Ending the age of entitlement

“there are no cuts to health, no cuts to education, pensions don’t change…”

That was Tony Abbott at the National Press Club just days before the last election, as reported by Peter Martin.


was the headline of Samantha Maiden’s Murdoch paper report in the Courier Mail on Sunday.

Budget pain to hit all: Hockey

That was the headline of Laura Tingle’s front page article in the AFR on Monday.

Treasurer Joe Hockey says no group will be safe from cuts in the May budget, as he braces voters for potential changes to the age pension and tighter asset tests.

Large numbers are cascading everywhere. Maiden’s article tells us that 94% of Australians over 70 qualify for either a pensioner concession card or a seniors health care card. Some 78% of the cost of scripts claimed under the PBS is going to concession card holders. Half of the $40 billion age pension bill goes to households with assets of more than $500,000. The $40 billion bill could rise to $70 billion over the next decade.

Labor increased the aged pension from 65 to 67 but that is to be phased in by 2023. The LNP are considering lifting the eligibility age to 70.

Another option is to include the family home in the assets test if it is worth more than $1 million.

Moreover, Hockey reckons the age pension indexation needs to be sustainable. Labor increased the rate and indexed it to average male earnings, which escalate faster than the CPI. Hockey appears to favour a return to the CPI.

Cutting the ‘seniors supplement’ (I get $500 taken off my tax because I’m old) has also been mentioned.

Justin Greber quotes the savings (paywalled) calculated by Stephen Anthony of Macroeconomics. Anthony reckons we need to cut the budget by about 1% of GDP or $16 billion. Overall he says:

the primary focus for the government should be in stemming middle- and upper-class welfare, with the most obvious savings in the aged and family benefits, drugs, industry assistance and removing overlaps between different levels of government.

As to the oldies, he says changing the indexation back to the CPI will save $900 million. Including the family home in the assets test will save $1.1 billion, while cutting the seniors supplement would garner a further $500 million. Peter Martin identifies a further $1.5 billion in carbon price compensation, so in all about $4 billion could be screwed out of the oldies.

Peter Martin also points out that the aged pension has increased by 25% since the indexation changed four and a half years ago, compared to the CPI of 13%.

There’s little doubt that rich old men could contribute a little more.

For context we need to note that the Australian budget is approaching $400 billion.

As a disclosure I’m modestly self-funded with no superannuation. I’d appreciate help with pharmaceuticals but get none other than the normal PBS. In this post I’m not arguing the merits or otherwise of any of the proposed changes. I do think, however, that we could consider paying a bit more tax.

Yet Peter Martin argues that tax increases are already included in the forward estimates because they don’t compensate for bracket creep. The CPI and bracket creep could make our incomes virtually flatline in real terms. He favours increasing the GST.

New Zealand increased the GST in two phases from 10 to 15% without stalling the economy or undue public concern. John Hewson says we are the champions in the OECD in tax concessions, including notoriously concessions to rich retirees and the fossil fuel industry. There are plenty of options available and Anthony stresses the problems are in the out years, not the next budget or two. There should be time for debate.

The Commission of Audit report is said to be available shortly as is a review of the welfare system.

My main worry in all this is that the poor and the vulnerable are going to be hit as well when there really is no need. Also there are sectors where we need to increase spending, such as skills, education including universities, research, innovation and smart industry development. Did everyone see the 4 Corners program on the hollowing out of sophisticated manufacture with the demise of the car industry? That at a time when the CSIRO prepares to cut another 300 jobs.

Meanwhile the Fairfax poll is now 48/52 in favour of Labor. There are some problems for Abbott in the regions, perhaps over foreign investment and trade policies. However, the Labor TPP surge is largely courtesy of a stunning increase in the Greens vote. 26% of 18-24 year-olds now favour the Greens. From 16-39 the LNP vote is lower than Labor, while within the margin for error. It’s the oldies that are keeping Abbott afloat. They don’t always vote in their own interest.

You can use this post as an open thread on politics.

23 thoughts on “Ending the age of entitlement”

  1. I’ll believe the age of entitlement is over when they scrap the VIP fleet. Let Joe share the pain by travelling cattle class.

  2. I can’t help thinking the Coalition is fudging the figures here a bit, as Penny Wong seemed to suggest last night on Q&A.
    The interesting question is why Hockey/Abbott/Joyce and company would do that. The obvious answer is that they’re a bunch of mean cold-hearted bare-faced liars, and while that’s no doubt true, and very comforting to lefties, I think the more likely answer is even more horrifying.
    Taking their cue from neo-cons the world over, they’ve decided to go down the path of austerity, which may or may not work -I think the jury is out on that – and they are going down that road because they really don’t have a clue what to do or how to run a modern 21st century economy, partly because they are blinded by ideology – Keynes is a socialist, etc, well maybe he was but his theories kept Australia out of the GFC when they were applied under Rudd. All they can do is cut, cut, cut. Think what a mess we would’ve been in now, right now, if the Coalition had been – we’d still be crawling up out of the sewer.

  3. So we have had a few decades of egregious corporate charity, unbelievably stupid policies, grand-standing and showing-off, unhindered tax dodging, bloated tendering, uninvestigated corruption, hare-brained privatization, ignored once-in-a-lifetime opportunities, weird international treaties, naïve trade agreements, self-destructive engagements – oh yes, I almost forgot – and unpunished upper-class welfare rorts …. we have had to endure all of these things and yet it is you and me, not the culprits, who will have their money slashed.

    What Mr Hockey and his ilk do not understand – and will not understand until it is too late – is that have passed a tipping point already …. and what they are slashing is the legitimacy of their regime, not that of their particular government, but of their whole regime.

    Under other circumstances (“normal” circumstances, perhaps) I would have been in favour of broadening the GST and making the single fiscal shock of increasing GST to twenty percent – EXCEPT that these buffoons would blow the lot on whatever get-rich-quick scheme was put in front of them and on handouts to the undeserving.

  4. The real problem with the budget is the unsustainable tax concessions Howard made in favour of the rich near the end of his reign. I commented at the time that it looked as though Howard realized he was going to lose and decided to look after his core supporters. The superannuation tax concessions for the rich is just one example.
    The situation was made worse when Rudd decided to match Howard’s election tax promises and, as far as I can recall, actually delivered on them, even after all the GST expenditure.
    Post GST Labor should have declared the Howard cuts unsustainable and got on with lifting tax levels back to a point where they could get things done without cutting welfare to single mothers and endless arguments with cash strapped states about who should pay for what.

  5. If your 65 today you first voted at 23 years of age in 1972.
    In the 17 elections (Fed ) since then is the class of 49 happy with where we are now compared to 1972 ?
    Remembering most of the voters added since are your children.

  6. For those who are interested this interactive demographic calculator allows you to see how demographics in the past and future changed or are predicted to change for Australia and individual states.

    The interesting thing to look at are both ends of the age range. 1971 looks good if you are obsessed with supporting the unproductive oldies but it is terrible if you are obsessed with the cost of raising and educating the unproductive young. It is also worth remembering that in 1971 unemployment was less than 2% and expected to stay that way. Now, there are an awful lot of people being supported because the rest of us are unwilling to share the available work.

    Read somewhere the other day that the Japanese are actually better off as a result of their changing demographic despite the very low growth in GDP. The reason was claimed to be the big reduction of young people who had to be supported.

  7. National Audit Commission Report press release.

    Tuns out it’s Ambit, not Audit:

    This Press Release is a joke but then so is spending millions on an ‘independent’ Commission of Audit headed by ex-Business Council of Australia President Tony Shepherd to justify the government’s ideological agenda.

  8. John D @ 6:

    Read somewhere the other day that the Japanese are actually better off as a result of their changing demographic despite the very low growth in GDP. The reason was claimed to be the big reduction of young people who had to be supported.

    I heard on RN the other day that the business of demographics and our ability to support the oldies in 2050 was over-egged and that growth would take care of it. Unfortunately I was busy at the time and didn’t note who was saying it.

  9. Good point you made there about the Japanese – and please note that the Japanese do not have any overwhelming compulsion to bring a tsunami of immigrants on themselves to make up for the shortfall in younger people.

    Japan does have immigrants and lots temporary foreign workers. However, these are people allowed into Japan to meet the actual needs of Japan and on conditions that do not harm Japan; certainly not so as to enrich a few in the more respectable end of the people-trafficking industry nor in response to the tenets of one ratbag economic cult or another.

    It may be time for decision-makers to abandon their superstitions and take a rational look at the most likely real-world effects of an aging Australian population …. fat chance of that happening in today’s Australia though.

  10. The word this morning is that Abbott has heard the messages from nervous backbenchers about not breaking promises and the wisdom of leaving changes to the pension until after the next election in which they would seek a mandate. Now as long as someone tells Joe Hockey…

    In his statement quoted at the top of the post I think Abbott went on to say there would be no changes to the CSIRO, the ABC or SBS. There is talk, however, that the ABC will suffer ‘productivity’ cuts, from which it has been exempt. The ABC has been fond of saying that it mounted ABC 24 and ABC Online from within existing resources.

  11. In breaking news, Barry O’Farrell has resigned. A note has turned up showing him thanking the Australian Water mob for a bottle of Grange Hermitage wine in 2011, on becoming premier. He had told ICAC that there was no bottle of wine. He still says he can’t remember it.

  12. Well, that’s interesting, because the NSW Libs don’t really have anyone to replace him. Seriously.
    I suppose the first thing the new Premier will do is disband ICAC. Putting Liberal Party politicians and officials in the gun! ‘Twill not do.
    Abbott was doing a squirm to distance himself without really appearing to distance himself.
    Guess Sinodinos is next.
    I love ICAC.

  13. I thought Barry O’Farrell was a decent enough chap and still do. But how could you forget drinking a bottle of ’59 Grange Hermitage? I’m wondering whether someone swiped it off his front doorstep or whether the delivery person ended up with it!

  14. Every man and his dog is running around telling each other scary stories about how we simply cannot afford to keep oldies alive any more because we are running out of money or because all the money has gone. Well, I tend to disagree and here offer a few quite practical solutions to these troubling delusions and financial hallucinations.

    (1) Erect gallows in the CBD of every major city in Australia and hang there every crook and scoundrel who stole, or allowed to be stolen, our money and our productive public assets. And also, have swinging in the breeze for a year-and-a-day, every corrupt official who allowed a money-making public asset to be run into the ground for the purposes of privatization. I suggest this not only to raise the spirits and to bring joy to the long-suffering taxpayers – but also, as Voltaire said of the English hanging an admiral, “to encourage the others”.

    (2) Remove the tax welfare from each and every firm that discriminates against workers and job applicants over the age of thirty-eight. Easy. A stroke of the pen and half the Bludget deficit is gone in a flash.

    (3) Penalize Australian firms that have shipped jobs off-shore in the past quarter-century “so as to remain competitive”. They call themselves Australian firms – yet they don’t (or won’t) employ Australians – so we continue rewarding them with tax handouts. Something screwy in that. Nah, just take their lollies away and ignore their tantrums. The tax saved knocks out the other half of the Bludget deficit.

    (4) Review all privatization deals over the past quarter-century. Wherever the Australian public has been grossly underpaid the true market value of those assets, extract (by fair means or foul) the money for remainder of the true value of those formerly public assets and – bingo – overnight you will have several tens of billions of dollars to put into a GENUINE sovereign wealth fund.

    Don’t try to tell me my suggestions here are any less workable than a lot of the faux-solutions to the demographic “time-bomb(???)” emanating from twaddle-and-bunkum thunk-tanks on high.

  15. I’m wondering whether someone swiped it off his front doorstep or whether the delivery person ended up with it

    Perhaps that same delivery person wrote the note to thank the giver? And pinched Barry’s mobile to thank also?

    Simply doesn’t ‘wash’.

    Barry had no real option other than to resign.

  16. I think he really did forget. Him and his missus probably got pissed on more than just that one bottle of Grange (which was a pretty awful year apparently) at the beginning of their Easter holidays, and everything was so busy when he got back to work he forgot to enter it in the pecuniary interest register.
    A genuine liar would have stayed in the job and brazened the whole thing out, and probably got away with it.

  17. WPD, I’m forced to agree.

    PB, yesterday he was saying ‘I don’t know much about wine, but I’d definitely remember a ’59 Grange’. The only generous possibility is that they got pissed and then drank the Grange.

    But then to write a whole note in longhand and forget that too.

    WPD is right, he had to go.

  18. Don’t worry, Paul; no major policy shifts at all. The one, the only, the lonely, the single policy is still Blame The Previous Labor Government For Everything.. I did feel sorry for Baird; surely he himself is aware of how ridiculous it sounds to the voters but he still had to toe the party line and say it.

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