Here’s a breakdown of what it says and how will it affect your future.
After the warning that Australians ‘would fall off their chairs’, IGR4 has now been released. So what does it say – and how will it affect your future?
As Australia’s leading retirement website, we have prepared a brief summary of IGR4; its headline statements and Kaye's concerns about what is missing, as opposed to what has been reported.
Read the key sections for yourself
Intergenerational reports consider government spending and revenue over the coming 40 years, in conjunction with expected demographic changes.
They offer a great chance to spark public debate about our challenges, opportunities and priorities. Introduced by the Howard Government under the Charter of Budget Honesty Act in 1998, the first report in 2002 (IGR1) noted our ageing population and projected a five per cent fiscal deficit. This deficit was adjusted downwards in IGR2 and IGR3 to 2.75 per cent – entirely manageable. IGRs are authored by the Department of Treasury and, as such, contain reliable projections. This fourth report, however, has had projections altered and a chapter inserted to ‘compare’ the previous government with the current government based on previous projections, many of which may never have come to pass.
Introducing the report, the Treasurer, Mr Hockey called on older workers to work longer – we now need this ‘grey army’ he declared. But academic analysis of the dependency ratio (how many people over age 65 ‘rely’ on workers aged 15-64) tells us that a ratio of 62.4 per cent in 2054-55 (compared with 64.6 per cent in 2014-15) is actually very stable when we consider the dependency ratio in the prosperous economic days of the 1960s was as low as 42.1 per cent (1966). As many commentators, including YourLifeChoices, have noted, Australia is actually travelling quite well when it comes to funding its older population. The real problem is that the narrow range of the IGR's projections does little to address the full picture of our revenue and spending possibilities.
When we were told the contents of the IGR would make us fall off our chairs, it was a heavy hint the Treasurer would use it for political purposes. He has.
As seen above, the IGRs are prepared by Treasury, but it is the prerogative of the Treasurer to put his or her own particular political spin on the document and Mr Hockey has had a field day with this one. Sadly, the document is now so politicised that any useful bi-partisan discussion of the challenges ahead is unlikely to occur. Yes, there are more older people living longer – good news. Yes, we need to tighten our belts. But even more so, we need to look at the revenue side of the ledger and at the tax forgone to appease the wealthiest members of our communities while legislation to further slash the meagre Age Pension sits in the Senate, waiting for Minister Scott Morrison to convince one cross bencher to agree to what will equate to an $80 per week cut in the full single Age Pension.
Now should be the time to consider retirement incomes in a holistic fashion. Just asking older people to work longer when there is 6.4 per cent unemployment is totally unrealistic. We need to review the three key pillars of retirement income – the government pension, compulsory superannuation and private savings – and analyse why, 40 years after the last baby boom – we are no closer to creating a sustainable and adequate retirement income system for ordinary Australians. And why our concessions on superannuation ($35 billion) will, in two years balloon out to $50 billion, overtaking spending on the Age Pension (currently $39 billion). Yes, of course the Age Pension could be better targeted so those with very deep pockets are not recipients. But cutting the rate of the single Age Pension when it is below the amount recommended by the Association of Superannuation Funds of Australia (ASFA).
As a ‘compact’ for all generations, IGR4 also takes the easy way out on climate change (a major emphasis in IGR3), noting how hard it is for Australia to influence a global phenomenon, but reassuring us that the current government continues to do it’s best. Really? I think our children and grandchildren deserve far better than this.
So when you‘ve pulled yourself up off the floor and are sitting comfortably in your chair, why not share your thoughts about the type of long-term budget strategies you think would be fair for most Australians – young, old and in between.
What about you? How will you be affected?