Will Libs bite bullet, withdraw Howard’s over-the-top entitlements to self-funded retirees?


By Margo Kingston  @margokingston1

9th March, 2014

When Samantha Maiden reported today that the Audit Commission wanted super-generous seniors health card benefits to self-funded retirees reversed, I dug up my 2002 SMH budget comment on the matter. The Libs are to blame for this totally unsustainable entitlement culture they knew would help cripple the budget over time due to our aging population. If they don’t act in the budget and instead just cut benefits for the less well-off they will be credibility-naked.


Don’t hold your breath for action

Source SMH: http://www.smh.com.au/specials/budget2002/730/730_6.html

What a shocking dilemma! The Liberals overwhelmingly won the over-55 vote at the 2001 election, while Labor outpolled them in just about every other age group. They did it partly through a massive budget bribe of $900 million – including huge tax cuts for self-funded retirees, letting lots more elderly people get the seniors health card and even throwing in a $300 giveaway if you received any aged pension at all.

I wrote in last year’s budget lock-up that the government was “eerily silent on the implications of this supposedly quick and easy largesse”.

“We have an ageing population. Fewer and fewer people of working age will have to pay for more and more retired citizens.”

So what do we get this year, without the slightest hint of deprecation? A weighty tome saying we’d all be ruined without super tough action to rein in outlays on the aged (my piece on the first intergenerational report is also published below). Otherwise, Treasury said, we’d have to blow out government debt or whack up taxes to fund a crazy $87 billion deficit by 2042.

What new policy would Costello produce? What would he do about this disaster in the making? Nothing really. Like George Bush, who talks free trade and signs off on billions of farm subsidies to earn a few votes, Costello and co. look solemn and throw the aged and the multidude of baby boomers about to enter their ranks some more largesse.

Holders of the seniors health card, that golden bit of plastic, will now pay an extra dollar – that’s right, $1 dollar – to fill a prescription, even if they’re flush with funds after Costello last year let elderly couples earn up to $50,000 a year in investment income without paying any tax. Workers, of course, even the lowly paid, will be slugged with an extra $6.20 to fill a prescription.

What could he have done? For a start, he could have accepted the key recommendation from the independent review of fuel taxes which he commissioned in March 2001. The Trebeck report, realesed in the lock-up, recommended the reintroduction of indexation of the petrol excise. No way, said Costello.

Howard and Costello had done a minor fiddle to shortchange voters on compensation for higher petrol prices due to the GST. They said they were trying to protect the revenue. Then, after Howard thought he’d lose the election over his scam mid way through last year, he didn’t fix the fiddle, he abolished indexation! That will cost billions soon, and the figure will keep growing.

They could also have made the case for much greater immigration, which Treasury forecast would make a huge difference to the problem. Instead, Costello failed to mention this proposal in his glossy budget overview.

They could have announced a much-needed review of superannuation with a view to reigning back the endless tax take of the government so people would actually have a chance to build secure retirement income. Instead, he met his election promise to slightly lower the super surcharge for high income earners, the surcharge he introduced in the Liberals’ first term.

Oh well. Next time, eh Peter? Or perhaps he’ll leave that to Labor when it gets back into government years hence. After all, on the election figures they represent all those people who’ll bear the burden of funding the people who voted you in.


New sunset clause: pay your way

By Margo Kingston

The long awaited Treasury report on our ageing population tells us what we already know – we’ve got a big problem – but puts some figures on just how big.

In 40 years, the number of people under 18 will have fallen a little bit, while the number older than 65 will have more than doubled and the number over 85 more than quadrupled.

 The cost of health, aged care and aged pensions will explode, and proportionately fewer workers will have to pay for them.

The figures are almost inconceivable: Treasury estimates that if revenue stays at the current proportion the economy’s output (GDP), by 2042 we’d have a deficit of $87 billion in today’s dollars.

The government’s message is that we have to act now to lower those doomsday numbers and massage the expectations of Australians about what government will do for them in old age.

The Problem

� By 2015 baby boomers will be entering old age at the same time as fertility rates and death rates are falling. The number of births per Australian woman is already below the 2.1 needed to have a steady population, and this could fall to 1.6 by 2042.
� Federal government spending on health is likely to more than double to 8.1 percent of the economy’s output by 2042, fueled by a higher proportion of elderly people and, even more significantly, because people will want access to the latest expensive technology and drugs.
� Government subsidies for drugs under the Pharmaceutical Benefits Scheme could rise by five times, outstripping spending on hospitals and doctors.
� Spending on aged care, mainly nursing homes, will more than double by 2042.
� The number of Australians old enough for the aged pension will escalate from 2.7 million to 6.3 million.

The Solution

� Increasing government debt – this would mean higher interest rates and less investment – and the next generation would have to pay for it. Higher taxes means less disposable income, with a heavier tax burden for working-aged Australians to pay for their parents sins.
� People have to become more self-reliant in their retirement. Superannuation is a top priority.
� People need to work longer, and jobs must be found for people wanting to work but who can’t find work.
� We need much higher levels of immigration, a finding ignored by the government in its glossy overview of the report. The report states: “Higher migration would tend to increase growth in the labour force and thus in GDP. The composition of the migrant intake also influences spending.”
� Treasury suggests a net migration rate of 135,000 people a year, an increase of 50 percent. On that basis, it says this: “As immigrants are younger on average than the resident population, the increased migration scenario results in a decline in the aged to working-age ratio over the next four decades and a ten per cent increase in GDP by 2041-42. This increase in GDP results in government spending on health, aged care and pensions falling as a percentage of GDP.”


The government has painted the doomsday scenario and said we have to start work on the problem now, yet the only real start is to charge seniors with a health card an extra dollar on their prescription drugs – including the many self-funded retirees given access to the card in last year’s budget

In a crazy twist, Minister for Ageing Kevin Andrews, under the heading “Planning for an Ageing Australia”, announces lots MORE spending on the aged, including more care services in nursing homes, increased nursing home subsidies and relaxing the income test for nursing homes.

The government has not faced the tough decisions it wants to avoid – increased migration, getting its fingers out of superannuation savings, restoring petrol indexation, and the like.

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  1. Kate Alcorn says

    Great to get the history on the LNP’s hidden plans. Some of us kind of remember what happened in politics a few parliaments back, but not the details. Well done Margo (my sister!) for this timely reminder, 12 years on. The LNP thought we might have forgotten how it was THEY who put this policy in to effect to win the over 55 vote, but not now.

  2. joy cooper says

    Thank you Margo.

    .Another thing that irks me about this middle class welfare is using their Seniors Card they will get discounts from certain supermarkets, on particular days, which other pensioners (who really need a help) aren’t entitled to. They also can get more discounts whilst enjoying their overseas travels.

    Never knew that their superannuation was excluded from their income. This is disgraceful. Still, it won’t be touched as most of the recipients of this welfare are the Liberals rusted-on voting base. Yes, the very ones who despise others for being so-called welfare bludgers.

    Am I cranky? YES!!

  3. Kerryn Higgs says

    Those were prescient words, Margo. And demonstrate the reason why your columns of that time were not to be missed. That budget was part of the overall giveaway of the sources of the old revenue stream (graduated tax scale; more modest super concessions for the top echelon; the excise that had helped put a price on carbon as far as petrol goes) in order to finance the many forms of middle class welfare that again secured the vote of the centre for Howard.

    Today, this previous revenue stream would be yielding more than half of the much-deplored deficit so glibly blamed on the “Labor Mess”. The Costello tax cuts and tax changes are the real roots of the “structural deficit”. This is akin to the Grover Norquist (USA Rep.) tactic of shrinking the fair-go state and drowning it in a bathtub. And redistributing tax revenue to those who already have enough – or more.

    The ALP has appaeared to be a mere variation on the neoliberal thrust, but the current government confirms they come from a far more radical corner. They are the direct heirs of the push embodied in the Costello moves so well analysed here. You had your finger on the pulse!

  4. Angrybudgie says

    See I don’t understand that such a large number of over 55’s seemingly vote against themselve. Not all of this age group have superannuation that returns this kind of income yearly – I certainly don’t. Most ‘boomers’ & especially women would not have had super until it was made compulsory in 1992, about 20 years after they started work. So about halfway through their working life, they start putting money into super & they would have had to have been in a very high paying job to get that much stashed away. Most women certainly were not in that category, the average amount of money women have in super is $100,000.00, obviously not a large enough amount to benefit from these tax cuts/changes. It can’t be this ‘welfare’ alone that is gaining the LNP the vote of this cohort, as not enough of them actually gain from it. Surely the number of people who actually benefit from it isn’t that large compared to the total number of ‘boomers’? Yes the government has to do some forward thinking & planning to deal with a problem that all countries face eventually; an aging population. But is the response to punish all those who were unable to put enough money away for their retirement due to the time that they were born. I now face, and I can not be alone in this, making my slightly more than $100k last an extra 7 yrs before I can expect any pension (if it is still there when I reach that age). Being eligible for the health card can make a lot of difference to most who are self-funded. Of course everyone knows that all boomers have pots of money & several houses to see them through their old age.

  5. Howard/Costello set up the structural deficit >>Will Libs bite bullet, withdraw Howard’s over-the-top entitlements? http://t.co/BMeSaGl6nd

  6. Will Libs bite bullet, withdraw Howard’s over-the-top entitlements to self-funded retirees? – No Fibs http://t.co/tOUUWpASAu via @NoFibs

  7. Will Libs bite bullet, withdraw Howard’s over-the-top entitlements to self-funded retirees? – No Fibs http://t.co/juHfsvMi5I via @NoFibs

  8. Will Libs bite bullet, withdraw Howard’s over-the-top entitlements to self-funded retirees? No Fibs http://t.co/juHfsvMi5I via @NoFibs