Australia's $4.4tn compulsory superannuation system is among the world's best, with age pension spending projected to remain stable at 2% of GDP through 2063, according to Treasury's 2023 intergenerational report (IGR). This contradicts claims by conservative politicians Andrew Bragg and Pauline Hanson that the system is broken.
Critics' Claims Contradicted by Treasury Data
Andrew Bragg, the Coalition's putative shadow housing minister, told ABC radio last week that compulsory super "is one of the biggest public policy failures since federation, in the sense that it hasn't helped the budget, and it has not really helped many people get off the pension." Pauline Hanson, One Nation's leader, echoed this on News24, saying, "A lot of people [are] pulling out their superannuation, spending it, then end up on the age pension anyway. I think the whole system is broken."
However, Treasury's IGR shows that total projected annual cost of Australia's retirement income system will remain steady at 4 to 4.5% of GDP over the next 40 years, despite population ageing. The report states, "The rise in total projected costs of tax concessions is driven by earnings tax concessions from the increased stock of funds, offset by a fall in projected spending on the age pension."
Self-Funded Retirement on the Rise
Contrary to Bragg and Hanson's assertions, the IGR predicts that the share of people fully funding their own retirement will rise from 29% to 38% by 2050 and continue increasing. David Knox, a former senior partner at Mercer and leading actuary, says by 2030, Australia will have the lowest aged pension cost of any OECD nation. "With our ageing population, you would expect that [aged pension spending] cost to rise, but it's not rising and if anything it's falling," Knox says. "Around the world it has risen or is rising. And if we hadn't done anything our aged pension cost would be higher than they are today."
International Comparison Highlights Success
The OECD's latest "pensions at a glance" report shows that average public pension spending among member countries is expected to climb from 8.8% in 2023-24 to 10% by 2050. Even including the cost of tax concessions, which Knox says significantly overstate their actual cost, that's about two-and-a-half times what Treasury predicts Australia's retirement income system will cost by mid-century. Among European countries plus Norway, average government spending on pensions is forecast to rise from 9.9% to 10.9% over the same period, which the OECD report says "would be a significant achievement given the demographic change throughout the period."
