The politics of social benefits contribute in no small way to the difficulties in containing government spending and the associated tax and debt burdens. There was a reminder of this recently when the public became aware that age pensions would not increase in September under the normal indexation arrangements.
When does indexation of the age pension lead to a pension increase? You might think the answer is obvious — when the relevant index goes up. But this simple logic seems to have escaped the Shadow Minister for Social Services, Linda Burney, who recently expressed dismay on discovering that pensions would not be increased as scheduled next month.
According to her, this meant they were not being ‘indexed’ — despite the fact that the relevant index did not increase, and actually declined. She is being either disingenuous, or ill-informed about her shadow portfolio.
‘Indexation’ means pensions are linked to an index. If the index falls, indexation cannot generate an increase. Pensions are indexed to the CPI or the living cost index for pensioner and beneficiary households, whichever delivers the larger increase.
In the relevant six months (March and June quarters) the CPI fell by 1.5% and the living cost index fell by 0.6%. Pensions are not reduced if the index falls, which means the unchanged pension yields a real increase. Even the living cost index for age pensioner households was unchanged. Whichever measure you use, pensioners’ cost of living did not increase.
The Prime Minister — himself a former Minister for Social Services — should have responded in these terms when he was out and about and ambushed on the issue by the media; not express surprise and arouse expectations of a special non-indexation pension increase, for which there is no justification.
He might also have pointed out that pensioners have recently received two special lump sum payments of $750 each in the name of fiscal stimulus.
There are more than enough excesses in government spending without more ‘special’ increases in pensions.
Home > Commentary > Opinion > When ‘indexation’ does not mean ‘increase’
When ‘indexation’ does not mean ‘increase’
When does indexation of the age pension lead to a pension increase? You might think the answer is obvious — when the relevant index goes up. But this simple logic seems to have escaped the Shadow Minister for Social Services, Linda Burney, who recently expressed dismay on discovering that pensions would not be increased as scheduled next month.
According to her, this meant they were not being ‘indexed’ — despite the fact that the relevant index did not increase, and actually declined. She is being either disingenuous, or ill-informed about her shadow portfolio.
‘Indexation’ means pensions are linked to an index. If the index falls, indexation cannot generate an increase. Pensions are indexed to the CPI or the living cost index for pensioner and beneficiary households, whichever delivers the larger increase.
In the relevant six months (March and June quarters) the CPI fell by 1.5% and the living cost index fell by 0.6%. Pensions are not reduced if the index falls, which means the unchanged pension yields a real increase. Even the living cost index for age pensioner households was unchanged. Whichever measure you use, pensioners’ cost of living did not increase.
The Prime Minister — himself a former Minister for Social Services — should have responded in these terms when he was out and about and ambushed on the issue by the media; not express surprise and arouse expectations of a special non-indexation pension increase, for which there is no justification.
He might also have pointed out that pensioners have recently received two special lump sum payments of $750 each in the name of fiscal stimulus.
There are more than enough excesses in government spending without more ‘special’ increases in pensions.
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