Unreal Retirement Age

Treasury Secretary Ken Henry, at a speech to a Melbourne Institute forum this week, spoke on the workforce shortage theme and the threat to economic growth as Australia?s population ages. His figures project that average hours worked per adult in the population will decline from 20 hours per week now to 18.4 hours per week in 2040. On this basis he projects GST would need to rise to 24% from the current 10% (see also FinDem?s March News http://www.findem.com.au/news/displayArticle.php?id=381 ).

FinDem argues that ageing analysis based on age 65 retirement fixations underestimates future labour supply. The age pension started in 1909 at age 65 and improved lifetimes since then mean that this age should now be 73 for men and 75 for women to give the same percentage of life lived after retirement. Current opportunities for expansion of employment are highlighted by the high ratio of private sector job vacancies to people unemployed (see Miscellaneous Chart in Research Centre).

The evolution of society to flexible working arrangements, greater longevity, technology replacing manual labour and kinship support networks will produce a different pattern of work and consumption to what anyone has been used to in Australia. Already people are talking about wanting to work to 70 rather than quitting work early. Public servants with lifetime indexed pensions of about 3 times the age pension, payable in some cases from 60 (and soon to be underwritten by the Future Fund) may linger with different attitudes.

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