Treasurer Josh Frydenberg’s much-reported speech, where he referred to my cohort (the over-65s) as ‘an economic time bomb’, should not be seen as random.
The speech to the conservative think tank, the Committee for the Economic Development of Australia (CEDA), was deeply calculated. Frydenberg’s thesis is that older Australians should work longer and take up re-training to help facilitate a return to the work force, thus easing the country’s social security burden.
Frydenberg was immediately attacked by Seniors’ advocates who pointed out (for starters) that 25% of people on the government’s inadequate unemployment payment (NewStart) are aged 55 and over.
It came in a week when the ABC television debuted its much-hyped show, Australia Talks. The latter is based on a huge survey of 54,000 people, who were asked to prioritise their chief concerns.
The list of worries was headed by household debt, the cost of living and drug and alcohol abuse. Ninety percent of respondents answered they were ‘somewhat’ or very much’ concerned about the top three issues, with water (89%) and ageing population (87%) not far behind.
The Treasurer was interviewed the following day by 2GB radio shock jock Steve Price, who didn’t let him off too lightly:
Price: What do you say to our listeners – people like truckies, labourers and builders, all tradies, saying ‘look, we just can’t work past retirement age because physically our bodies are worn out’?
Frydenberg: Well, that is totally understandable and nobody is asking them to do that. What I am saying…
Price: Well, we are pushing up the age of the pension.
Frydenberg: But what I am saying is that when it comes to that age that you referred to (67), that was legislated by the Labor Party back in 2009 and we haven’t said that we would change the retirement age, so we’ve been very clear about that.
Price: But it goes up to 67, right?
Frydenberg: It does. And again, the Labor Party legislated that in 2009.
Price: But you’re going to leave that there?
The Labor Government did introduce measures in 2009 to increase the pension age to 67 through gradual increases during the period July 2017 to July 2023. But the Abbott government’s 2014–15 Budget proposed to increase the pension age by six months every two years from 1 July 2025 until it reached 70.
Despite Prime Minister Scott Morrison shutting down speculation last year that the government was considering lifting the retirement age to 70, it was a Coalition policy and could resurface at any time.
Ian Henschke from National Seniors Australia said it was unfair to stigmatise older Australians.
“We should blame previous treasurers from 1980 who have stood by and watched this happen.
“Let’s deal with the facts, for example, that older Australians want to work more and longer but they are not getting the work they need.”
“When they do retrain, we know they are experiencing discrimination.”
Statistics support the government’s rhetoric that older people are indeed either staying in the workforce longer or making a comeback. The workforce participation for over-65s stands at 14.6%, up from 6% 20 years ago. It’s not hard to find the reason for that: a basket of goods from the supermarket costing $200 in 1999 will set you back $331 today.
There is lots of sage advice around for people nearing retirement age about how much money they will need to fund a comfortable retirement. There is less information around for those in advanced stages of not working anymore and trying to make their money last.
Moreover, factors well out of everyone’s control continue to move the goalposts, forcing retirees to come up with new and inventive game plans. Specifically I’m talking about the unsustainable investment returns available to retirees, who typically are advised to invest in no-risk strategies.
The Association of Superannuation Funds of Australia (ASFA) advises that the ideal superannuation target for a single person on retirement is $545,000 (implying that a couple needs $1.09 million).
So how are we all doing then?
While half-watching the cheerfully superficial Australia Talks, I heard a butcher’s assistant confide that she had $45,000 in her super fund. She didn’t look old enough for this to be a worry yet, but let’s face it; you’d have to sell a shitload of sausages to reach that mythical half a million dollars.
Superannuation was supposed to be the panacea for older Australians not wanting to be a burden on the national pension scheme. But ASFA statistics tell a sobering story. While there are 16.1 million Australians with at least one superannuation account, one in three women and one in four men, across all ages, have no superannuation. So 25% of women and 13% of men are retiring with no superannuation, relying partially or substantially on the Age Pension for their retirement income.
Fair enough, the Age Pension is supposed to be a safety net for Australians who find themselves at 65+ and broke. But why doesn’t Josh Frydenberg shut down the loophole that allows a couple to earn about $75,000 per annum and/or have assets well over $2 million, and still be eligible for some benefits.
In case you had wondered, Australia is a long way down the list of countries which pays its retired citizens something close to a living wage. The Organization for Economic Co-operation and Development (OECD), analysed data from 35 member countries and a number of other nations. Pensioners in the Netherlands, Turkey and Croatia receive more than 100% of a working wage when they retire (the right-hand end of the graph).
At the other end of the scale, pensioners in the United Kingdom receive just 29% of a working wage (compared with the OECD average of 63%
Pensions paid as a percentage of a working wage
Image: OECD countries ranked by pensions as a percentage of a working wage. Australia is 12th from the left, paying 43%. Source OECD.
The OECD’s 2017 report Pensions in Australia noted that public spending on pensions is low and will remain low (currently 4% of GDP and projected to be 4% in 2050) as opposed to 9% and 10% for the OECD. From this we can deduce the government’s future reliance on superannuation, including the government’s compulsory scheme and privately-funded superannuation accounts.
The old age income poverty rate in Australia is high, at 26%, compared to 13% across the OECD. This is partly related to the high prevalence of people taking superannuation funds as lump sums rather than annuities at retirement. These people, as any current affairs programme worth its spots will tell you, squander their money on travel, then risk falling into poverty if they outlive their assets. No doubt they will then sign on for our Age Pension (which costs the county $50 billion a year).
What, may I ask, is wrong with someone who has paid taxes for 45 years retiring on a combination of savings (super) and a part-pension from the government? Frankly, I’d have thought that paying $1 million+ in income tax through my working life would have been enough.
Nobody considered me a burden then, did they?
Further reading: https://bobwords.com.au/taking-an-interest-in-recessionary-economics/
.