The Federal government’s fiscal position is on a negative trajectory over coming years without austere budget measures, even if commentators differ on how soon or how hard it must be tackled. The Federal Government wants to raise the retirement age, when the evidence is that age discrimination is entrenched. Further, the Prime Minister announced on Monday he wants to link aged pension increases to the Consumer Price Index (CPI) from 2017.1 This strategy of hitting all aged pensioners equally raises the question of whether the Federal Government is taking the wrong tack in order to save money from this slice of the welfare sector.
More significant savings would come from lowering the asset test for the aged pension and/or including the family home, which is currently exempt from the assets test. Retirees aged 65 and over who have assets worth $2 million or more still receive $500 million in welfare benefits each year; the biggest component of these assets is the home they live in.2 For example, why should a couple on part pensions be allowed to own their home of whatever value and a $1,145,500 investment property, without losing a cent in benefits? The usual defence is aged pensioners may be asset-rich and cash-poor, but a reverse mortgage would not require them to move out of their home. Politics is all that stands in the way, as Social Services Minister, Scott Morrison, rules out including the family home.3
Effectively such middle-class welfare is being used as a means of intergenerational wealth transfer. In contrast, a balanced view should view the welfare system as a safety net for those who have no other means of support. This means restricting entitlement, so Australia can afford to maintain the real value of aged pension payments relative to average weekly earnings for those who really need them.
