The Commission of Audit (COA) report, released yesterday, contained a raft of recommendations, the centerpiece of which were sweeping changes to Australia’s retirement system, including:
- lowering the indexation rate of the Aged Pension to 28% of Average Weekly Earnings (from 28% of Male Weekly Earnings currently);
- tightening means testing around the Age Pension, including capturing the value of one’s principal place of residence above $500,000 for a single and $750,000 for a couple;
- gradually increasing the Aged Pension access age to 70 by 2053;
- increasing the superannuation preservation age to 5 years below the Aged Pension access age, so that by 2027 it would reach 62; and
- restricting access to the Commonwealth Seniors Health Card by adding deemed income from tax-free superannuation to the definition of Adjusted Taxable Income used for determining eligibility.
Taken at face value, the COA has produced a sensible set of recommendations, which are similar to those espoused on this blog for the past year or so.
However, there is a nasty sting in the tale in the COA’s recommendations that should anger Australia’s younger generations, which is summarised in the below statement:
The Commission considers that people born before 1965 should not be subjected to this change or any other further changes to the eligibility age to ensure they have adequate time to plan for their retirement.
That’s right, the COA panel – dominated by baby boomers – has conveniently chosen to spare its own generation from wearing any Budget cuts. Meanwhile, the younger generations – “generations rent” – will be required to bear the full burden of adjustment while their relatively well-off parents continue to enjoy their full entitlements while living in their expensive homes.
Retirement policy isn’t the only area where the COA places its cross-hairs over the young. It has also recommended that the Government curb Newstart – already a measly $13,273 per year (versus around $20k for the single Aged Pension) – by forcing young singles without dependents aged 22 to 30 who have already been on benefits for 12 months to move to higher employment areas or lose their payments, as well as increasing the rate at which Newstart payments are decreased for extra income to 75%.
It has also recommended slashing the minimum wage from 56% of average weekly earnings to 44%, as well as slashing family tax benefits, which could effectively lower families’ disposable income by 10%, according to COA modelling.
And of course, the generation that received free university education has recommended decreasing Commonwealth Grant Scheme funding for higher education from 59% to 45% and increasing the proportion of costs paid by students from 41% to 55%, along with increasing the interest rate on HELP loans.
While many of the COA’s recommendations can be justified in isolation on the basis of restoring the Budget back to long-run health, they are a bitter pill to swallow when the wealthiest generation – the baby boomers – have effectively been quarantined from bearing any Budget pain.
Genuine and equitable budgetary reform is about sharing the burden of adjustment. By excluding its own generation from cuts, the COA has failed, and in the process declared war on on the younger generations.
