Date posted: 10/05/2018 4 min read

Resistance to change – the conundrum of our ageing population

The latest future[inc] report highlights the real hurdles in managing the cost of an ageing population

In brief

  • The latest future[inc] study from CA ANZ identifies the rising cost of ageing populations in both Australia and New Zealand
  • People on both sides of the Tasman are resistant to change, seeing a pension as an entitlement
  • Meaningful reform hinges on public education, leadership and an electoral mandate

Anthony O’Brien

The latest future[inc] paper by Chartered Accountants Australia and New Zealand addresses the issue of population ageing in Australia and New Zealand.

The paper, Population Ageing – Do we understand and accept the challenge? investigates attitudes to retirement income policies on both sides of the Tasman.  Like many developed nations, each country faces an ageing population, increasing the cost of their superannuation/pension schemes and health care. The future settings for retirement policy and their fiscal outlooks however are quite different.

In New Zealand, the Labour Government under Jacinda Ardern has pledged to retain the age of eligibility for New Zealand Super at age 65. In Australia, eligibility for the age pension is rising to age 67 with a planned further increase to 70. 

As a result, the pension cost to GDP ratio in New Zealand is projected to rise by 60% in 40 years. In Australia the corresponding increase is around 25% under current policies and a small decline if the announced entitlement age increase to 70 is enacted.

The two countries have a fraught history of reforms in this space. A survey conducted as part of the future[inc] paper has revealed that neither New Zealanders nor Australians want further changes to the retirement system. That’s despite acceptance of the growing cost to support our ageing population.

Opposition to change

Indeed, the future[inc] study identified remarkably similar attitudes among New Zealanders and Australians when it comes to retirement incomes policies. The strongest opposition across all age groups was to broad brush reductions in the amount available through government pensions.

Tony Negline, CA ANZ’s Superannuation Leader, says both Australians and New Zealanders “are resistant to change, including the prospect of increasing taxes to fund the inevitable increase in costs.” This leaves politicians in a difficult position when it comes to retirement funding, and Negline says the study shows the community is divided on how to improve the sustainability of the system.

“The New Zealand public’s dominant preference is for the status quo to remain in place and that the government pension should be provided universally, without a means test,” says Negline. In Australia, the majority view also wants the status quo to hold steady, backed by a belief that the government pension should be provided without continued means testing.”

On both sides of the ditch, there is clear resistance to the prospect of increasing taxes to fund the inevitable rise in costs. There are also strong views regarding protection of the family home from asset tests, and an enshrined view that an age pension is an entitlement. Yet as Negline points out, the future[inc] research also highlights “a real gap when it comes to knowledge about the level of payment and how the schemes are funded.”

Yet few admit the pension provides comfort

The irony here is that government support payments are widely recognised as providing only a meagre level of household income. One in two (48%) New Zealand couples believe they could only ‘get by’ on current New Zealand Super levels – a figure that drops to 41% of Australian couples. Far fewer people, 16% of New Zealand and 12% of Australian couples, say they could ‘live comfortably’ at that level.

Negline sums up the conundrum of retirement funding saying, “Politicians are caught between a rock and a hard place – the public don’t want change, despite knowing the system will cost significantly more in the future.”

No easy solution

Negline notes, “It’s clear older citizens suffer from reform fatigue and they are sick of constant change.” That may be the case but at some point, something has to give.

“The clear finding from our survey is that we need more than public education to change this debate,” observes Negline. Though he adds, “Meaningful and successful reform will need a range of supporting factors – an electoral mandate, leadership, cohesion and persistence.”

Only time will tell if politicians in either country will be able to satisfy what appears to be a very tall order.

Discover the real challenges

Get the full picture on why the rising cost of an ageing population calls for significant change.

Read more

Search related topics