ELLIOTT:
Earlier on in the programme and in last Saturday’s Herald Sun, I spoke and wrote about the whole issue of pension entitlements. At the moment, in this country, if you are a couple you can live in a house with $2 or even $3 million, you can have a share portfolio worth between half and $1 million and you will still get a part, or in some cases, the full pension from the Australian Government. Now it seems clear to me that this can’t go on for ever. We simply will not be able to afford it. At the end of my article on Saturday in the Herald Sun, I said well, I reckon people my age – or even a bit older say after 55, we need to get used to the idea that if we have a home that’s paid off when we retire, we might have to use the value of that home to help subsidise our pensions or at least subsidise our retirement. I don’t think there is going to be enough money in the till to pay people my age pensions. I think it’s time we accepted that and got on with life. And essentially accepted the fact that we will not be able to have the age pension as it currently exists 15 – 20 years down the track. Kelly O’Dwyer is Parliamentary Secretary to the Treasurer Joe Hockey. She joins us now. Kelly, good afternoon.
O’DWYER:
Good afternoon Tom.
ELLIOTT:
Now what do you think? A lot of Australians seem to think that the Government, of which you are a part, takes a bit of everybody’s wage and puts it in a box and then saves it up for their pensions later on in life. Is that true?
O’DWYER:
That the Government takes a bit of everybody’s wage and saves it up? Well it depends which government you’re talking about. Certainly the previous Government – who inherited a surplus budget, spent all of that down and then got us into debt. I think their six Budgets were some of the most unfair budgets from an intergenerational perspective that we are likely to see…
ELLIOTT:
Ok but the point I’m trying to get to is that, I mean, today’s pensions are paid for by today’s taxpayers aren’t they?
O’DWYER:
That’s correct. It’s paid for by working aged people who are earning an income and paying tax. That’s what’s going into the kitty to actually pay for people’s pension payments.
ELLIOTT:
Did you think pension payments should be regarded as the right of all Australians?
O’DWYER:
Look, certainly I think we need a very strong social safety net which cares for those people who are truly vulnerable. This is part of our social compact in this country. Australians are a very fair-minded people. We believe we have a moral responsibility to look after those people. The question that you’re really asking is where do you actually draw the line? Who is the person who should be entitled to receive a pension or a part pension and who should really be relying on their own savings, who should be relying on their own squirrelling away of money throughout their life? We’ve got a superannuation system that’s been in place now for something like 30 odd years and we already know that people in that retirement age, even today, are still drawing down on either a full pension or a part pension – 80% of people aged 65 and above are still drawing down on a pension or a part pension and the question that you rightly ask is ‘is this going to be sustainable in the future?’ – particularly when you consider that our population is ageing. It’s a nice problem to have – an ageing population. It means people are living longer – this is a good thing. We shouldn’t always see this in a negative way, it’s actually a really positive thing that people are living longer but we are going to need to have a realistic discussion about the Budget and how we can fund the retirement of people we need to look after in our community. Now the Labor Party have been reckless. They delivered six budgets that took us very seriously into debt and that limits our choices today. If we are going to kick the can down the road, if we are not going to address the Budget issue of addressing more than $202.5 billion in net debt and growing debt, when you consider the deficits into the future because of their increased spending of $120 billion on top of all of that, then you are never going to be able to fund – with the increasing demographic challenges that we face – you are never going to be able to fund that unless you are going to start making some changes.
ELLIOTT:
Final question: as I said at the end of my article in the Herald Sun on Saturday, I don’t believe in changing the entitlements to pension for current retirees or indeed people close to retirement but I think that 55 or under you have at least another decade in the workforce, the bulk of your life you’ve had compulsory superannuation. If you’ve bought a home you’ve seen it go up a fair bit in value since the 80s or the 90s. Should people of my generation, as I think, get used to the idea they probably won’t be able to draw on the Aged Pension? Or at least the availability of the Aged pension will be restricted in say 20 years’ time?
O’DWYER:
I think you’re right to say that people will be living longer and working longer. Because they are going to be living longer, healthier lives we need to accept that there is a period of time that they will now have and now be able to enjoy, where they can have a productive working life, where they can help prepare for their own retirement and contribute to their own retirement. Whether it be through superannuation, or through other savings people might have. We certainly believe that there needs to be a strong social safety net in place. What we need to do though is if we are to accept that there is an argument for change in the current long term government settings and that’s a position that’s been put by you – its not a position that I’m putting Tom…
ELLIOTT:
It’s me, it’s my view…
O’DWYER:
It’s your position, it’s the position you’ve put, that you have to make sure that any government that would make a decision to change those long-term settings, needs to be aware of fairness, transitional fairness, so that people who have made decisions based on those long term settings are not disadvantaged in a serious way. I think that’s probably where some of your callers are coming from Tom – that people are very concerned when governments make changes overnight and that that can have a dramatic impact on their lives. When we think about this whole question of fairness, we need to think about the full complexity of the equation here. It’s not simply a binary choice and we have to think about things, not only like generational fairness, but transitional fairness as well.
ELLIOTT:
Kelly O’Dwyer, thank you so much for your time.
O’DWYER:
Terrific, thanks Tom
ELLIOTT:
Kelly O’Dwyer, Parliamentary Secretary to Joe Hockey and Kelly, by the way, is due to become a mum for the first time in about three months so she’ll be thinking about intergenerational equity a lot.