The generous history of pensions

We can all be grateful that Bob Carr has finally retired at 66; imagine the cost to the nation if he worked to the age of 70.

After a good few days of hilarity over the Bob Carr diaries it was back to earth yesterday as the rapidly greying Treasurer Joe Hockey warned that the retirement age would have to increase beyond the 67 to which it is increasing already.

What about 70, asked Barrie Cassidy on Insiders. Well, yes, maybe we will have to work for another three years, replied the Treasurer.

Of course the retirement age should increase. When it was set at 65 in 1910 that was about the average male life expectancy; now residual life expectancy at 65 is 20 years for males and 22 for females.

This is a wonderful thing, for sure, but unaffordable thanks to the march of medical progress combined with regular bouts of political generosity (with the greatest generosity, of course, towards retired politicians).

Indexation of the pension was introduced in 1933, repealed in 1937 and reintroduced in 1940.

In 1969 the means (income) test reduction was cut from 100 per cent to 50 per cent. In 1975 the income test was abolished for those over 70; in 1985 the assets test was introduced, but the family home left out entirely.

Paul Keating introduced mandatory super in 1992 but not only let us keep the money, rather than put it into a sovereign wealth fund, he made it possible to blow the lump sum on world travel at retirement so we could still qualify for the pension.

Perhaps the most damaging change of all was the 1939 creation of the Commonwealth Department of Social Services which took over administration of pensions from Treasury. DSS and its minister thus became a powerful advocate in cabinet for the nation’s pensioners as well as their paymaster.  

In general the history of pensions in Australia is one of always giving when times are good, or even just fair to middling really, and never taking away.

Will the current Treasurer really take way? Perhaps, but as the previous Treasurer did -- from a date in the future so far off as to only affect people not thinking about retirement so they won’t get mad.

In any case, it won’t help the budget now. With significant tax increases more or less ruled out, the budget must be repaired with spending cuts, and even then Joe Hockey has an arm tied behind his back.

Like the previous Labor government, this one has a last-minute Prime Ministerial panic to deal with.

For the ALP it was Julia Gillard’s “there will be no carbon tax under a government I lead”.

For the Coalition it is Tony Abbott’s “no cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS”, in an interview on election eve.

They almost made it to election day, but then Abbott panicked at the final hurdle.