AUSTRALIA - The Australian Labor Party's bungled ‘65 at 65' super reforms have lost a great deal of shine after a massive A$8bn error in the policy was exposed.
Opposition leader Mark Latham had promised that, if elected, Labor would ensure that the basic government aged pension would not fall below 25% of male average weekly ordinary time earnings.
But the aged pension is currently linked to male total average weekly earnings, 11% less than Labor’s higher wage measure. This would have cost Labor $2bn a year, or $8bn over forward estimates.
Labor was quick to retract the statement. Labor’s ‘65 at 65’ policy hinges on a target pension of 65% of gross income at 65 and the eventual abolition of contributions tax, starting with a 2% reduction to 13% over four years.
But the government took in $5.6bn in super contributions tax in the 2003/2004 tax year and questions are being asked as to how this is going to be funded.
Labor’s policy is indeed light on detail and heavy on spending, rebuked assistant treasurer, Helen Coonan.
“’65 at 65’ is a great catch cry, but how do you get there?” said Towers Perrin managing director Australia, David Solomon.
“You need a lot more money to put into the system. There is a general consensus that the 9% [contribution] needs to move to 15%, but the problem is that you have a system that nobody understands.”
Both the government’s and Labor’s endeavours to simplify the system have to date resulted in further confusion and distrust from the public. “Quite frankly, the concessions aren’t there,” said Solomon.
With 70% of Australian retirees getting by on a weekly income of less than $320, according to research from AMP, the system is in need of a real overhaul that neither the government nor Labor has yet measured up to.
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