Yes, according to Fairfax, with the story reprinted in The Guardian, and then picked up by other media outlets. For the record, the ABC also got it wrong by saying it was all people over 60. It was all people over 65.
But the article was misleading in other ways as well.
Poverty here is defined as receiving incomes less the 50% of median equivalised disposable household income*. According to the OECD report Pensions at a Glance 2015 35.5% of people over 65s live in poverty in Australia compared to 12.6% for the OECD. Only Korea at 49.6% is higher.
Bruce Bradbury at Club Troppo reckons the whole concept is off beam because it ignores the cost of housing and Australia’s relatively high rate of home ownership. Quoting some very old figures and with a bit of a guess he reckons the poverty rate is about middling and around 15%.
It would be nice to know. He says the pension rate is very close to the poverty rate, so the percentage above and below depends heavily on calculation methodology. A small change and a large percentage shift.
That makes Australian pensions anything but generous by community standards. We spend 3.5% of GDP on pensions, less than half spent by the OECD which comes in at 7.9%. We have 15% of the population over 65, nearly the same as the OECD at 16.2%.
You may recall Di Natali and The Greens selling out on pension eligibility when they agreed to these changes:
- From 2017, the assets test threshold for home-owning couples will be lowered from $1.15 million to $823,000. For single home-owners it will drop from $775,000 to $547,000. In addition, the current taper rate will double from $1.50 to $3.
The economists, the politicians, and the better off professional class who seemed to favour this asset stripping of prudent middle Australians are unaffected. Now they are having a rant about people not spending all their superannuation when they retire. Shock, horror, some are even leaving it to their kids.
Apparently the problem is an irrational fear of running out of money when you are old and frail and unable to earn any more!
- “Most people are naturally risk averse, and so will tend to hang on to their savings, in order to avoid running out of super if they live longer than expected,” Dr Reeson said.
“They may also wish to ensure that money is on hand to deal with possible large expenses, which could be a new hip or a new roof.”
Well, Dr Reeson, what do you do when you are old and poor and need a new hip or roof?
One contingency that we might save for is the need for residential care. In that case the family home can come into play. It didn’t when my mother had to go into aged care in the 1970s.
A particular problem arises when one partner goes into care and the other wants to remain in the family home.
In any case those with enough resources ($823,000 for couples and $547,000 for singles) never to receive a dollar of pension, may find their assets stripped at that point if they are not lucky enough to die in their sleep or similar while in relatively good health.
Today The Australia Institute is recommending that capital gains apply to mansions worth over $2 million. Apparently the family home exemption will cost the budget $46 million in 2016 alone. 55% of that windfall flows to the wealthiest 20%.
But the LNP won’t touch it and Labor are “not interested”. Presumably they want to avoid a scare campaign that they are coming after everyone’s home.
So the poor and increasingly middle Australia are meant to leave the world with nothing, while the rich carry on regardless, completely unaffected.
It’s time we looked comprehensively at ‘end of life’ income/wealth provisions with equity as a major focus. And treat oldies as though they are entitled to more in life than bread on their plate.
* Corrected 14.1.16. In the earlier version I had “mean disposable household income”.
Update: For Australian household income and wealth information, see this ABS site.
9 thoughts on “One-third of Australian pensioners live in poverty?”
I have a real problem with defining poverty using statements like:
It is a lazy definition that will tend to lock in “the percentage of people living in poverty” even if there are dramatic improvements in the purchasing power of this income.
In theory we may be able to define a poverty line in terms of the goods and services required to live “a reasonable life”. Still a bit tricky in a country where the welfare system can leave old people with large crisis payments for things like knee replacements, old age care etc.
Also gets tricky when we start asking whether it is reasonable to pressure people to move out of their home and go somewhere else when they leave work. And…..
Trying to define Poverty is strictly money terms is, at best, silly, and, at worst, deliberately deceptive.
The depictions of retirees spending their children’s inheritance on luxury cruises and of pensioners playing pokies all day long are, like the Dole Bludger image, useful for propaganda purposes, especially if nasty policy changes are in the pipe-line.
We are pensioners, living very frugally indeed (having been well trained in poverty management during childhood) and we are champion recyclers too.
Yet even we are really feeling the pinch now; we have no reserves whatsoever these days through absolutely no fault of our own, and certainly not through any lack of planning at all. How much worse must it be for those who are not as lucky as us?
One thing living in poverty does do is make one aware of very small changes in prices – and for this reason we are amused by the glib claims that inflation is under control.
What was really annoying was hearing this morning’s news that dud CEOs (and that tiny handful of those who do have real leadership potential) earn as much in a single week as do their intellectual equals and betters in menial jobs earn in a whole year. No mention was made of all the perks and freebies these CEOs get in addition to their money. Wonder how long these duds would stay in their jobs if they were paid what aged or disabled pensions get?
Graham, the pension eligibility changes were implemented on January 1, as I understand it. I heard a few sessions on local radio where people reeling at the prospect of reduced income were ringing in and venting.
The big issue seemed to be food, which indicates pensioners are not leading the life or Riley!
Indeed Brian. It is in essential foodstuffs and in household necessities that the unpublicized inflation is most obvious.
Can’t help but wonder if the prices of ultra-luxury foodstuffs and of non-essential household items are used to give false means or averages – and so give the illusion that inflation is minimal and nothing to worry about.
One good thing is the Saudi Arabian sell-off of oil at “beggar thy neighbour” prices. That has reduced our transport costs out here in The Other Australia – temporarily, very temporarily.
An Australian retired couple with a house and $823,000 in additional assets is on a far better wicket than the most wealthy and powerful twentieth century monarch. I suspect you would also be on a better wicket than 98% of extant humanity. Unless you have more hips than a spider and a crack addiction, you should have no trouble living on that kind of money.
My mother recently had a hip replacement and she still works part time even though she is in her mid 70s because she has almost no assets apart from the house she recently paid off. But she doesn’t moan about it or act with a sense of aggrieved entitlement (although like me she thinks the super-rich live by a different set of rules). If things get tight, she says she’ll take in an overseas student or two. It isn’t that hard!
I agree that the super-rich don’t pay their fair share in tax and I find it obscene that the corporate elite can rake in millions even if they don’t appear to be doing such a great job. But as I understand it, things get extremely tricky if you try to do something about this because corporations can put their headquarters offshore and the mega-rich can use tax havens and use the services of fancy accountants who always manage to stay a step ahead of the tax office. Such is capitalism
It is far more important to me that the genuine need is properly catered for. I’d support better unemployment benefits, better public schools and a comprehensive national health service like the Brits. I would pay more tax for these things quite happily even though my income is more in the lower-middle range.
But on a more sympathetic note, I believe it is a given in psychology that losing something is more painful than never having had it in the first place, so Brian’s response is entirely human and understandable. As a corrective, I suggest Brian take his next holiday in a part of the world where he will see bony kids in soiled rags living in stark poverty. I’ve seen this in SE Asia and I recall it each time I need a perception correction.
Thanks Karen. I accept. The $8 230 in assets and the cottage with potable water on tap will do us just fine.
Disagree with “Such is Capitalism” though because it is straight out plunder. Although Australia’s super-rich squawk night-and-day about Capitalism, Free-Enterprise, Markets and the like, nobody, in 2016, really believes them any more. These fraudsters are closer to old-time Soviet nomenklatura than they ever could be to real venture capitalists and risk-taking investors.
(b.t.w. Many of us have seen extreme poverty elsewhere in the world – and view our own situations in proportion – in my case, those experiences have protected me from the overwhelming despair that grinds so many older people into early graves).
Karen, I don’t enjoy being personally harassed by you on the blog. I point out an error in the headlines, and in the articles, then give a corrective article which can only cite old information.
I point out a few things policy makers might consider in the name of equity, and somehow I’m found to be defective in various ways.
Karen, you don’t know my situation and the post wasn’t about me. I haven’t lost anything. I’m self-funded and with a bit of luck hope to remain so. At the same time I’m not particularly well off. I spend more money over time on my teeth than I do on overseas holidays. Income is only relevant to obligations and I have some I’m not going to talk about.
So in sum, I’m taking nothing from the tax payer. If, OTOH, I die now the tax person gets a goodly slice of capital gains (currently reducing by the day!)
My wife is six years younger than I am and we don’t know how we’ll fare if I have to go into residential care. That is actually a project for investigation this year, just as contingency planning, while we are able.
I don’t need to be reminded that there are desperately poor people in the world.
I hope your mum stays able and healthy until she dies. As I mentioned on another post recently, I’ve seen over 20 people I worked for over those last few years before they die. My wife works in home care. What is easy now may not be so easy as the years progress.
Where did you get the idea that $823,000 gives outrageous wealth? As I explained on the other post the DSS deeming rate is 3.25%, which would yield an income of $26,747, compared to a pension of $33,717 if you have nothing.
I’ve corrected the definition of poverty in the post. It should have been “median equivalised disposable household income”, not “mean”.
My apologies if my comment sounded harassing to you Brian. On a re-reading it does sound more abrupt that I had intended. I hope you are still mobile and sharp witted when you have 100 candles on your birthday cake! Best wishes and apologies once again.
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