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Australia could be crippled by pension spending, says Tony Abbott audit chief

Monday, 27 March 2017

Australia could be crippled by pension spending, says Tony Abbott audit chief
Photo: Brook Mitchell

Original article by Peter Martin in the Sydney Morning Herald

Australia runs the risk of becoming the new Japan, "crippled by pension spending" unless it winds back the entitlements of a swelling aged population.

Business figure Tony Shepherd, who chaired the Commission of Audit for the incoming Abbott government, raises the prospect in the first of three studies intended to update the commission's work for the Liberal Party-aligned Menzies Research Centre.

The study says Australia's age dependency ratio is set to climb to the same level as Japan's by the middle of the century, when there will be only 2.7 people working to support each aged Australian compared with 4.5 people today.

On current settings 80 per cent of those retirees will be entitled to a full or part age pension, about the same proportion as today, after half a century of compulsory superannuation.

By the middle of the century there will be only 2.7 people working to support each aged Australian, it is predicted.
By the middle of the century there will be only 2.7 people working to support each aged Australian, it is predicted. Photo: Greg Newington

Spending on "non-revenue-generating payments" such as social security, defence and health, was forecast to grow faster than spending on "productive investments" such as transport and communications.

"Failure to proactively manage government expenditure risks eroding the pool of available funds both now and into the future for value-generating investments by locking it into non-revenue-generating recurrent spending," the study says.

Writing to Menzies Centre supporters, the head of the review's secretariat, Andrew Bragg, says the new Shepherd reports will do things differently by first outlining problems, then in June releasing options papers detailing possible solutions, and then in September a final blueprint.

The first report, Statement of National Challenges, will be launched in Sydney's Parramatta on Monday, a location chosen because western Sydney was the "heartland of Australian enterprise".

Although it offers no solutions, it says the current level of government spending is "simply unaffordable". The welfare system is described as "complex and potentially unsustainable".

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