Don’t expect to hear any cheering or thanks, but aged pensioners continue to be the standout winners over nearly five years of Labor Federal government. And a Howard government initiative expensively locked into our social welfare system is steadily increasing their relative wealth.
Nanjing Night Net

Aged pensioner wealth is very relative indeed. It’s hard to imagine the household grouping that has fared worst over the past four financial years (single income couple with children on 167 per cent of average earnings) offering to swap with them, but our demographic trajectory is setting future governments on a collision course with what pensioners no doubt regard as “hard won entitlements”.

Today’s Australian Bureau of Statistics’ breakdown of inflation increases for different sorts of households reports that the “analytical living cost index” for age pensioner households rose just 0.7 per cent in the year to June 30 with most of that rise occurring in the June quarter. That age pensioner ALCI compares with a 1.2 per cent rise in the Consumer Price Index.

Most importantly for age pensioners, their twice-a-year pension increase is based on the highest number of three measures: the CPI, the Pensioner and Beneficiary Living Cost Index and Male Total Average Weekly Earnings.

MTAWE is the big mover of the three. The latest update of that measure is due later this month, but it was up by a strong 5 per cent over the year to the end of March. Thus, if all the data gathering is right, age pensions are increasing by seven times the rise in the average pensioners’ cost of living.

That affordability lift continues to build upon the big one-off pension increase under the Rudd Government.

Tucked away in the Treasury’s budget papers is a neat chart documenting the change in real disposable income (after tax, after inflation, after social welfare) over the past four financial years for 17 different sorts of households. Most types were up by 6 or 7 per cent but there were two outliers: an increase of just 1.6 per cent for the single income family on 167 per cent of average earnings, taking them to $82,752; and single pensioners up 19.8 per cent to $18,820. Pensioner couples fared next best with a rise of 10.2 per cent to $28,373.

No-one’s drinking Hill of Grace and running a Maserati on such real disposable income, but pension growth well above cost of living increases must at some stage gain the attention of governments dealing with the impact of the Baby Boom bulge retiring.

Just as Ross Gittins’ fingers the challenge of funding the national disability insurance scheme, future governments will face major social welfare and health demands that will require either increased taxes or reduced service expectations.

There is a third alternative, but you end up as Greece.

But wait, there’s more – or perhaps less. On Q&A last week, there was the unusual sight of a politician declaring neither side of politics had the extra five or six billion a year to fund the Gonski report recommendations. Opposition education spokesman Christopher Pyne bluntly explained why the coalition wouldn’t commit to it:

“Planning education funding around that amount of money is like planning your household budget around winning Powerball. It is utterly unreasonable. It will not happen.”

As Gittins hints, for all the political grandstanding, all that is happening with the NDIS is a limited trial program. Actually implementing the suggested NDIS is a couple of elections and several budgets away.

Labor is highly unlikely to have the problem of finding the money after the next election while the coalition has already stitched itself into a series of fiscal contradictions.

Between ditching the carbon and minerals resources rent taxes, delivering budget surpluses, suggesting income tax cuts and getting our defense budget back up from its 1938 level, a whole raft of escalating health, education and social welfare costs in the mix don’t add up.

Or maybe some politicians tell lies. Who would have thought it.

Michael Pascoe is a BusinessDay contributing editor. 

This story Administrator ready to work first appeared on Nanjing Night Net.

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