New pension asset-test rules will effect the wealthiest 10 per cent of retirees. Photo: Getty
Older voters deserted the Coalition in droves over the December quarter according to the latest Newspoll analysis, with primary-vote support in the over-50 age group falling from 49.9 per cent to 43 per cent.
That exodus was, according to The Australian newspaper that published the data, a response to the government’s winding back of superannuation tax concessions, its tightening of pension asset test rules, and uncertainty over the government’s review of aged care reforms.
Let’s put aside the aged-care review for now because it has received scant media coverage – not enough to influence many older voters.
But on the other two issues, we’re again seeing an attempt at serious reform being hampered.
Remember, these reforms are being made in the context of large federal budget deficits – $100 billion or so over the next four years, and probably much more once the usual forecasting errors become apparent.
The government’s pension asset-testing reform comes into force on January 1, 2017, so is front-of-mind for some Australians. The question is, which ones?
The overwhelming majority of older Australians will be untouched or better off under the pension and super reform.
Treasury figures show that:
So nearly 4 million will be better off, and around 330,000 wealthier Australians will lose some or all of the state pension.
And yet voters are clearly reading these reforms as an attack on the majority of older Australians, when in fact the numbers say the opposite.
Prime Minister Turnbull: even genuine reform seems to send opinion polls south.
The government’s super tax concession changes, which passed the Parliament in mid-November, are even more benign.
The Department of Treasury lists the changes, and the percentage of taxpayers/retirees affected by them on its web site. In essence the changes are:
Put those pension reforms and super reforms together, and the picture is clear.
The lowest-earning quarter of the Australia’s workforce will be able to save more for retirement through LISTO, partially funded by all those “less than 1 per cent” groups of high-income earners who’ve been using the tax/transfer system to accumulate wealth for years.
And around 10 per cent of retirees – the people the state pension was never set up to serve – will have to hand back some or all of those tax-funded benefits.
Low income workers will be able to save more for retirement. Photo: Getty
That will, according to one recent study, lower the percentage of couples hitting the ‘comfortable’ retirement income benchmark set by the Association of Super Funds of Australia – though it will not substantially change the number of singles reaching their benchmark.
While that’s not good, the bigger picture is one of budget deficits and a tax system leaking billions through loopholes such as the more excessive super tax concessions – and higher income earners benefit from them disproportionately compared with lower income earners.
The Labor Party has attempted to use the impending pension asset-test changes to make political hay, but it should know better.
These changes, when seen in context of the strained federal budget, make the tax system and super system fairer and more progressive.
That means people with the ‘highest propensity to consume’ – the low income tax payers benefiting from LISTO and the most vulnerable pensioners who get the $30 per fortnight top-up – will have more money in their pockets.
That’s good for private sector final demand, and good for breathing life into an economy in which household consumption growth is weak.
If older Australians really are rejecting the Turnbull government for making them better off, what must they think of some of its other policies?