There are many ways of looking at a Federal Budget. It really depends on who you are and what is at stake.
At the highest level, economists consider the sustainability of the Budget over the forward estimates period (i.e. the next four years) and beyond if further measures are proposed.
The next level down is that of a sector or interest group – perhaps an industry sector or business council or a not-for-profit. Here, the way the budget matches the interests of that group are of prime importance.
And then there are the more individual levels: Are you a worker, a student, a carer, a pensioner or a person with special needs? Here, the fine detail of your entitlements and ability to pay your bills is of paramount importance.
As the voice of retirement, YourLifeChoices is keenly interested in the welfare of Australian retirees and those planning to retire in the next 10 years. This means the six retirement tribes – the Affluents (self-funded single or couple homeowners), the Constrained (single or couple homeowners on a full or part pension) and the Cash Strapped (single or couple renters on a full or part pension). And we continue to ask the question whether everyone has a genuine chance to live a productive and dignified life in retirement?
We are also interested in the overall sustainability of a government’s budget. Put simply, is this nation racking up too much debt for future generations to reasonably manage?
So does Federal Budget 2018 deliver for retirees?
Our first impression is that this is indeed an election budget, with carefully calibrated income tax cuts for low and middle-income workers. There is no increase to the Age Pension – the base rate was last increased in 2009 and remains too low for a reasonable retirement life.
But given the Turnbull Government’s intention to raise the Age Pension age to 70, there is at last a recognition that things need to change if people are expected to work an extra three years beyond the current (increased) age of 67, due to commence in 2023.
So the sweeteners for older workers are a ‘living longer’ health program, with online checks on health, fitness and skills at age 45 and 65 and some community health funding.
Also a $10,000 restart subsidy for employers who hire older workers and a $2000 allowance for upskilling for mature age workers. Strangely, that program was introduced in the 2014 Budget. And it was a $10,000 subsidy even then.
The work bonus is an important plus, allowing older workers to earn up to $7800 without affecting their pension entitlements. As the Benevolent Society has noted, this is a long way from the opportunities Canadians have of earning up to C$1400 per week before an income test kicks. Further, in New Zealand there is no income test for the Age Pension. YourLifeChoices maintains that many older workers simply cannot continue to work until age 70. This is particularly the case in physically demanding jobs such as building, hairdressing, nursing and cleaning. Their bodies simply give out. Most people do not retire because they want an easier life – they are forced out of the workforce for health reasons. So to force such people onto Newstart at $40 a day is not just unrealistic, it is the wrong thing to do to people who have paid taxes for 40 years or more.
The expansion of the Pension Loans Scheme to full age pensioners and self-funded retirees is helpful for asset-rich, cash-strapped retirees lucky enough to own a home. But this is not a ‘gift’ from the Government, merely a loan for which 5.25 per cent interest will be charged. By expanding its role in the mortgage market, the Government will earn more money from this measure. And it must be totally galling for pensioner renters who are struggling to cover higher rents – taking 30 per cent of their income, according to the YourLifeChoices Retirement Affordability Index™. They must be asking what is in this budget for them. There appears to be nothing.
In summary, we believe this Budget is ‘fattening older workers for the kill’ – for the move to an Age Pension age at 70. And when it comes to a question of sustainability, we do not share Mr Morrison’s optimism that this nation can lock in a seven-year program of tax cuts at a cost of $140 billion (over 10 years), in the hope that receipts will continue to be rosy.
There are too many external factors at play to commit younger generations to such a high level of debt.
Does the Budget deliver for you? What are the key benefits?