Pensioners should pay their own pension!

Recommendation from the Australian Chamber of Commerce and Industry

The Australian Chamber of Commerce and Industry (ACCI) has released its Australian Chamber Pre-Budget Submission 2016-17 report.

In its Economic Reform Agenda section, the report says,

“Recommendation 2.1: Economic reform agenda.

The Government should embark on a comprehensive reform agenda that addresses tax reform, infrastructure reform, deregulation (particularly in relation to workplace relations), ongoing barriers to trade and flaws in the education and training system.”

It goes on to say, “Much of Australia’s prosperity is the legacy of past reforms and recent record demand for commodities. Australia’s growth is impeded by poor public policy, including an unsuitable tax system, excessive regulation, poorly targeted infrastructure investment, ongoing barriers to trade and a flawed education and training system.”

Translated, this means that previous governments have created reforms that are still having a lasting effect on Australia. Combine these previous reforms with the recent record demand for commodities and this is what has kept Australia afloat, but now the demand for commodities has waned, we need to reform policy again to suit our impediments.

The report goes on to say, “Without comprehensive economic reform to address these impediments, Australia’s national income growth will likely slow substantially, meaning lower profits, smaller pay rises and weaker government revenue.

While comprehensive reform is not the focus of this submission, the key priorities are straightforward.”

Under the Fiscal Strategy section, the report makes recommendations as follows;

“The Government should consider transforming pension payments to owner-occupiers into a loan that is recoverable against their property when it is sold, potentially with a residual value that would allow pensioners to access equity for other purposes, such as aged care. While it seems prudent to allow retirees to maintain a minimum residual value, very little of the equity in owner-occupied housing is currently being drawn down for other purposes. A similar reform has been suggested by the Centre for Independent Studies, including coverage of the family home in the pension assets test complemented by a guarantee supporting pensioner homeowners accessing reverse mortgages for their homes. Any changes could be introduced via a transitional process whereby existing recipients can maintain the pension under current arrangements whereas the tightened asset test applies to pensioners after some date in the future.”

So, let me understand this correctly. Not only do pensioners work and contribute to their own pension through income tax over their whole working lives, they now have to pay again for their own pensions with their own family home and deprive their family of their estate that they can pass on when they die?

Not bloody likely!

This is a triple whammy. Pensioners have worked and paid their taxes, now it is suggested that they access the equity in their home to pay themselves a pension which really isn’t a pension, but money borrowed against their own home, which they paid for and now they are paying for again. And, to top it off, the families pay for their parent’s pension through the deprivation of their estate from their parents.

There is another, more sinister aspect to this suggestion that underpins a different problem that the government is likely to face very soon.

Australia’s personal debt is at a record high and as a result, people will slow down (which has already started) on borrowing and spending as they are forced to live within their means due to high interest charges and payments of overzealous loans and credit card debt. This will result in money becoming more scarce and will create a recession for Australia. In ours and the world’s monetary system, money is created (yes, created) by the banks through debt. If nobody borrows any money, then no money will be created.

By getting pensioners to borrow against their own property, they will be creating the money that Australia needs to avoid a severe recession. Sounds like a noble cause, but the plan falls down when the pensioner dies or has to move into permanent care facilities and the bank then sells the property and collects all of its interest and fees and leaves the family with virtually nothing. Again, the banks win and the government dodges a bullet – at least for the next ten to twenty years. What then? Who cares, it will be somebody else’s problem then.

This is just so typical of the narrow minded, short sighted view of the real and underlying problems that face Australia in the near and not so near future.

What is required is a holistic view of where we are now as a nation and where we want to be in the next twenty, thirty, forty and fifty years. We actually need to rethink how we govern, how we treat our social welfare participants, our workers, our public sector employees and especially how we treat our aged pensioners. It will take a huge by-partisan collective of people working together to solve these problems for our future. Unfortunately, our two party governmental system is just not built for this type of collaboration. Maybe it’s time for a workable alternative.

Darryl Bothe

The full report can be found here.

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