Pensions

From last Tuesday’s Financial Review:

The Oppositions proposal for a $30 a week boost to the single age pension has not died, let alone been cremated. To avoid more political embarrassment, the government will grant an expensive pension increase before the next election. The annual cost of last weeks debate will thus be at least $3 billion a year, in spite of the budgetary implications of an ageing population, and in spite of there being little justification for such an increase.

According to hyperbolic Senator Helen Coonan, manager of Opposition business in the Senate, Australias single age pensioners are finding it virtually impossible to live on the basic pension. Coonan provided no evidence for this judgement.

The accidental senator, Steve Fielding, believes all pensioners should benefit from increased pensions. He says that Australias 3.4 million pensioners are overlooked and are really struggling to make ends meet. Fielding also provides no evidence, just anecdotes from pensioners wanting more money.

Lesser lights were just as enthusiastic. According to Liberal Senator Bernardi, Pensioners cannot afford to live. Bernardi added that we have to make sure pensioners can get more than a loaf of bread and a jar of jam to feed themselves for a week. Liberal Senator Barnett went on to tell us more about this pensioner penchant for jam: a fair wack of [pensioners] would be eating blackberry jam the poor mans strawberry jam. All of this ignores the intention of and the real effect of Australias pension schemes.

The first thing to remember is that pensions were designed to provide a frugal benefit for those unable or unwilling to save for the hard times. This intention is a fading memory. It was not long ago that many pensioners were coy about being on the pension, regretful that they had to rely on government. Now pensioners unabashedly seek higher pensions for better life-styles. And as their numbers grow – in 40 years, older persons will constitute 25 per cent of the population and a much higher share of voters – they will have increasing political clout and cost. The price of higher pensions will thus be added to the burden carried by a declining number of taxpayers.

Pensioner expectations were fuelled by the 2008 Senate committee report on cost pressures faced by older people. Because the committee preferred anecdotes to research, it suggested that the base pension rate was inadequate. This sentiment was refreshed by ministers loose comments about the adequacy of pensions.

Evidence showed that pensions have increased in the last decade by 48 per cent compared to a 30 per cent increase in the CPI. Over the period the base pension had thus grown in real turns by nearly $2,000. In the previous decade – because of restraints on the growth of employee remuneration – pensions had actually increased faster than average wages.

And although the pension is meant to be frugal, surveys show that only 1.8 per cent of older people – three-quarters of whom rely on pensions – categorise themselves as poor or very poor. This contrasts with over six per cent of lone parents and younger single persons. Over three per cent of younger persons reported multiple financial hardships, a rate six times higher than that reported for older persons.

There are undoubtedly some, perhaps many, pensioners who find it difficult to live on the base pension. But as the Brotherhood of St Laurence wrote in its submission to the Senate committee, even the pension for single persons living in rented accommodation was above the poverty line, something which could not be said for many families requiring government assistance.

Much of this analysis relates to the adequacy of the base pension. The ever-widening concessions available to pensioners from state and federal agencies – including dental and other health services, aged care, public transport, council rates, water and energy consumption, vehicle registration and telephone concessions – as well as the $500 lump sum payment, $500 utility allowance, $1000 carer payment and $600 carer allowance add significantly to the income of older Australians.

Governments have already been too generous to Australias older persons. It is a pity their expectations have been excited when governments need to tackle more pressing issues.

This entry was posted in Economics and public policy. Bookmark the permalink.
Subscribe
Notify of
guest
1 Comment
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
vanaalst.robert
vanaalst.robert(@vanaalst-robert)
13 years ago

I’d be willing to trade-off higher pensions with much stronger asset tests — I don’t see why things like family homes arn’t included when it’s easy to get negative equity loans and so on now.