Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 60

Extracts from the National Commission of Audit

On Thursday 1 May 2014, Joe Hockey released the National Commission of Audit, accompanied by this statement. It’s an important review, the first into the scope and efficiency of the federal government in 20 years. Mr Hockey said it will provide important input to the forthcoming budget, as well as guiding future policy.

For those who would like to read the report, the home page of the Commission is linked here. In the following extracts, we have links to the recommendations on aged pensions and superannuation preservation age, as well as the Commission’s statements on age pensions and aged care.

Perhaps the most important graph in the entire report, as shown below, estimates the proportion of the eligible population receiving an age pension. While the proportion on full pension is expected to fall from the current level of 50% to about 30% by 2050, part-pensioners rise by the same amount, from 30% to 50%. So the current ratio of 80% of the eligible population receiving a pension remains unchanged out to 2050. A part-pension gives eligibility to a wide range of benefits relating to health, transport and utilities. This will change if the recommendation is adopted to include the family home in the means test for the age pension, and income from super for eligibility for the Commonwealth Seniors Health Card.

The full list of recommendations is linked here.

Recommendation 13: Age Pension – tighter targeting of eligibility

The Age Pension is an essential part of Australia's social safety net. The Commission recommends that changes be made in future to ensure it is more sustainable, affordable and better targeted by:

  • formally linking the eligibility age of the Age Pension to 77 per cent of life expectancy at age 65 from 2033. This will result in the eligibility age for the Age Pension increasing to around 70 by 2053. The proposed change would not affect anyone born before 1965;
  • replacing the current income and assets tests with a single comprehensive means test. Under this approach the existing assets test would be abolished with the income test extended by deeming income from a greater range of assets. The new comprehensive means test would apply prospectively to new recipients of the Age Pension from 2027-28 onwards;
  • including in the new means test the value of the principal residence above a relatively high threshold. The threshold in 2027-28 would be equivalent to the indexed value of a residence valued today at $750,000 for coupled pensioners and the indexed value of a residence valued today at $500,000 for a single pensioner. This change would apply prospectively to new recipients of the Age Pension from 2027-28 onwards; and
  • increasing the income test withdrawal (taper) rate from 50 per cent to 75 per cent. This change would apply prospectively to new recipients of the Age Pension from 2027-28 onwards.

Recommendation 14: Superannuation preservation age

The Age Pension and superannuation are interrelated elements of the retirement income system. The Commission recommends some changes be made to the superannuation system to complement changes being recommended for the Age Pension by:

  • increasing the superannuation preservation age to five years below the Age Pension age;
  • extending the current phased increase in the preservation age by an extra four years so the preservation age reaches 62 by 2027; and
  • increasing the preservation age in conjunction with the Commission's proposed increases in the Age Pension age thereafter.

The section on Age Pension is linked here.

In 2013-14, an estimated $39.5 billion will be spent on the Age Pension, benefitting 2.4 million recipients. Expenditure on the Age Pension is currently growing at 7 per cent per year. Age Pension expenditure is expected to continue to increase largely as a result of an ageing population, increased life expectancies and benchmarking to the Male Total Average Weekly Earnings benchmark.

The features of the Age Pension means test, such as a 50 per cent taper rate and high income free area, can mean pensioners with relatively high levels of income (up to $47,000 in annual income) are able to access a part-rate pension.

As shown in Chart 7.1 on current projections there is unlikely to be an increase in the proportion of individuals who are completely self-sufficient and not reliant on the Age Pension despite the significant investment in superannuation over time. Even allowing for a decline in the proportion of people receiving the full pension, a rise in the number of people receiving the part-rate pension will see the proportion of older Australians eligible for the Age Pension remaining constant at 80 per cent over the next forty years or so.

The section on aged care is linked here.

Currently around 1 million older Australians receive some form of aged care support. The majority of these are people who receive services in their own home and the community. Around 200,000 people are in permanent residential care.

With the ageing of the population, the number of Australians aged 65 and over will rise rapidly, from 3 million today to over 8 million by 2050. Moreover, by 2050 it is expected that more than 3.5 million people will access aged care services, with around 80 per cent of these delivered in the community.

There is a strong rationale for government involvement in aged care on equity grounds and also to overcome information gaps and protect vulnerable Australians. However, over recent years there has been increased acceptance and use of private co-contributions toward the cost of care.

Formal aged care services are predominantly financed by government, with supplementary user contributions also required in many areas. Public funding is primarily delivered through payments to the providers of the various care services.

Aged care expenditure is expected to be around $13 billion in 2013-14, with strong growth expected over coming years. Expenditure on aged care is currently growing at around 4 to 5 per cent per year in real terms. Residential age care is the single largest area of expenditure. Expenditure is being driven primarily by demographic and health factors.


 

Leave a Comment:

banner

Most viewed in recent weeks

16 ASX stocks to buy and hold forever, updated

This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now. 

2025-26 super thresholds – key changes and implications

The ABS recently released figures which are used to determine key superannuation rates and thresholds that will apply from 1 July 2025. This outlines the rates and thresholds that are changing and those that aren’t.  

Is Gen X ready for retirement?

With the arrival of the new year, the first members of ‘Generation X’ turned 60, marking the start of the MTV generation’s collective journey towards retirement. Are Gen Xers and our retirement system ready for the transition?

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

What Warren Buffett isn’t saying speaks volumes

Warren Buffett's annual shareholder letter has been fixture for avid investors for decades. In his latest letter, Buffett is reticent on many key topics, but his actions rather than words are sending clear signals to investors.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Latest Updates

World's largest asset manager wants to revolutionise your portfolio

Larry Fink is one of the smartest people in the finance industry. In his latest shareholder letter, the Blackrock CEO outlines his quest to become the biggest player in private assets and upend investor portfolios.

Economy

Australia's economic report card heading into the polls

Our economy grew by a nominal rate of 7% per annum from 2017 to 2024, but it benefited from the largesse of fiscal and monetary policies, both of which are now fading. We need a new, credible economic growth agenda.

Preference votes matter

If the recent polls are anything to go by, we are headed for a hung parliament at the upcoming federal election. So more than ever, Australians need to give serious consideration to their preference votes.

SMSF strategies

Meg on SMSFs: Tips for the last member standing

It’s common for people as they age to seek more help in running their SMSF if their capacity declines. An alternate director may be a great solution for someone just planning for short-term help in the meantime.

Wilson Asset Management on markets and its new income fund

In this interview, Matthew Haupt from Wilson Asset Management discusses his outloook for the ASX, sectors such as REITs that he likes, and his firm's launch of a new income-oriented listed investment company.  

Planning

‘Life expectancy’ – and why I don’t like the expression

Life expectancy isn't just a number - it's a concept that changes with survival rates over time. This article breaks down how age, survival, and societal factors shape our understanding of life expectancy, especially post-Covid. 

The shine is back on gold, and gold miners

Gold mining stocks outperformed in 2024 and are expected to do well in 2025. At this point in the rally, it's worth considering what has driven gold prices higher and why miners could still have some catching up to do.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.