RECENTLY there has been extended debate about whether the age pension is sufficiently high to allow older Australians to attain an acceptable standard of living. This has been partly driven by lobby groups for seniors, and partly by the federal government’s review of pensions. The underlying question is whether the benefit paid to single aged pensioners is enough for them to live on.
Recent research has found a substantial proportion of older Australians living in poverty (23.9 per cent), but the poverty rate for single older people - at 46.5 per cent in 2008-09 - is the highest of any group. Many of these are living on government benefits (about 73 per cent of them), with little or no ability to supplement their income through part time work. This means it is imperative to ensure that the benefit provided to single aged pensioners provides an adequate standard of living. At present, single aged pensioners receive about 60 per cent of the couple aged pension. This rate is lower than the average across all OECD countries, which is 63 per cent of the couple rate. It is also lower than a poverty line set at half the median Australian income.
Recently, advocacy groups in Australia have suggested that an aged singles pension of 66 per cent of the couple rate is a target that Australia should be aiming for. But how many pensioners will remain in poverty if the single age pension was increased to 66 per cent of the couple? What effect will this change have on the proportion of pensioners in poverty?
Recent research by NATSEM at the University of Canberra models what would happen to poverty rates for single aged pensioners if the pension was increased to 66 per cent of the couple pension; and how much this would cost the Commonwealth government. This is then extended to look at the effect for small areas in Australia.
The policy option modelled was to increase the single aged pension to 66 per cent of the couple aged pension. This would add about $30 per week to a single aged pension. The total cost to the government would be about $1.3 billion. This policy change would reduce the poverty rate for single aged pensioners from 46.5 per cent to 36.5 per cent. The benefit paid is still just below the poverty line, but by about four per cent rather than the 14 per cent gap before the change.
Extending this analysis to small areas in Australia, we found that many of the areas that experienced below average decreases in poverty rates fall on the edges of Australia’s capital cities, in areas like Hornsby in New South Wales and Manningham in Melbourne, and that many rural areas experience above average decreases in poverty (Bourke in NSW and Cook in North Queensland).
But many remote areas in Australia have high poverty rates among lone older people allied with below average decreases in poverty rates (Longreach in Queensland and Deniliquin in New South Wales) following the policy change. This suggests that single aged persons living in such areas are more likely to be wholly dependent upon the age pension, with no or few private resources of their own to supplement their government pension.
Overall, the main message from this report was that increasing the single age pension to 66 per cent of the couple age pension was not enough to bring the single age pension above a poverty line calculated as half median disposable income. While it reduced the poverty rate for older single people, nearly 37 percent were still in poverty. What it comes down to is how well we as a society treat our aged, and what is a reasonable amount to live on. •
Robert Tanton is Principal Research Fellow at NATSEM and co-author of the report Old, Single and Poor: Using Microsimulation and Microdata to Analyse Poverty and the Impact of Policy Change Among Older Australians.