The big end of town is quietly attacking the cost of our age pension.
While the talk of increasing the GST has dominated the media, the Australian Chamber of Commerce and Industry (ACCI), the Grattan Institute and the Financial Services Council have been floating a claim on the family home to claw back age pension payments.
They say the government has to address ‘runaway spending’.
The idea is that age pension payments will be debited against the family home and when the pensioner sells it or dies, the government will grab that money back.
John Daley, Head of the Grattan Institute – a ‘non-partisan’ policy think tank – is quoted in The Australian as saying pension reform was needed. Because owner-occupied housing was not included in age pension means testing, it was in effect a tax payer-funded inheritance subsidy scheme.
Putting it in context
But is it true that our aged pension excessive and getting out of control as a ‘runaway’ expense? The answer is ‘no’.
The Organisation for Economic Co-operation and Development (OECD) 2013 report on Public Spending on Aged Pensions as a Percentage of GDP shows the average spending on aged pensions across OECD members in 2010 was 9.3 per cent of GDP. In that report, Australia’s aged pension was just 3.6 per cent of our GDP.
Our expenditure is about one third of the OECD average. Germany’s aged pension is 10.8 per cent of that country’s GDP! The UK’s is 7.7 per cent and the US, which is famous for not providing ‘social security’, is 4.6 per cent. They pay out 28 per cent more than Australia.
The OECD report also projected forward, using Australian Government supplied Treasury figures. They calculated that by 2020 (ten years on from the baseline figures), the cost of the aged pension in Australia will have grown by just 0.1 per cent, up to 3.7 per cent. By 2050, with the mass of Baby Boomers passing through old age, it will grow to 4.9 per cent.
This is not ‘runaway’ expense growth.
Different rules for the big end of town
Why does the ‘top end of town’ want to attack pensioners while protecting top end superannuation contributors? Why have these lobby groups and think tanks, funded by some of the leading accounting firms and law firms, not spoken up about the negligible tax paid by multinational companies – the big paying clients of those same leading accounting and law firms?
The maximum single aged pension is $433 per week ($22,516 pa) and for a couple it is $653 ($33,982 pa).
The Association of Superannuation Funds of Australia (ASFA) tells us that the average superannuation balances at the time of retirement (assumed to be age 60 to 64) were $292,500 for men and $138,150 for women in 2013/2014. This means that half of retirees will have less than this.
Most of us will live another 20 years after traditional retirement age. Super will give most of us less than $4,300 per week extra to live on for men – half that for single women. It is highly likely we will have to downsize somewhere over that time to release money to live on and pay medical bills – increasingly not paid for by government.
At the same time, the average partner in the big accounting and law firms earns more than $1 million a year – providing advice on ‘tax minimisation’ as Kerry Packer famously called it.
The whole argument doesn’t seem ‘Australian’ (meaning fair), does it?