Increasing the access age for superannuation and the age pension are one of the limited policy levers the Government has at its disposal to boost economic growth, Grattan Institute chief executive John Daley told an Association of Superannuation Funds of Australia (ASFA) luncheon.
Daley said Grattan Institute research indicated that increasing participation rates among older workers and females, and tinkering with the tax mix, were the only government policies which could have as significant an impact on economic growth as was needed as Budget pressures increased and real incomes declined.
"Sooner or later governments are going to wake up to the fact that this is the single biggest weapon in their armoury, and over the longer term it will be difficult to resist using it, and indeed I would argue they should," he said.
Governments would face increasing pressure from the older population as it became a larger proportion of the population and had more political sway, Daley said. But to reach surplus, economic growth had to be stimulated — which meant someone would always be worse off.
"We're going to have to do a lot better and I'm guessing that's not going to be wildly politically popular," he said.
Of the $14 billion real increase in age pensions over the last decade, $6 billion was the result of specific policy choices to increase the age pension above weekly earnings and to expand eligibility, according to Daley.
"In the last decade, specific interest groups could stymie reform by saying ‘well, there's a loser here and therefore it's bad'.
"It's no longer going to be good enough to say if the Government does x, y, z, some people have less money for their retirement.
"To be blunt — that's kind of too bad."
The mining boom disguised Australia's underlying structural Budget by boosting its cash balance, but as the mining boom wound down and real incomes decreased, questions about inter-generational equity and who would pay for government spending would become a larger part of the conversation, Daley said.
"Retirees, like everyone else, are going to have to share their part of the burden — and that's the world I suspect we'll be in," he said.
Combined with increased participation rates, increasing the access age to 70 could add 2 per cent to economic growth, according to Daley.
