Hey there, time traveller!
This article was published 25/7/2014 (650 days ago), so information in it may no longer be current.
CANBERRA, Australia -- Australian Treasurer Joe Hockey wants to raise the nation's retirement age to 70, the oldest in the world, to prevent an aging population from draining state coffers. Miner Noel Chatterton laughs at the idea.
"Good luck with that," said the driller, who at 48 will be among the vanguard of workers who would be affected by the proposed change. "My hands are already about stuffed. The way my body is, I'll be lucky to be able to work until I'm 60, let alone 70."
Hockey is part of the Liberal-National coalition that won power in September pledging to end what he called the nation's "age of entitlement" and repair a budget deficit forecast to reach ($47 billion US) this fiscal year. Australia is leading the charge for a group of advanced economies from Japan to Germany that are pushing up the retirement age to head off a grey time bomb caused by a growing army of pensioners and a declining pool of taxpayers.
The ratio of working-age Australians to those over 65 in the world's 12th-largest economy is expected to decline to 3:1 by 2050 from 5:1 in 2010. In Japan, it's already below 3:1 and in Germany, it's close to that level, the International Labour Organization says.
"While Australia is the first to raise the age to 70, it won't be the last," said Steve Shepherd of international employment agency Randstad Group in Melbourne. "The world will be watching this."
Australia's 2.4 million state-retirement-age pensioners draw about $37.5 billion a year, making it the largest government spending program. That's forecast to rise 6.2 per cent a year during the next decade, according to an independent review commissioned by Prime Minister Tony Abbott. The program provides the main source of income for 65 per cent of retired Australians.
Under Hockey's plan, Australians born in 1966 or after will have to work until they are 70, from 65 now, before they can draw their government retirement allowance.
Failure to rein in the program would put a greater onus on younger workers to fund it through increased contributions and taxes. Raising the pension age may also mean more competition for those just starting in the workforce. Unemployment among those ages 15 to 24 reached a 12-year high of 13.1 per cent in May, more than double the national average of 5.8 per cent.
The decision to increase the retirement age is only going to exacerbate unemployment among the young, said Chris Riley, chief executive of Youth Off the Streets, a Sydney organization that provides accommodation and counselling.
"We're wilfully creating a jobless generation," he said.
But, said Saul Eslake, Bank of America Merrill Lynch's Melbourne-based chief economist for Australia, the longer years at work can help boost the economy.
"The notion that there is only a fixed amount of work to be done and if someone stays in the workforce for longer there will be less for someone else doesn't ring true," said Eslake. "If people are working longer, they will be earning and spending more, which creates more jobs."
-- The Bloomberg News