Joe Hockey says Australia has no choice but to take tough decisions in the federal budget, giving his clearest signal yet the pension age will rise to 70 in the May budget and holding out the prospect of future governments not being able to afford medicine for sick children.
Fairfax Media reported on Saturday that a rise in the pension age to 70 was under "active consideration" by the government, while changes to the indexation of pensions to slow the rising cost of the payment could also be made.
On Sunday, Mr Hockey said his generation will have to work for longer because there will be serious future budgetary stresses from an ageing population.
“That’s certainly one of the issues that needs to be addressed,” Mr Hockey told the ABC’s Insiders.
“It may be the case that my generation has to work for an extra three years … the fact is that now, as in the United Kingdom, it’s probably the case in Australia, one in every three children born today will live to 100,” he said.
Mr Hockey said the government’s determination to rein in entitlements was designed to shore up the sustainability of our quality of life.
“It is about what we want to be in 5, 10, 20 years' time and I often ask myself if there's a drug that's going to save my child's life in 10 years' time and I couldn't afford it, I would expect the government to help me out,’’ he said.
“Now in 10 years' time is the government going to have the money to be able to afford that drug? They might have it today but they won't have it tomorrow unless we actually start fixing the budget now.”
Last week the Labor Party, seniors groups and unions accused the Abbott government of preparing to break a pre-election promise that there would be no cuts or changes to pensions.
It came after Mr Hockey gave a speech in Washington DC in which he stressed the need for the federal budget to be sustainable.
The chief executive of National Seniors Australia, Michael O’Neill, told the ABC’s Radio National on Monday that changes to the pension indexation rate or assets test would be a turnaround from what was promised before the federal election.
“They trusted the government in no uncertain terms at the time of the last election,” he said.
“The reality is for those folks who are just on the pension, not with other income but just on the pension, they have very little room to manoeuvre.”
Mr O’Neill said more work needed to be done in reviewing the assets test than simply “plucking the family home out as a good target”.
He also repeated his organisation’s criticism of the government’s paid parental leave scheme saying that cuts to the pension should not be on the table unless the government was prepared to consider shelving the overly-generous scheme.
“I think the paid parental leave scheme is one of those high value options that the government needs to look at very, very closely, particularly if they’re going to play with the pension” he said.
“I think equally the Treasurer needs to pay attention to the fact that folk in their 50s, if you lose your job at age 55, you’re out of work on average for 72 weeks.
“The likelihood is that you won’t get another job, that you will float through other forms of welfare.”
Mr O’Neill added that increasing the pension age to 70 was concerning for Australians who might not have the opportunity to work to that age.
“If you’re in an industry where you don’t have the physical demands, where there’s a future there beyond 55 or 60 then you might be happy,” he said.
“But for the great majority of folk that opportunity won’t be there.”
Mr Hockey used the Washington speech to warn that the number of Australians aged 65 to 84 will double between 2010 and 2050, while the number of people aged over 85 will quadruple.
He said access to the pension system will need to be ''prioritised for the most vulnerable,” but stopped short last week of nominating a rise in the pension age to 70.
Labor introduced changes in 2009 that will see the pension age rise from 65 to 67 between 2017 and 2023.
If the Abbott government decides to further raise the pension age, it would be staggered over half a decade or more.
Opposition Finance spokesman Tony Burke seized on Mr Hockey’s comments, warning that Australians should brace themselves for the Coalition to break its pre-election promises.
Mr Burke highlighted Prime Minister Tony Abbott’s election-eve promise that his government would deliver “no cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS” and compared it to former prime minster Julia Gillard’s “no carbon tax” pledge in 2010.
“That no changes to pension promise is about to be broken, and that was made clear today by Joe Hockey,’’ he said.
Mr Burke brushed aside suggestions that the Coalition could keep its word by delaying the implementation of any pension changes until after the next election.
“I think that’s a nuance that Tony Abbott did not flag at the election.”
Mr Burke said he accepted Treasury secretary Martin Parkinson's warning that spending must fall, but accused Mr Hockey of removing the 2 per cent spending cap in the mid-year budget update.
“Joe Hockey, when he changed the budget presumptions, more than doubled the deficit … he blew the figures out so he could then say the problem is much, much worse, now I’ll go about fixing it,’’ he said.
But Mr Hockey accused Labor of breaking its own fiscal rules by not allowing spending to grow beyond 2 per cent annually, arguing it was on track to reach 3.5 per cent under Labor’s projections.
“The fact is we've been given a mandate to fix the budget and we are trying to fix the budget. If there was genuine concern about the state of the budget from the Labor Party then you can ask them why they're opposing $20 billion of savings we've already put to the Senate and they have blocked, including, alarmingly, $5 billion of savings that they announced themselves,’’ he said.