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Labor says basis for payments cuts undermined

PROJECTIONS showing federal spending on welfare payments falling over the next decade has sparked a ­renewed row on budget cuts.

PROJECTIONS showing federal spending on the pension and other welfare payments falling over the next decade has sparked a ­renewed row on budget cuts.

The Intergenerational Report shows spending on age and service pensions is predicted to fall from $2000 per person in 2014-15 to $1900 in 2024-25, before rising to $2200 a decade later in constant dollar terms.

The IGR said as the Australian superannuation system matured, and compulsory contributions increase­d, many workers would retire with much larger super ­balances and the proportion of part-rate to full-rate pensioners was expected to increase.

The IGR cited financial system inquiry figures showing the size of the superannuation industry would grow from $1.84 trillion to $9 trillion by 2040.

INTERACTIVE: The InterGenerational Report

Opposition families spokeswoman Jenny Macklin said the ­report undermined the entire basis for the government’s budget cuts.

“The report shows that total government payments to individuals are already falling under current policy settings,’’ she said. “Government spending on New­start, Family Payments and the Disability Support Pension are already projected to fall over time as a percentage of GDP, from 4.5 per cent now to 3.4 per cent in 2055.’’

But Social Security Minister Scott Morrision said Labor “just wants to continue the spendathon which the IGR shows would put Australia on the Greek trajectory’’.

“The government wants to preserve the safety net bequeathed to our generation for future generations, which will require sensible changes implemented over time,’’ Mr Morrison said.

The IGR shows the number of people receiving the Age Pension will fall from 70 per cent to 67 per cent over the next 40 years, as we confront an ageing population.

It argues that, without reforms to the pension, spending on the benefit will rise from 2.9 per cent of GDP now to 3.6 per cent of GDP in 2054-55.

The government wants to raise the aged pension qualifying age to 70 by July 2035, compared with Labor’s legislated rise in the pension age to 67 by 2023.

With that policy and lower index­ation rates for pensions, the IGR predicts spending on age and service pensions will fall from 2.9 per cent of GDP to 2.7 per cent in 40 years.

However, the IGR says the ­government hopes to restore ­pegging indexation to average weekly earnings instead of the Consumer Price Index from 2028-29, when the surplus returns to 1 per cent of GDP.

The IGR predicts the number of people older than 70 will almost trip­le over the next 40 years, reaching about seven million by 2055. Under proposed policy scen­arios, Australian government aged-care spending is projected to rise from 0.9 per cent of GDP to 1.7 per cent of GDP in 2054-55, a rise of $80 billion in today’s dollars.

The number of people aged between 65 and 84 is projected to rise from 3.1 per cent now to 7 per cent in 40 years. The proportion of ­people older than 85 will rise from 0.5 per cent of the population now to 1.9 per cent in 2054-55.

The Australian Institute of Superannuation Trustees called on the government to review its proposal to lift the Age Pension eligib­ility age to 70 by 2035.

Original URL: https://www.theaustralian.com.au/national-affairs/in-depth/intergenerational-report/labor-says-basis-for-payments-cuts-undermined/news-story/58be9dc7d575f153939e9326f003c4d9