:

  • Establish an independent tribunal to assess the base rate of the pension and determine the best mechanism for annual review and revision
  • Increase the maximum rate of Commonwealth Rent Assistance (CRA) to reduce the gap between age pensioners who are home owners and those who are renters
  • Index CRA to housing costs instead of CPI to more accurately reflect changes in costs faced by renters in specific geographical areas, particularly in metropolitan regions, for example, Sydney vs. Albury-Wodonga
Download the full paper