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Category Archives: Budgets

 Michelle Grattan

April 20, 2012

 THE government has seized on shadow treasurer Joe Hockey’s provocative attack on ”entitlements” to claim a Coalition government would make widespread cutbacks that would hit families.

In a major speech in London, Mr Hockey condemned systems of ”universal entitlement” in Western democracies, contrasting this with the concept of ”filial piety” thriving across Asia, where people get what they work for and families look after their own. Although Mr Hockey was more qualified about the Australian situation, when pressed later about whether the Coalition would look at the whole range of entitlements, he said: ”Yes.”

Prime Minister Julia Gillard said Australian families should be deeply concerned about Mr Hockey’s remarks.

She said he was talking about cuts ”to things like family payments to help people with the costs of raising the kids, things like pensions that older Australians rely on, all of the benefits and services that help families along, like relief on childcare fees, let alone of course the great benefits of things like Medicare and free public hospitals”.

The message of Mr Hockey and Opposition Leader Tony Abbott to families was ”you’re in for cutbacks and if you can’t cope, well, just try fending for yourself and if you can’t fend for yourself well, unfortunately that’s too bad”, she said.

But Mr Abbott said Mr Hockey was making the obvious point that governments had to live within their means. Australia’s situation had not got to the level of some other countries but ”there is a danger that we ourselves could ultimately go down an unsustainable path … it’s the job of the Coalition to ensure that we never do”. Greens leader Christine Milne said the logical conclusion of what Mr Hockey was saying ”is no universal healthcare, no universal access to public education”.

Ann Nevile of the Crawford school of public policy at the Australian National University said it was unlikely that the policies of Asian countries could be successfully transplanted to Australia because those countries’ social conditions were different to Australia’s.

 Read more: http://www.theage.com.au/opinion/political-news/hockey-attack-on-benefits-blasted-20120419-1xa39.html#ixzz1sYtiIbBP

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We are witnessing the emergence of a new working poor

Brian Howe April 20, 2012

The divide between blue and white-collar workers has become much uglier.

THERE is a new divide in the Australian workforce. It is no longer between the blue-collar and white-collar worker, but between those in the “core” of the workforce and those on the “periphery”. Those in the core are likely to be in full-time employment, either permanently within organisations, in management positions, or possessing skills for which there is steady demand and for which they can charge a premium. They are likely to have sick leave, paid holidays and in many cases parental leave above the government’s minimum standard. For them, flexibility means the chance to work in a variety of industries, to work overseas, to earn good money freelancing or in a secure part-time arrangement. Periods of unemployment are likely to be short or voluntary.

Those on the periphery are employed on various insecure arrangements – casual, contract or through labour hire companies, on low wages and with no benefits. Many do not know what hours they will work from week to week, and often juggle multiple jobs to attempt to earn what they need. Their skills are low, or outdated, and they are not offered training through work. They shift between periods of unemployment and underemployment that destroy their ability to save money. Their work is not a “career”; it is a series of unrelated temporary positions that they need to pay rent, bills and food.

For them, flexibility is not knowing when and where they will work, facing the risk of being laid off with no warning, and being required to fit family responsibilities around unpredictable periods of work. For many, life on the periphery is not a temporary situation; there is no pathway into the core. For the past six months I have been the chair of an inquiry, commissioned by the ACTU, into the phenomenon of insecure work. In hundreds of submissions, and during hearings around the country, we have come across a multitude of stories from people on the periphery.

Although 40 per cent of Australian workers are in insecure work, this is a development of the Australian economy that has avoided proper examination for too long. For people in their late 20s, with children and mortgages and no time to retrain; or older men in their 50s who have lost full-time work, this is their permanent position. Increasing numbers of workers are engaged in unpredictable, uncertain work that undermines their security.

Others fear that the loss of a good secure job will push them into the world of insecure work they see around them. This uncertainty makes people more sensitive to rises in interest rates, power bills and petrol prices. For the first time in our history since Federation, Australia is seeing the development of a working poor. As long as we can retain our relatively high minimum wages and public health system, we will not see the extremes of poverty of the United States, but we will see a society with families where one or both parents work, but who are unable to save or own a home, and remain vulnerable to the slightest financial crisis.

What this means for social mobility and social cohesion is the great unknown, and a subject that is only obliquely referred to in political debate. This is particularly the case when combined with a growing number of inter-generational jobless households. The economic changes of the past two decades cannot be unwound. But the unforeseen consequences of insecure work must be addressed to continue to produce jobs that will preserve the Australian social contract that has provided a decent welfare safety net, and a chance at social mobility, for generations of citizens and migrants.

Changes are needed not only to our employment and labour laws, but to the role of government and the social security and tax transfer systems, to education, training and labour market transitions and, yes, to our trade unions. We are witnessing the emergence of a new working poor

Brian Howe April 20, 2012

Brian Howe is a former deputy prime minister of Australia.

 This is an edited extract of a speech he gave to the National Press Club on Wednesday.

Read more: http://www.theage.com.au/opinion/society-and-culture/we-are-witnessing-the-emergence-of-a-new-working-poor-20120419-1x9z2.html#ixzz1sYkesXq6

Julia’s brilliant backflip
July 2, 2010 – 1:18PM

Mal Maiden dissects Julia Gillard’s new mining tax. What does it mean for business and who is going to pay?

Is this a massive backflip by the government or a brilliant piece of re-engineering that sets Julia Gillard up for an early election? Both.

The new Minerals Resource Rent Tax is almost unrecognisable from the Resources Super Profits Tax it replaces.

Instead of being applied across the entire resources sector, it focuses on only two mining businesses, iron ore and coal, with the existing Petroleum Resources Rent Tax extending to the domestic oil and gas industry, including the fledgling coal seam gas projects in Queensland.

Prime Minister Julia Gillard and Treasurer Wayne Swan at today’s announcement. Photo: Andrew Meares

Instead of being an elaborate scheme that sees the government take 40 per cent of mining profits but also assume 40 per cent of the development costs and risk on each project, it simply taxes the miners at the mine gate, for 75 per cent of their income at that point, at a rate of 30 per cent.

This concession, that the miners pay only 30 per cent of 75 per cent of their income at the mine gate after costs to that point are deducted means that the real new resources rent tax rate is about 22.5 per cent, not 30 per cent as advertised.

Instead of forcing the big miners into a resources tax regime with the big mines still valued at book value, a fraction of their real worth, it gives them a choice (it’s complicated, but here goes): either bring their existing mines into the scheme at book value, in which case they will be able to aggressively create depreciation tax deduction over just five years, and will not be liable for the 30 per cent resources tax until their mine returns have exceeded the 10-year Commonwealth bond rate plus 7 per cent (about 12 per cent currently), or bring the mines in at market value (defined as cash flow plus the risk value of the resource) but write the value down in smaller increments over a longer period, up to 25 years, and have the tax imposed without a hurdle rate. It’s likely that the big miners will opt to inject their assets in at market value. In either case, they can claim what they invest in their mines as they go.

Inspired move

And instead of applying to all mines, the tax also exempts iron ore and coal miners with profits of less than $50 million. This is an inspired idea, and like the proposal to limit the scope of the tax and exclude not just quarries and other low value operations but copper, nickel, gold and bauxite mines it came from the big three miners who were negotiating the deal, BHP Billiton, Rio Tinto and Xstrata.

These two measures see the number of companies affected by the new tax fall from about 2500 under the original proposal to about 320, significantly reducing the risk that the deal will be seen as one cooked up by the big three miners for the big three miners.

The existing 40 per cent Petroleum Resources Rent Tax is also being extended, to cover not just offshore projects but the entire Australian oil and gas industry, including the merging coal seam gas producers and exporters in northern Queensland, and the oil and gas groups will also be able to elect to inject their assets at market value, and expense their development costs as they go.

Gillard makes the call

So if radical change to the original proposal qualifies as a backflip, this certainly is one. But it’s a backflip from a tax proposal that was launched and prosecuted by Kevin Rudd, not Julia Gillard. Treasurer Wayne Swan was involved in the talks this week, but the key figures were Gillard, who in personal calls to BHP chairman Jac Nasser and other convinced the big miners that she was genuine about settling the dispute, and resources minister Martin Ferguson, who Gillard inserted into the process after her appointment as PM.

And it is one that has been achieved at a manageable cost to the budget. The tax take in the first two years to 2013-14 falls by $1.5 billion to $10.5 billion, as the government loads in higher commodity price assumptions that are closer to what is actually being achieved this year, cuts its linked cut in corporate tax by one percentage point to 29 per cent, and axes its poorly received exploration tax rebate.

The deal seems to cover all the bases. It satisfies Gillard’s only condition, that the government’s tax take from the resources boom rise. And it exempts most mines from a new tax, while charging those captured by the regime less than the 50 per cent plus total tax rate they faced under the Rudd version.

The iron ore and coal miners will pay corporate tax after the resources tax has been paid, and when coal and iron prices are high as they now, will face a total tax bill of more than 40 per cent, with a maximum above 45 per cent, according to one person close to the negotiations.

There’s a way to go. The Greens have been making ominous noises about blocking a compromise, for example. But Gillard’s backflip is politically marketable – and an election campaign must surely now be just around the corner.

mmaiden@theage.com.au

Kenneth Davidson
May 18, 2009

Turnbull is wrong, it is not the size of the deficit that matters, but how it is used.

THE political debate about the budget is bizarre. The fiscal strategy is not rocket science. As the budget papers say, the task of budgetary policy is “supporting the economy and jobs now while investing in infrastructure for the future”.

The prime short-term objective of budgetary policy (reinforced by monetary policy) is to balance the economy. In other words whether the budget should be in balance, surplus or deficit depends on the rest of the economy. There is no particular virtue in a surplus budget unless the surplus is designed to offset a potential inflationary gap between expenditure plans and economic capacity.

Today there is a deflationary gap which can be measured by rising unemployment. As the world is experiencing the biggest recession since the 1930s, it isn’t surprising that Australia is running the biggest deficit since the end of World War II. It is also at least arguable that the reason the world is unlikely to experience another Great Depression is because of the willingness of the industrial nations to “pump prime” demand to offset the crisis in consumer and business confidence.

Because the budget accounts for about a third of gross domestic product and sets expenditure and revenue-raising priorities, it is also the major direct government influence on income distribution and the allocation of resources. This in turn influences the growth in living standards.

Yet all the Opposition can do is bleat about the size of the budget deficit. In a truly pathetic budget reply in Parliament last week, the Leader of the Opposition, Malcolm Turnbull, said: “Australians are now paying the price for Labor’s reckless spending” and he contrasted this with the record under the Howard government when “… the Coalition, together with the Australian people, (took) 10 years to pay off $96 billion of Keating Labor debt”.

The Howard government paid off the debt by a slash and burn policy on higher education, public schooling, training and hospitals, as well as the privatisation of Telstra, airports and virtually all government office buildings.

Arguably, the net sale of the overwhelming majority of these assets generated no net benefit to the nation.

The Howard government undermined support for CSIRO and independent university research. The bureau of manufacturing industry was abolished, meaning the future of manufacturing was left to the tender mercies of the Treasury and the Productivity Commission.

This contributed to the destruction of manufacturing know-how and capacity and the blow-out in foreign debt from about $150 billion in 1996 to about $600 billion now.

And, despite the erosion in services that added to household expenses, there was no tax relief. The tax burden rose from 22 per cent of GDP under Labor to a peak of 25 per cent between 2004 and 2006. The diminution of public services, which led to higher private costs in health and education and the rise in the tax burden, was a major factor in the rise in household debt to a record 160 per cent during the Howard era. It is household debt and foreign debt that is the real burden on Australians.

Government debt raised domestically is largely owed to ourselves. If it is borrowed from the Reserve Bank, the interest charged becomes part of the profit of the RBA, which is owed to the Government.

The money borrowed from the public is a burden on us as taxpayers but it is an asset to us as superannuants and as depositors in financial institutions.

Part of the debt will be borrowed offshore. But these borrowings will be largely associated with the necessity to finance the foreign debt burden that grew out of the Howard government policies that undermined Australia’s balance of payments in the first place.

If the budget reply by Turnbull can be taken at face value, he would impose a smaller deficit on the economy than the Government.

This is the path to the Great Depression Mark 11. The budget is already deflationary. The impact of the budget on the economy is measured by the change in the surplus or deficit, not its size.

The net injection into the income-expenditure flow this financial year is equal to 4.4 per cent of GDP (from 1.7 per cent in 2007-08 to -2.7 per cent in 2008-09).

In 2009-10, the net injection from the budget into the income-expenditure flow will be halved to 2.2 per cent of GDP according to the budget papers (from -2.7 per cent in 2008-09 to -4.9 per cent in 2009-2010).

In 2010-11 the forward estimate suggests the budget deficit will contract from 4.9 per cent of GDP to 4.7 per cent, resulting in a cut in the contribution to the income expenditure flow of 0.2 per cent.

Just because the stock of debt will be increasing over the two years, it doesn’t mean fiscal policy is contributing to an expansion in consumer demand and job creation.

One of the oldest confusions in economics is between stocks and flows and there always seem to be plenty of politicians happy to exploit this, rather than educate themselves and the public. This is reinforced by financiers whose prestige and profits would be diminished by a more active fiscal policy underpinned by financial reregulation.

By maintaining the fiction that responsible fiscal management demands balanced or surplus budgets, the opportunity for profit from “innovative financial products” that got the world into the present financial mess is maximised.

Whatever. Both sides of this political debate are reluctant to embrace deficits of the scale necessary to support employment, even though there is little risk that this would promote inflation.

While the cynicism on both sides of this debate is palpable, I don’t think either party is aware that the greatest danger to the prospect of an above trend 4 per cent growth rate after 2011-12 is not the level of debt— which is forecast to be a piddling 13.6 per cent of GDP with an interest burden of 0.6 per cent of GDP — but questionable infrastructure projects such as the $4.3 billion express rail project from West Werribee to Southern Cross Station.

It is not the size of the deficit that matters in terms of the burden on future generations, but how it is used. Households and corporations use debt to enhance their long-term wealth. The same principles apply to government debt. Providing the debt yields a higher rate of return than the cost of borrowing, there is no burden on the future.

Conversely, where governments sell productive assets for a price that yields a lower return to the taxpayer than if the assets and the dividends were kept in public ownership, then the nation is impoverished.

kdavidson@theage.com.au
http://business.theage.com.au/business/cut-deficit-and-bring-on-depression-20090517-b7e6.html?page=-1

Rebecca Smith
May 13, 2009

Rebecca Smith: ”To invest in research is to invest in society’s long-term well-being.”
In the last quarter of 2008, a significant group of Australians was living below the poverty line. For a single person, this meant living on less than $415.06 a week. These people were working full time — 40 hours a week, and probably much more. They received no employer superannuation and weren’t entitled to concessions or pensions.

Who were they? Illegal migrant workers? Sweatshop employees unaware of their rights? No — they were some of Australia’s best and brightest minds: PhD students.

A PhD is a long-term research project. PhD students take up these projects after undergraduate studies. They work for about four years to train as independent researchers with the aim of making a significant contribution to knowledge. If successful, a PhD student is awarded a doctorate (D) of philosophy (Ph) and can begin a research career.

Research into the fundamental questions of science and the humanities is what drives a society forward. The application of the resultant knowledge makes a society healthier, wealthier, happier and more productive. To invest in research is to invest in a society’s long-term well-being.

Four reports into research and higher education were delivered to the Government in 2008, and each recommended increasing the nation’s investment in research and development.

In response, the 2009-10 budget increased funding to science and innovation by 25 per cent. For the basic research administered by the Australian Nuclear Science and Technology Organisation, the CSIRO, the Australian Institute of Marine Science and the Australian Research Council, funds were increased by 8 per cent overall.

These increases will go some way to improving Australia’s gross expenditure on research and development, which was last measured at 2.01 per cent of GDP, below the 2.26 per cent OECD average.

But the budget was another disappointment to PhD students. Their stipends will increase 10 per cent from $20,427 in 2009 to $22,500 in 2010. This is an improvement relative to the 2 per cent increase between 2008 ($20,007) and 2009, but nowhere near what is needed.

The 2008 Parliamentary Inquiry into Research Training and Research Workforce Issues recommended increasing PhD scholarships by 50 per cent to $30,000 a year, and to extend support from 3½ years to 4½ years.

The Cutler and Bradley reviews recommended more modest increases to $25,000 and four years. The Australia 2020 Summit report also suggested formalising research as a career path, like teaching or medicine, and giving researchers the recognition they are due.

The 10 per cent increase is, as Innovation Minister Kim Carr hinted, “as budget permitted”. It’s a reflection of the times and a nod to the advice given to the Government by the reviews of 2008. But it doesn’t acknowledge the true worth of Australia’s researchers to our future prosperity.

Doubling the number of places for PhD students, as the 2008-09 budget allowed, was only half the solution to fulfilling Australia’s future demand for highly skilled workers.

The other half of the solution was to increase PhD stipends. PhD students and the research community were hoping this year’s budget would deliver. It didn’t, and we are still paying our next generation of researchers a relative pittance.

An annual $20,000 or $22,500 PhD stipend (tax-free) is not an adequate financial inducement for talented students who could earn double that amount, and more, by entering the workforce directly after their bachelor’s degree.

If money is what motivates, the result will be that Australia has fewer and fewer researchers in training.

But it is not financial rewards that drive bright, idealistic students into the long and challenging route to their research licences. Those who choose a research career would probably do so regardless of money.

And so we have to ask, is this systematised exploitation of Australia’s young researchers? An out-of-date training model stressed by the economic crisis? A reflection of the entrenched short-sightedness of three-year governments, focused not on building intellectual infrastructure but patching holes? Or an expression of Australia’s sad tendency to shun scholarly achievement and tall poppies? That PhD stipends have remained so low for so long, even in our recent boom, suggests the answer to that.

We could also suggest that a 10 per cent increase to stipends helps students but it helps our politicians more, because, most of all, it helps avoid the embarrassing situation of another financial quarter in which Australia’s future leaders are living below the poverty line.

Dr Rebecca Smith is the founding director of Science Hub Australia, a new organisation for the advancement of Australian scientists and science.

http://www.watoday.com.au/opinion/clever-country-our-brightest-are-kept-dirt-poor-20090513-b3bz.html?page=-1

Malcolm Turnbull
May 15, 2009
The enterprise and energy of Australians and the richness of our resources mean with the right leadership our greatest, most prosperous days should be in front of us.

But opportunities can be seized or squandered. The budget should have laid a foundation for recovery, growth and hope for a better future. Instead, we were offered a counsel of despair setting out no credible plan for economic recovery, a budget so unbelievable the Prime Minister is already running away from it – racing to an early election so that he can get to the polls before the full consequences of his mismanagement are felt.

Last year, the Treasurer was filled with pride as he proclaimed a surplus built by others. This year, he was so ashamed he could not bring himself to even mention the $58 billion deficit he created. He could not utter the words “$188 billion of net debt – the highest in our history – double the record under Paul Keating”. That’s $9000 for every man, woman and child in Australia.

The Prime Minister’s reckless borrowing and spending today is guaranteed to deliver higher interest rates and higher taxes in the future. Debt has to be repaid with interest – whether it is a family’s credit card, or the credit card of the nation. How many years will it take us to pay off hundreds of billions of dollars of Rudd Labor debt?

It didn’t have to be this way. Australian didn’t have to embark on this irresponsible, dangerous course of high deficits, high debt, and high unemployment. There was a better way forward, involving less debt and less risk.

Our plan for recovery will be based on four key principles: protecting and creating jobs; no more government debt than necessary; targeted spending at jobs and building infrastructure; and supporting private enterprise and small business as drivers of growth.

Labor has no strategy to return the budget to surplus other than hoping that “something will turn up” – in this case, an incredible six successive years of above-trend growth. Nobody believes this scenario is credible.

Australians deserve an honest appraisal of the nation’s circumstances. We will appoint an independent commission to determine what levels of expenditure are sustainable and consistent with the need to address intergenerational equity. We would create an Australian version of America’s Congressional Budget Office, which has for many years provided the Congress with objective advice and analysis on fiscal policy.

Governments never welcome greater scrutiny, and I’m under no illusion this proposal will be greeted with any great enthusiasm by the Prime Minister and the Treasurer. But it would contribute greatly to a better-informed debate about fiscal policy alternatives and the consequences of different choices and trade-offs.

This deficit is already too big – we do not want to make it bigger, but there is one savings measure in this budget which we will oppose. The changes to the private health insurance rebate are the latest phase in Labor’s unrelenting war against private health insurance.

Every Australian knows the cost of public health is growing, and as our population ages the need for more self-reliance becomes greater. This broken promise will directly hit the family budget of at least 1.7 million Australians and indirectly will result in higher premiums for all Australians. And as private health insurance costs go up, more pressure is put on public hospitals.

This broken promise contributes $1.9 billion of savings over four years – when total revenues will exceed $1200 billion. But the Government could comfortably afford to retain the rebate by increasing the amount of excise collected on tobacco by 12.5 per cent. Tobacco is the single most preventible cause of ill health and death in Australia.

There’s a tough choice for a weak Prime Minister: raise $1.9 billion by making health more expensive and putting pressure on the public system or do it by adding about 3 cents more to the price of a cigarette and taking pressure off the public system.

Australians took on trust this Prime Minister and Treasurer, that they were economic conservatives, and they genuinely wanted this Prime Minister to succeed. Yet today, Australians see our national balance sheet drowning in red ink.

Our job as political leaders is to build hope for the future. For at least 60 years our proudest boast as a nation is that no generation of Australians has been left worse off than their parents. Yet, tonight, we cannot avoid the question: will we be the first generation of Australians to bequeath to our children a lower standard of living?

To what extent are our actions today consigning the next generation of working Australians to higher taxes, higher interest rates and higher debt – and a lesser opportunity to give their families what we ourselves enjoy in life?

When the time comes to answer for these failings, who will be judged the guilty party? That day of reckoning is approaching for the Rudd Labor Government.

This is an edited extract of the Opposition Leader, Malcolm Turnbull’s, budget address in reply last night.

http://www.smh.com.au/opinion/a-pile-of-debt-for-future-generations-20090514-b4s2.html?page=-1

14 May 2009 8:07am

Many employers will be faced with a new battle to retain their best workers after the Federal Government announced plans to invest $22 billion of its 2009/10 budget in the nation’s infrastructure, says Hewitt’s Australia and New Zealand managing director, David Brown.

“We will see some talent migration due to opportunities that will open up in the infrastructure sector,” Brown told HR Daily.

“Organisations that win tenders will take advantage of the tight talent market.”

Engineers, scientists and others with specialist skills will be in particular demand, he says, and will be difficult to retain as new projects get off the ground.

In the budget papers released on Tuesday night, the Government says that the $22 billion will be invested in roads, rail and ports; education and research projects; hospitals and other treatment facilities; and a clean energy initiative.

It will also contribute $4.7 billion towards the development of a superfast broadband network.

The Government has also committed to:
establishing a paid parental leave scheme (see related article), in which eligible parents will receive 18 weeks’ paid leave at the minimum wage (currently at $543.78) after the birth or adoption of a child;

investing nearly $150 million over four years in the implementation of Fair Work Australia, plus $14.3 million to inform and educate employers and employees on the new workplace relations legislation;

ditching the alternative dispute resolution assistance scheme, in favour of the “less legalistic” approach to dispute resolution allowed for in the above legislation;

investing $1.5 million in training initiatives;

increasing the small and general business tax break to 50 per cent for eligible assets;

increasing the retirement age from 65 to 67 by 2023; and

cutting concessional superannuation contribution caps.
Baby boomers left short with superannuation instability
A reduction in the concessional contribution tax limit – from $50,000 to $25,000 – could leave workers closer to retirement with less opportunity to top up their super and make up for recent significant investment losses, according to Mercer’s chief executive, Peter Promnitz.

Long-term changes to pension-age policy are necessary, Promnitz says, but the concessional cuts appear to have been made in isolation from a clear retirement-income framework.

“Tinkering with the system and making piecemeal changes will potentially damage Australians’ confidence in the stability of superannuation rules,” he says.

“Halving the cap on concessional contributions may provide short-term budgetary relief but lacks a long-term plan or foresight.

“Anyone playing catch-up for their retirement income – baby boomers nearing retirement or women out of the workforce for extended periods – will be hit by these changes.”

HR must “recalibrate” retirement planning
Brown says that HR personnel will now need to “recalibrate and think a little harder about retirement planning”, with changes to the superannuation platform and the increase of the retirement age likely to be the areas where the budget has its biggest impact.

The new super rules will affect organisations at all employment levels, he says, leaving employers with the difficult task of determining how to factor in contributions and how to “fit” super into job offers or frame it as a perk.

He says the budget papers also hint at the restriction or removal of executive share options, in line with the general tightening of executive remuneration, although the language used in the budget does not make the nature of the new restrictions particularly clear.

Brown notes that the increased retirement age will be a boon to baby boomers who haven’t yet prepared for their exit from the workplace, but that it could create a “squeeze” as Gen X employees, working their way through the ranks, are blocked from opportunities they would have otherwise expected.

Mixed feelings from business advocate
ACCI chief executive Peter Anderson says that while a boost in infrastructure spending is a “big plus” for employers, the budget doesn’t go far enough to take the pressure off the cost of doing business at a time when the private sector is “doing it very tough”.

Cuts to the skilled migration program could damage labour-market efficiency, he says, and the paid parental leave scheme will expose employers to indirect labour and administrative costs.

“It’s a budget aimed at these tougher times,” he says, “but the mix of big spending and moderated saving is a risky high-wire act.”

Employee advocates are a little more enthused.

“This is a budget for jobs, jobs and jobs, with a bit of tough love on the side,” says ACTU president, Sharan Burrow.

“The achievement of a national paid maternity leave scheme is an historic win for working women.”

Adele Horin
May 14, 2009

“I’m jack of it “…sewer repairer Richard Bishop wants to retire but the later eligibility for the age pension will affect his plans. Photo: James Brickwood

RICHARD BISHOP began working at 14 and after decades of hard manual labour he is keen to retire as soon as possible.

“I’m jack of it,” said the 57-year old who repairs sewers for a living. “I’ve just had a knee reconstruction and by the time I’m 60 I don’t think I’m going to be getting any better. I want to enjoy what I’ve got left.”

Mr Bishop’s plans to put his feet up have been derailed by the Federal Government’s plan progressively to raise the pension eligibility age to 67 from 2017.

He admits the plan will hurt him and he is not alone – most Australian workers will not applaud the initiative, according to social researcher Julia Perry.

“Employers don’t want older workers, and a lot of mature-age workers want out, too,” said Ms Perry, who produced the Too Young To Go report on older workers for the NSW Government.

To prefer to work beyond 60 has always been a minority taste. At most, 25 per cent of mature-age workers enjoy their jobs so much they want to keep going beyond the usual retirement age, research consistently shows. “Only a minority of workers have the kind of job that is exciting or fulfilling,” said Sol Encel, emeritus professor at the University of NSW who is an expert on the ageing population. “Work is a chore for most people, especially as they age.”

Yet most experts agree the decision to lift the pension age is a necessity in the absence of higher tax rates to fund burgeoning health and aged care services, as well as pensions and superannuation concessions for a greying population. Australia is following a trend set by the US, Germany, Iceland, Norway and Denmark. In Britain 68 is the age for pension eligibility.

Australia’s plan will affect workers now aged 57 or younger. Those aged 55.5 to 57 will not be eligible for a pension until they are 65.5 and those aged 52.5 or younger not until 67.

Australians appeared to be resigned to their fate, Professor Encel said.

In the past decade, workers have reversed the trend to early retirement. Since 1998, the proportion of men aged 60-64 in the workforce has risen from 43 per cent to 52 per cent, and the proportion aged 65-69 has jumped from 19 per cent to 27 per cent, with most working part-time. For women the proportion of those aged 60-64 in work has almost doubled to 36 per cent.

But most, Professor Encel said, were economic conscripts. “The boomers have come to realise they don’t have the money to retire at 60. They’ve got responsibilities upscale and downscale – ageing parents and dependent children,” he said. “And they know if they have to rely on the pension, they’ll suffer a dramatic drop in lifestyle.”

Ms Perry said it was regrettable to compel low-skilled and low-paid workers, many with health problems, to work longer for the pension if highly skilled workers continued to be able to retire early by accessing superannuation at 55 or getting it tax free at 60.

The Henry review of the tax system recommended the preservation age for super be aligned with the age pension age.

If employees are expected to work longer, employer attitudes will need to change, experts say. “It’s a good idea to encourage people to work longer but you have to encourage employers to employ them longer,” Ms Perry said.

David Murray, 57, a company director, said though he was unlikely to be affected by the change in the eligibility age, he had lost retirement savings in the downturn. “Most people have lost 25 to 30 per cent of their retirement funds, so it’s going to take them another four to eight years before they can start to recoup some of that. Most retirements have been pushed out anyway.”

with Jonathan Dart

http://www.smh.com.au/national/too-young-to-retire-and-too-old-to-work-20090513-b3dt.html?page=-1

Misha Schubert, Daniella Miletic and Peter Martin
May 14, 2009

AUSTRALIANS could be forced to wait until they are 67 to get access to their superannuation savings under a radical proposal to be considered later this year by the Rudd Government.

A day after flagging a rise in the pension age to 67, the Government has confirmed it will look at introducing the same age limit for super access – in effect making 67 a universal minimum retirement age.

Bringing the superannuation age into line with a higher pension age was recommended by Treasury secretary Ken Henry in a review published with the federal budget papers on Tuesday.

Dr Henry’s plan, for a phased lifting of the super age from 60 to 67 from 2024, is part of a broad push to keep Australians at work longer to help the nation cope financially with its ageing population.

A spokesman for Treasurer Wayne Swan said the Government would “thoroughly assess the findings of the Henry review when they are delivered at the end of the year”. But he stressed that the super issue would not be considered before then.

The plan could be even more controversial than the budget decision to lift the pension age.

Jane Chisholm, 53, was unhappy enough at the idea of having to stay in the workforce beyond 65 before she could even think about applying for the age pension.

“They are finally getting us baby boomers back, I guess,” said Ms Chisholm, marketing manager of Gasworks Arts Park in Albert Park.

But she expressed stronger misgivings at the proposal to lift the super access age. While she understood the need to prepare the nation for people living and working longer, she said the super proposal was cruel.

“People like to think they could have control of the money that is there for their retirement,” Ms Chisholm said. “If you want to go travelling and do some of the things you want to do, it’s just putting it closer to the 70 mark, when you can’t count on your health.”

The move to raise the pension age sparked fierce debate, with critics saying it would entrench inequality and force more old people into poverty.

Mr Swan said the decision was needed to keep pensions sustainable. “Currently we have five workers in Australia for every person aged 65 and over and by 2050, that will be 2½,” he said in a post-budget interview.

“Life expectancy has increased by 23 years since the age pension came in,” he said. “Twice as many people are going on it for twice as long.”

Opposition Leader Malcolm Turnbull supported the pension age increase, saying his only concern was that it would not come in soon enough.

National Seniors also backed the move, noting that it would not come in until 2023.

But critics highlighted the contrast between the rich getting access to super at 60 (at least under existing rules), while the poor were being forced to work or stay on the dole until 67.

The Combined Pensioners and Superannuants Association warned the move would add to poverty among over-65s and force some to toil longer at hard physical labour. “People in their 50s and 60s are often unable to find adequate employment,” said the association’s policy officer, Charmaine Crowe.

But she backed the idea of aligning the pension and superannuation ages, saying it would ensure more equality between richer and poor retirees, keep skilled people in the workforce longer and boost super savings.

Sydney University workplace relations centre analyst Michael Rafferty said increasing the pension age would entrench inequality and force some of the hardest working people in the world to work even longer.

He also pointed to what he said was a disparity between the pension decision and the mild cuts in the budget to tax breaks on superannuation. “The rich have been hit with a feather duster and the poor have been told you are going to work longer and harder,” he said.

Australian Council of Social Service chief Clare Martin said lifting the pension age to 67 might disadvantage “lower-income, mature-age people with limited job prospects, who will have to remain on lower income support payments for longer”.

UNSW Centre for Pensions and Superannuation deputy director John Evans said the pension age rise was a “knee-jerk” decision that could damage the vulnerable.

But Brotherhood of St Laurence chief executive Tony Nicholson said raising the pension age was inevitable to ensure the long-term sustainability of the system.

David Knox, a partner at Mercer Consulting who proposed the 67 pension age in a paper prepared for the Committee for the Economic Development of Australia, also welcomed the decision.

But he expressed dismay at the proposal to lift the super preservation age to 67.

“The superannuation access age should generally be about five years younger than the pension age in order to provide flexibility. You cannot assume that everyone will retire at the same age, in fact today most people retire before 65.”

Superannuation access is at present available at 55, with the age set to climb to 60 by 2024. The Henry Review recommends a further staged increased to 67, after which it would remain aligned with the pension age in order to stop Australians spending their super payout quickly and then getting access to the part-pension.

http://www.theage.com.au/national/push-to-lock-up-superannuation-savings-until-age-67-20090513-b39y.html?page=-1