26 Nov When I’m 70 (Not 64 !!!)

As The Beatles remarked back in 1967
When I get older losing my hair, Many years from now,
Will you still be sending me a valentine Birthday greetings bottle of wine?
If I’d been out till quarter to three Would you lock the door,
Will you still meet me will you still greet me when I’m 64.

The recent Productivity Commission report recommends increasing a persons qualifying age for an Age Pension to 70 in future to offset rising costs & to increase workforce participation rates (i.e. get more people working & working to an increased age). Currently Age 65 is the qualifying age for an Age Pension , but this is being progressively increased to 67 as from 2017.

What really needs to happen to increase Australia’s economic well being is a combination of the 3 P’s (not the 5 !) – participation, population & productivity.

To achieve these aims the Government need to look at reforming taxes (basically increasing the rate of the GST from 10% and/or include all items in the GST mix – in concert with this cut personal income and company tax rates & provide greater levels of benefits for lower income earners &/or welfare recipients) and lifting the labour force participation rates of women and older males. The Grattan Institute in 2012 advocated that by only changing the tax mix and raising workforce participation rates that this will make a big difference to the economy – and consequently to tax revenues collected and the Federal Budget bottom line.

Changing the tax mix would lift productivity (work harder/smarter & get paid more & pay less relative income tax compared to present marginal tax rates). These people in likely earning more monies will then spend more & thus pay a greater share of GST (Australians tend to as a rule live to their income. not the other way around). Cutting company tax would increase the profitability of business investment & encourage new investment by business. That would lift labour productivity through the introduction of new technologies used & through new capital equipment. In turn business would be encouraged to increase investment in research and development and by making production more capital intensive. Increasing the GST may also indirectly promote or encourage saving, as it would be likely that more of the returns on investment would flow to Australians rather than foreign investors.

As I have remarked previously I consider that the current & future governments of Australia are going to have problems in growing their revenue unless they are prepared to make changes.

The Productivity Commission has estimated that the number of Australians aged 75 years or over will increase by 4 million from 2012 to 2060, lowering labour participation from 65 to 60 per cent. By increasing the eligibility age of the age pension to 70 years the government would save approx. $150 billion over the period from 2025-26 to 2059-60 and increase participation rates among older workers by around 3 to 10 per cent, the report found. Without changes to government policy, the report’s authors say net national income per capita will grow by 1.1 per cent a year over the next 50 years compared with 2.7 per cent over the past 20 years.

So a Government needs to tell it’s constituency that it needs to increase taxes & also that they must work longer & smarter before they can reach a new Age Pension qualifying Age – or in the immortal words of John Lennon & Paul McCartney –

Every summer we can rent a cottage in the Isle of Wight
If it’s not too dear
We shall scrimp and save
Grandchildren on your knee
Vera, Chuck & Dave Will you still need me, will you still feed me
When I’m sixty-four (Seventy or Seventy Five…..?????)
Ho!