Australia tackles pension time bomb
Melbourne - Australia’s finance minister, Joe Hockey, wants to raise the nation’s retirement age to 70, the highest in the world, to prevent an ageing population from draining state coffers.
Miner Noel Chatterton laughs at the idea.
“Good luck with that,” said the driller, who at 48 would be among the vanguard of workers affected by the proposed change. “My hands are already about stuffed. I’ll be lucky to be able to work until I’m 60, let alone 70.”
Hockey is part of the Liberal-National coalition that won power last September pledging to end what he called the nation’s “Age of Entitlement” and to repair the budget deficit.
Australia is leading the charge for a group of advanced economies, including Japan and Germany, that are pushing up the retirement age to head off a time bomb caused by a growing army of pensioners and a shrinking pool of taxpayers.
The ratio of working age Australians to those over 65 in the world’s 12th-largest economy is expected to decline to 3:1 by 2050 from 5:1 in 2010.
In Japan the ratio is already below 3:1 and in Germany it is close to that level, according to the International Labour Organisation.
“While Australia [would be] the first to raise the age to 70, it won’t be the last,” Steve Shepherd of international employment agency Randstad Group in Melbourne said. “The world will be watching this.”
Australia’s 2.4 million pensioners draw about A$40 billion (R384bn) a year in benefits, making it the largest government spending programme. The amount is forecast to rise 6.2 percent a year over the next decade, according to an independent review commissioned by Prime Minister Tony Abbott.
Under Hockey’s plan, Australians born in 1966 or after would have to work until they are 70, from 65 now, before they could draw their government retirement allowance.
That is not popular with voters. A Galaxy poll conducted last month found that 69 percent of voters polled disagreed with the plan.
But a failure to rein in the programme will put a greater onus on younger workers to fund it through increased contributions and taxes. Raising the pension age may also mean more competition for those just starting in the workforce. Unemployment among those aged 15 to 24 reached a 12-year high of 13.1 percent in May, more than double the national average of 5.8 percent.
An increase to the retirement age would only exacerbate unemployment among the young, said Chris Riley, the chief executive of Youth Off the Streets, a Sydney-based organisation that provides accommodation and counselling.
“We’re willfully creating a jobless generation,” he said.
Many older workers would require additional training anyway, especially those like Chatterton, who might have to switch to less physically demanding work. – Bloomberg