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May 24th 2014 print

Peter Smith

Gutting Grannies Is No Solution

Conservatives hailing the Hockey budget's planned crimp on the aged pension are cheering a move that is much worse than an example of ham-fisted political salesmanship. Without mincing words, what the Treasurer wants is morally indefensible

hubbard“When it comes to changes to the age pension, most are down the track, giving older persons some warning of the alterations that will be made to the indexation — which slows the increase in the pension; it doesn’t cut it…This is good policy. With 80 per cent of persons aged 65 or older on the full or part age pension, it is imperative that the government act to make the pension sustainable into the future…” – Judith Sloane

Save us from faulty logic and flattery. Sometimes you need family and friends to tell you that you’re wrong. Equally, Tony Abbott needs a few conservative commentators and his Liberal colleagues to have a word in his shell-like and tell him to back off pushing grannies over the cliff.

Let me explain this simply for those who mistakenly believe that by supporting the cuts to aged pensions in the budget they are fighting the good fight for truth, justice and end of the age of entitlement. What they are doing in reality is to help bury the government. Only a basic knowledge of arithmetic is required.

As an exercise, I brought the single basic aged pension of $20,000 a year back to where it would have stood 20 years’ ago if discounted by ‘average weekly ordinary time earnings’. I then inflated this figure over twenty years by the CPI. The result was $14,400. What this means, if the past is any guide at all to the future, is that the level of the aged pension, if indexed by the CPI, will progressively fall against community standards – by around 25% over twenty years.

How in the world is that politically, not to say morally, defensible? Unless, of course, you happen to believe that the current pension of $20,000 for singles and $30,000 for couples is much too high? Is that what you believe, Hockey (conservative) backslappers?

The aged pension at its current level against community standards has to be made affordable through superannuation; through encouraging employers to hire older workers; through freeing up union-inspired, employment-killing, labour market regulations; through reprioritising budget expenditure away from middle-class welfare; and through lower business taxation and freeing the product market from growth-stymieing red and green tape.

Where has Australia’s can-do attitude gone when impoverishing pensioners is seen as the solution?

 

Peter Smith, a frequent Quadrant Online contributor, is the author of Bad Economics