The increasing cost of the Age Pension is not due to demographic ageing.
Australia’s ageing population has long been discussed in terms of the financial burden it will cause. But a new report, published by the Monash Centre for Population and Urban Research, suggests that the increasing cost of the Age Pension is not due to demographic ageing. Rather, it has been caused by government policy changes.
The report, published yesterday, says that fears Australia’s shrinking proportion of tax-paying workers would not be able to support the ageing population are unfounded. “Even with no further growth in labour force participation rates, the proportion of workers will not fall as low as it was in the 1960s.”
Dr Katharine Betts, the author of the paper, has blamed Government decisions for the apparent increase in ageing costs. She cites policy decisions such as widening access to the Age Pension, and abolishing tax on superannuation payouts as being partially responsible. The report also shows that the number of older Australians actively engaged in workforce is at an almost record high.
“Some … are happy to deride baby boomers, [but] this does not help older people cope with discrimination,” Dr Betts writes. “In a more positive social environment, labour force participation rates for older people would be even higher.”
Dr Betts says only about 40 per cent of taxes are based on paid labour, meaning the remaining 60 per cent are likely to be unaffected as the population ages.
A comparison of data from 31 OECD countries shows no association between the proportion of a country’s population aged over 65 and the proportion of its GDP spent on health.
The US has one of the youngest populations in the OECD but spends 18 per cent of its GDP on health. Japan has the oldest but spends only nine per cent.
On Sunday Clive Palmer announced that his party would not support the Government’s proposal that the Age Pension eligibility age be increased to 70. Treasurer Joe Hockey and Prime Minister Tony Abbott have spent weeks explaining why the age increase is inevitable and necessary.
Mr Palmer told the ABC, "I just couldn’t employ Joe Hockey or Tony Abbott at 69 no matter how competent they are. They wouldn’t have a good future and I wouldn’t invest the time in training them because they’d be retiring the next year.
"I know Mr Abbott and Mr Hockey are not too concerned about the pensioners of Australia because they’ll have a big fat parliamentary pension that you’ve paid for. I think that’s the whole nub of it, really."
Prime Minister Abbott’s own party has also urged him to follow his own advice, and scale down his signature $5.5 billion paid parental leave scheme, in order to help share the burden of the upcoming budget amongst the age groups.
Read Dr Betts’s report The ageing of the Australian population – triumph or disaster?
Read more at The Age website.
It’s interesting how we have all accepted and taken for granted the simple fact that the rising costs of the Age Pension can be attributed to Australia’s ageing population. And it makes a lot of sense. More people receiving the Age Pension means it costs more to provide. It’s a very simplistic view of a complex situation, but because it’s so easy to understand I’m sure many didn’t even think to question the logic.
Dr Betts’s report looks at the other contributing factors, such as government policy, and then turns its gaze further afield to other OECD countries around the world. It is these international comparisons which I think are the most important part of her report. They show that an ageing population can be highly involved in the workforce. They show that more older people in the community does not necessarily mean healthcare has to cost more.
It is vitally important we don’t let these findings go to waste. We need to be looking at the countries which are successfully managing and embracing their ageing populations, such as Canada and China, and ask ourselves, ‘what are we doing wrong’ and ‘what are they doing right’ and ‘how can we take the best parts of their systems and use them to our benefit’?
We don’t have to reinvent the wheel, something Australia is often guilty of when it comes to implementing new ideas and systems. Surely it would be cheaper and easier to simply borrow the knowledge these other countries have and apply it to our own situation? It’s time to stop blaming our ageing population for getting older (I’m sure if we could stop we would), and start finding real ways to embrace the opportunity which our national demographic is offering.
What do you think? Is this the turning point for the way we think about our ageing population? Or will this report just get swept under the rug like so many before it? And, with all the leaked budget cuts, do you think pensioners are getting the short end of the stick?