Category Archives: Media

A $1.6b blueprint to boost teacher quality and student performance

Australia’s top teachers should be able to earn $80,000 a year more, and top school-leavers should get $10,000-a-year scholarships if they take up teaching, according to a new Grattan Institute report on how to boost teacher quality and student performance.

Attracting high achievers to teaching proposes a $1.6 billion reform package to double the number of high achievers who choose to become teachers, and increase the average ATAR of teaching graduates to 85, within the next decade.

With this higher-achieving teacher workforce, the typical Australian student would gain an extra six to 12 months of learning by Year 9.

The report details an Australia-first survey of nearly 1,000 young high achievers (aged 18-25 and with an ATAR of 80 or higher) which found that more bright young Australians would take up teaching if it offered higher top-end pay and greater career challenge.

The report recommends a three-part reform package:

1. Offer $10,000 cash-in-hand scholarships to high achievers to study teaching. People who get the government-funded scholarships should be required to work in government schools for at least several years.

2. Create two new roles in schools – ‘Instructional Specialist’ and ‘Master Teacher’ – so the best teachers can get extra pay, time, and responsibility to improve teaching at their schools and in their regions. About 5-to-8 per cent of teachers would become Instructional Specialists, paid around $140,000 a year – $40,000 more than the highest standard pay rate for teachers. About 0.5 per cent of teachers would become Master Teachers, paid around $180,000 a year – $80,000 more than the highest standard pay rate for teachers. 

3. Launch a $20 million-a-year advertising campaign, similar to the Australian Defence Force recruitment campaigns, to promote the new package and re-position teaching as an attractive, challenging, and well-paid career option for high achievers.   

The report shows that bright young Australians are turning their backs on teaching.

Over the past decade, demand from high achievers for teaching fell by a third – more than for any other undergraduate field of study. Only 3 per cent of high achievers now choose teaching for their undergraduate studies, compared to 19 per cent for science, 14 per cent for health, and 9 per cent for engineering. 

‘Australia needs more high achievers in teaching, because great teachers are the key to better student performance,’ said the lead author of the report, Grattan Institute School Education Program Director Peter Goss.

‘The low status of teaching in Australia has become self-reinforcing, putting off high achievers who might otherwise want to teach. By contrast, high-performing countries such as Singapore and Finland get many high-achieving students to apply, and then select the most promising candidates.’

The report recommends all three schools sectors in Australia – government, private, and Catholic – implement the reform package. State and territory governments, some of which have failed to properly fund their schools, should pay for the reforms in government schools. Private and Catholic schools should fund the reforms themselves, without extra taxpayer money.

‘Our reform package would transform Australia’s teaching workforce,’ said Dr Goss. ‘In the long term it would pay for itself many times over, because a better-educated population would mean a more productive and prosperous Australia.’

Read the report

For further enquiries:
Pete Goss, School Education Program Director, Grattan Institute
T. 03 8344 3637 E. media@grattan.edu.au

How to ensure a fair go for young Australians

Today’s young Australians are in danger of being the first generation in memory to have lower living standards than their parents’ generation, according to a new Grattan Institute report.

Generation gap: ensuring a fair go for younger Australians shows that older Australians today spend more and have higher incomes and greater wealth than older Australians three decades ago.

But living standards have improved far less for younger Australians.

The wealth of households headed by someone under 35 has barely moved since 2004.

Poorer young Australians have less wealth than their predecessors and are far less likely to own a home. In contrast, older households’ wealth has grown by more than 50 per cent over the same period because of the housing boom and growth in superannuation assets.

It’s a myth that young people’s spending habits and lifestyles are to blame for their stagnating wealth. ‘This is not a problem caused by avocado brunches or too many lattes,’ says the report’s lead author, Grattan’s Budget Policy Program Director Danielle Wood.

In fact, younger people are spending less on non-essential items such as alcohol, clothing, and personal care, and more on necessities such as housing, than three decades ago.

Economic pressures on the young have been exacerbated by recent wage stagnation and rising under-employment. Older households are better cushioned from low wage growth because they are more likely to have other sources of income.

‘If low wage growth and fewer working hours is the new normal in Australia, then we could have a generation emerge from young adulthood with lower incomes than the one before it at the same age,’ Ms Wood says. ‘This has already happened in the US and the UK.’

Young Australians will also bear the brunt of growing pressures on government budgets.

Because the population is ageing, governments will have to spend more on health, aged care, and pensions. But there will be fewer working-age people for every retired person to pay for it. The number of 15-64 year-old Australians for every person aged 65 or older fell from 7.4 in the mid-1970s to 4.4 in 2014-15 and is projected to fall further to 3.2 in 2054-55.

Governments have supercharged these demographic pressures by introducing generous tax concessions for older people.

The share of households over 65 paying tax has halved over the past two decades. And older households pay substantially less tax on the same income as younger households.

‘Working-age Australians are underwriting the living standards of older Australians to a much greater extent than the Baby Boomers did for their forebears, straining the “generational bargain” to breaking point,’ Ms Wood says.

Inheritances are not a magic bullet for young people: they tend to come later in life and are much more likely to go to people who are already wealthy. 

Policy changes are required. Policies to boost economic growth – such as tax reform, better education and smarter infrastructure spending – are wins for all, but especially for the young. Changes to planning rules to encourage higher-density living in established city suburbs would make housing more affordable. And a fair go for younger people means winding back age-based tax breaks for ‘comfortably off’ older Australians.

‘Just as policy changes have contributed to pressures on young people, they can help redress them,’ Ms Wood says.‘The time for action is now: none of us wants the legacy of a generation left behind.’

Read the report

For further enquiries:
Danielle Wood, Budget Policy & Institutional Reform Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Confronting the private health insurance death spiral

Australia’s private health insurance industry fears it is in a death spiral, and politicians need to rethink whether or to what extent taxpayers should continue to subsidise the industry, according to a new Grattan Institute working paper.

The history and purposes of private health insurance finds that Australians are increasingly dissatisfied with private health insurance, and policy reform is urgent.

Premiums are rising much faster than wages or inflation. People are dropping their cover, especially the young and the healthy. Those who are left are more likely to get sick and go to hospital, driving insurance costs up further.

Meanwhile, taxpayers subside the industry to the tune of about $9 billion every year: $6 billion for the private health insurance rebate, and $3 billion on private medical services for inpatients.

“It’s inevitable that government will have to make tough decisions about whether more subsidies are the answer to the impending crisis,” says lead author and Grattan Institute Health Program Director Stephen Duckett.

“Governments have failed to clearly define the role of private health insurance since Medicare was introduced in the 1980s. The upshot is we have a muddled health care system that is riddled with inconsistencies and perverse incentives.”

Australia needs to confront a fundamental question: what is the purpose of private hospital care?

If its purpose is to complement Medicare, offering people choice of specialists and a wider range of services, then the argument for taxpayer subsidies is weak.

But if its purpose is to substitute for public hospital care, then the argument for subsidies is stronger.

The paper urges policy makers to grapple with two further questions:

  • Do the current design features of the private health insurance system, including incentives, penalties and regulation, support its desired role (as a complement or substitute or both) in the overall health system? And if not, what other mechanisms or combination of arrangements are needed?
  • Does government support for private health insurance and private hospital care promote overall economic efficiency and the most effective and equitable use of government and community resources? And in the long run, are there better ways of providing support to the sector?

“The question then becomes whether government should support private health care directly, or via public health insurance – or not at all,” Professor Duckett says.

Future Grattan Institute work will tackle these questions and propose solutions to Australia’s private health insurance woes.

Read the working paper

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Future retirement of CEO of Grattan Institute Prof John Daley

The Chair of Grattan Institute, The Hon Alex Chernov, announced today that its inaugural CEO, Prof John Daley, would be stepping down when his contract finishes in July 2020. He said that ‘since John opened the doors in 2009, he has steered Grattan to become Australia’s leading domestic policy think tank, and a household name’. Its seven programs now cover a wide range of policy issues, from energy to health, education, budgets, tax, transport, and housing.

Under John’s leadership, Grattan has shaped debates and subsequent policy reforms on a broad range of public policy issues such as school funding, the costs of superannuation, and electricity pricing, and its ideas have been picked up by all sides of politics. A review published this year traced the enormous impact of more than 115 reports published so far.

Grattan’s work has a reputation for independent, rigorous, and practical analysis of public policy issues that facilitates better-informed discussions among decision makers and the public. Its ‘Orange books, for example, have become much used by public servants and journalists in preparing and assessing State and Federal election policy agendas.

The Chair emphasised that, ‘John has nurtured Grattan’s distinctive culture, which promotes both vigorous internal debate and passionate cooperation towards achieving Grattan’s outstanding results’. As a result, Grattan has become a magnet for talented policy analysts, and its alumni now hold a series of important roles in government and other bodies involved in public policy.

The Chair of Grattan Institute’s Public Policy Committee and Board Member, Dr Ian Watt AC, former Secretary of the Department of Prime Minister and Cabinet, reflected that ‘John has moulded Grattan’s unique brand in Australia for penetrating original analysis that is clearly communicated and sharply outlines the policies that government should adopt. Many hold up its work as an exemplar of high-quality policy analysis on complex issues.’

As well as leading Grattan’s overall program, John has personally authored a number of significant reports. Game Changers (2012), for example, identified the key priorities for economic reform, and has influenced governments for several years. John has also written leading reports on budget reform, intergenerational inequality, tax reform, housing affordability, and retirement incomes.

John said that  ‘after 11 years, the long-term growth of Grattan Institute as an institution requires new leadership and it is time for the Board to identify and put in place a new CEO who can take Grattan onto the next stage. The greatest legacy of a CEO is not what is achieved while you are there, but how you set up the organisation to develop afterwards. So far I have been a lawyer, a policy adviser, an academic, a management consultant, a banker, a stockbroker, and the founding CEO of Australia’s leading domestic policy think tank, and I am looking forward to what comes next.’

Alex Chernov said that the Grattan Board had enjoyed working with John and, on his departure, will miss his rigorous and practical contributions to Board discussion. John will leave Grattan with the thanks and best wishes of the Board and all at the Institute. The Board has begun the search for a new CEO with assistance from Egon Zehnder.

The Hon Alex Chernov AC QC

For further enquiries:

media@grattan.edu.au

Higher Education Program Director Andrew Norton moves on from Grattan

Andrew Norton, the Director of Grattan’s Higher Education Program since it started eight years ago, has decided to move on.

Andrew has been the driving force behind the Program’s overall direction, and its detailed analysis of everything from completion rates to funding trends.

For several years, the Higher Education Program’s advocacy helped persuade the Commonwealth Government to keep demand-driven funding of bachelor-degree student places. Although funding caps were eventually imposed, a record proportion of young Australians now attend university.

The Higher Education Program also drew attention to the escalating expense of the HELP loan scheme. Three reports proposed policies for bringing HELP’s costs down while keeping higher education accessible and debt repayments affordable. Some of these policies are now in place.

The Program devised and published five editions of Mapping Australian higher education, Grattan’s overview of Australian higher education. Public servants, university executives, university councils, and journalists all regard it as the essential introduction and reference guide to the sector.

Grattan CEO John Daley said: ‘Andrew has made an enormous contribution to the Grattan team. His wise counsel and wry observations about the realities of politics, ministers, and all sides of politics have often helped Grattan to steer a better course.

‘Andrew is truly irreplaceable, and in view of his departure Grattan has made the difficult decision not to extend the Higher Education Program further.’

Grattan will continue to host the substantial body of work produced by the Higher Education Program, and to respond to media inquiries to the extent that Andrew does not do so in his next role.

The Myer Foundation supported the Program for its first four years. John Daley said the work of the Program will resonate with higher education policy makers for years to come, and is an enduring monument to the Foundation’s support.

Andrew Norton is exploring a number of opportunities beyond Grattan, and his last day at Grattan will be 26 September.

Pass the stage 1 tax cuts now, but defer stage 3

Federal Parliament should pass the Government’s Stage 1 tax cuts immediately but should defer consideration of the controversial Stage 3 cuts, according to a new Grattan Institute working paper.

Budget blues: why the Stage 3 income tax cuts should wait finds passage of the Stage 1 cuts would give the economy a much-needed boost at a time of low growth and stagnant wages.

The Stage 2 cuts would help most Australians by giving back bracket creep and are likely to be affordable.

But the Stage 3 cuts, scheduled to come into effect in 2024-25, would cost the budget $85 billion over the subsequent six years. We do not know now whether these cuts are affordable or the right size and shape for the economy so far into the future.

‘The economy is softening, the budget position is weakening, and calls for the Government to use fiscal policy to stimulate the economy are growing,’ says Grattan Institute’s Budget Policy Program Director Danielle Wood.

‘Tax cuts now could provide that stimulus but there are big risks from locking in major tax cuts on the never-never.’

Government would have to substantially reduce growth in spending to deliver both the Stage 3 tax cuts and promised surpluses, particularly if the economy worsens.

The Stage 3 tax cuts would reduce bracket creep and boost people’s incentives to work, but they are far from the best way to do so. Committing to Stage 3 now could also ‘crowd out’ the chance of meaningful tax reform over the next decade.

If the Stage 3 cuts pass, the top 15 per cent of income earners would pay a lower share of their income in tax, but middle-income earners would pay a higher share. The income tax system in 2024-25 would be less progressive than it has been at any point since the 1950s. Whether this is desirable is a value choice, but it is a choice that Australia should make with its eyes open.

By contrast, the temporary and targeted Stage 1 tax cuts are well timed to boost consumer spending and economic activity at a time when inflation is virtually non-existent, the labour market is weakening, new building approvals are drying up, and per person living standards have gone backwards for three consecutive quarters.

‘Given the softening economy, passing the Stage 1 tax cuts should be a priority,’ Danielle Wood says.

‘But there is absolutely no need for the Government to tie its hands by committing to the Stage 3 tax cuts now.’

Read the working paper

For further enquiries:
Danielle Wood, Budget Policy & Institutional Reform Program Director
T. +61 (0)3 8344 3637 E. media@grattan.edu.au

Commonwealth Orange Book 2019: a policy manifesto for a better Australia

The winner of the May 18 federal election should defy the national mood of reform fatigue and stare down special interests to pursue a targeted policy agenda to improve the lives of Australians, according to a new book from the Grattan Institute.

Commonwealth Orange Book 2019: priorities for the next government rates Australia’s performance against similar countries and proposes policy reforms to schools and universities, hospitals and housing, roads and railways, cities and regions, budgets and taxes, retirement incomes and climate change.

It includes Grattan Institute’s new ‘International Scorecard’, which shows Australians live longer than most other people, and public debt is relatively low. But our electricity supply is more polluting, less reliable and more expensive than in comparable countries; we lag behind other developed economies on school results; and housing costs and homelessness are relatively high.

Lead author and Grattan CEO John Daley says the challenge for the next government, of whatever political colour, is to revive Australia’s proud tradition of enlightened public policy.

“The next government needs to choose to do less, but deliver more,” he says. “We can continue to be the lucky country, but we must make our own luck.”

Drawing on 10 years of Grattan research and reports, the Orange Book finds Australians’ living standards have stagnated, the pace of economic reform has slowed, people are increasingly anxious about their financial prospects – and our political system is not dealing well with these challenges.

On health, the Orange Book calls for a universal dental care scheme, so all Australians can go to the dentist when they need to; a boost to primary care, with new reforms to Primary Health Networks and GP payments; and a comprehensive review of the private health sector, including private health insurance.

On housing, the book recommends that the Commonwealth provide incentives to states to loosen planning laws so that higher density is permitted in the established middle suburbs of our capital cities; a 40 per cent increase in the maximum rate of Commonwealth Rent Assistance; and funding for additional social housing tightly targeted towards Australians at high risk of homelessness.

On retirement incomes, it urges the next government to abandon the current plan to increase compulsory superannuation payments from 9.5 per cent to 12 per cent, which would force workers to accept lower living standards today even though they are already likely to enjoy living standards in retirement comparable to living standards while working. It advocates changes to the Age Pension assets test that would loosen the assets test taper but include more of the value of owner-occupied housing. And it backs proposals to select “best in show” funds for default superannuation, to drive down costs and improve returns.

Major tax reform is needed to support economic development. The book recommends reducing income tax and modifying welfare tapers and childcare benefits to remove barriers and increase incentives for second income earners (usually women) to participate in the workforce. It also advocates an accelerated depreciation scheme for new investment by companies. To pay for these changes (and avoid other tax increases), the next government should cut the capital gains tax discount from 50 per cent to 25 per cent; wind back negative gearing; tighten superannuation tax concessions; and broaden or increase the GST. To increase workforce participation of older Australians, the government should ask the Productivity Commission to investigate the costs and benefits of raising the pension age to 70.

On energy, the book urges the incoming government to develop a clear, credible policy to tackle climate change. Our political leaders must be honest with voters: Australia needs to move to a low-emissions economy, and that transition will cost money. A raft of reforms to electricity generation, distribution and retailing are also required to push down energy costs.

On transport, the book calls for a more disciplined approach to assessing, selecting and reviewing major projects, to put brakes on spending billions of dollars in the wrong places for the wrong (often politically motivated) reasons.

On school education, it suggests that the government needs to finish off school funding reforms, and set up a national evidence institute, while strengthening incentives for universities to improve initial teacher education.

On higher education, it recommends a return to demand-driven funding of universities. Reforms to the HELP loan scheme are needed to help fund this change, and potential increases in funding for vocational education. The government should encourage more students into vocational education, although better funding arrangements for vocational education need careful thought and negotiations with the states.

On budgets, it suggests enshrining fiscal targets in legislation, giving the Parliamentary Budget Office responsibility for macroeconomic forecasts that underpin the budget and publishing an Intergenerational Report that includes long-term projections of both Commonwealth and state government revenues and spending.

The Orange Book identifies a crisis of trust in politics in Australia, with a growing sense that people in government look after their own interests and can’t be ‘trusted to do the right thing’. It calls for institutional changes to help restore faith in our democracy, including introducing a strong integrity commission, capping expenditure on political advertising during election campaigns, and new rules to ensure voters know who is donating to the political parties and who is lobbying our political leaders.

The book urges a reversal of the recent trend toward government intervention in electricity generation; an end to government programs designed to artificially divert population from the cities to the regions; and an end to government giveaways which supposedly help first homebuyers but which actually mostly benefit property investors and real estate agents.

“These are evidence-based policy recommendations designed to serve the interests of all Australians rather than sectional interests,” Mr Daley says.

“Our next government should seize the opportunity to forge a happier, healthier and more prosperous Australia. We can do better. The Orange Book shows how.”

Read the report

For further inquires:

On the Orange Book in general and priorities for
the next Commonwealth Government: John Daley
On Economic Development: John Daley
On Regional Development: John Daley
On Housing: Brendan Coates
On Retirement Incomes: Brendan Coates
On Budget: Danielle Wood
On Integrity Reforms: Danielle Wood
On Transport: Marion Terrill
On Energy: Tony Wood
On Health: Stephen Duckett
On School Education: Peter Goss
On Higher Education: Andrew Norton

T. +61 (0)3 8344 3637 E. media@grattan.edu.au

A universal dental care scheme for Australia

Australia should introduce a Medicare-style universal insurance scheme for primary dental care, to ensure all Australians can go to the dentist when they need to, according to a new Grattan Institute report.

Filling the gap: A universal dental care scheme for Australia calculates the scheme would cost an extra $5.6 billion a year, suggests it could be paid for in part by a rise in the Medicare levy, and recommends it be phased in over 10 years.

It’s needed because about 2 million Australians who required dental care in the past year either didn’t get it or delayed getting it because of the cost – and the poor and disadvantaged are most likely to miss out on care.

This is because most spending on dental care comes straight out of patients’ pockets.

“When Australians need to see a GP, Medicare picks up all or most of the bill. But when they need to see a dentist, Australians are on their own,” says the Grattan Institute’s Health Program Director, Stephen Duckett.

The consequence is widespread poor oral health. About a quarter of Australian adults say they avoid some foods because of the condition of their teeth; for low-income people, it’s about a third. Low-income people are more likely to have periodontal disease, untreated tooth decay, or missing teeth.

Bad oral health has painful and costly consequences. Oral health conditions can contribute to other health problems, including diabetes and heart disease. Most oral health conditions are preventable, yet people often end up going to a GP or hospital emergency department to be treated for conditions that could have been arrested with earlier care.

Existing public dental schemes are inadequate, uncoordinated, and inequitable across states and territories. Most states have waiting lists of well over a year for public dental care – and if people need to wait a year for care, their conditions are only going to get worse.

The Commonwealth Government should announce that it will take responsibility for funding primary dental care – just as it takes responsibility for primary medical care.

“There’s no compelling medical, economic, legal or logical reason to treat the mouth so differently from the rest of the body,” Dr Duckett says.

But it would be impractical to move to a universal scheme overnight. It would cost a lot of money – about $5.6 billion in extra spending each year – and more dentists and oral health professionals would need to be trained locally or recruited from overseas.

So, the Commonwealth should announce a roadmap to a universal scheme, including plans to expand the dental health workforce, followed by incremental steps towards a universal scheme.

First, the Commonwealth should take over funding of services for people eligible for existing public dental schemes, fund them properly, and enable private-sector providers to deliver publicly-funded care. Then the scheme should be expanded – first to people on Centrelink payments, then all children. Within a decade, the Commonwealth should take the final step to a universal scheme.

“Universal dental care is a big idea whose time has come,” Dr Duckett says. “All Australians should be able to get the care they need, when they need it, without financial barriers.”

Read the report

Further enquiries: Stephen Duckett, Health Program Director
T. 03 8344 3637 E. media@grattan.edu.au

Keep calm about electricity reliability

The popular perception that Australia’s electricity supply has become less reliable with more renewable energy, and that this is inevitably going to get worse, is wrong and dangerous, according to a new Grattan Institute report.

Keep calm and carry on shows the idea is wrong because almost all outages are caused by problems in transporting electricity, and have nothing to do with whether the power was generated from new renewables or old coal or some other technology.

And it’s dangerous because if politicians over-react to public concern and rush to intervene in the market, electricity bills could rise even higher.

Political leaders and media commentators have linked the 2016 state-wide blackout in South Australia with that state’s high level of wind power. But they haven’t recognised that the electricity market operator has since changed management practices to better suit the changing shape of the energy system, and a combination of regulatory obligations and market mechanisms are being applied to support grid stability as the system continues to evolve.

Equipment failures, falling trees, inquisitive animals and crashing cars can all cause the power to go out in the local distribution network. Over the past 10 years, more than 97 per cent of outages across the National Electricity Market could be traced to the poles and wires that transport power to homes and businesses.

But it would be prohibitively expensive to try to prevent all these outages. The NSW and Queensland governments spent $16 billion more than was needed on distribution networks over a decade, while achieving only very small improvements in reliability – and households and businesses are still paying for this through their power bills.

Regulators and network businesses need to carefully balance cost and reliability as technology and consumer preferences change. Consumers will not be happy to pay for another round of network ‘gold-plating’.

Events in Victoria and SA in January highlighted the current tight balance between supply and demand. As old coal generators are closed and summer heatwaves become more severe, outages will increase unless investment in new supply follows. But a lack of generation capacity on hot days caused only 0.1 per cent of all outages over the past decade. To encourage investment and keep this problem rare, governments need to create a stable policy framework to reduce greenhouse gas emissions and ensure that retailers have enough supply.

“What Australia needs now is not panic and politicking, but cool-headed policy responses to manage electricity reliability without unnecessarily adding to consumer bills,” says Grattan Institute’s Energy Program Director Tony Wood.

“Increased renewable generation does create challenges for managing the power system. But if we keep calm and carry on, these challenges can be met without more big price increases for households and businesses.”

Read the report

Fear not: Australians are likely to be comfortable in retirement

The conventional wisdom that Australians don’t save enough for retirement is wrong. A new Grattan Institute report reveals that the vast majority of retirees today and in future are likely to be financially comfortable.

Money in retirement: more than enough shows that retirees are less likely than working-age Australians to suffer financial stress such as not being able to pay a bill on time, and more likely to be able to afford optional extras such as annual holidays.

Grattan Institute modelling shows that, even after allowing for inflation, most workers today can expect a retirement income of at least 91 per cent of their pre-retirement income – well above the 70 per cent benchmark endorsed by the OECD, and more than enough to maintain pre-retirement living standards.

And many low-income Australians will get a pay rise when they retire, through a combination of the Age Pension and their compulsory superannuation savings.

Australians tend to spend less after they retire, and even less into old age. Their medical costs increase, but are largely covered by the taxpayer. Many retirees are net savers, and current retirees often leave a legacy almost as large as their nest egg on the day they retired.

“The financial services industry ‘fear factory’ encourages Australians to worry unnecessarily about whether they’ll have enough money in retirement,” Grattan Institute CEO John Daley said.

But the retirement incomes system is not working for some low-income Australians who rent, particularly in Sydney and Melbourne. And this problem will get worse because on current trends home ownership for over-65s will decline from 76 per today to 57 per cent by 2056.

To boost retirement incomes for the poorest Australians, the report calls for a 40 per cent increase in the maximum rate of Commonwealth Rent Assistance – worth more than $1,400 a year for a single retiree.

Loosening the Age Pension assets test could boost retirement incomes for around 20 per cent of retirees today, rising to more than 70 per cent of retirees in future. It would also deal with anomalies in the system: some people who save $100 while working increase their total retirement income by less than $100 in real terms.

But because most Australians will be comfortable in retirement, there is no need to boost retirement incomes across the board. The legislated plan to increase compulsory superannuation contributions from 9.5 per cent to 12 per cent should be scrapped, saving the Budget about $2 billion a year.

And superannuation tax breaks and age-based tax breaks should be reduced, to ensure the retirement incomes system does not become an excessive burden on future budgets, and endanger funding for aged care and health.

Read the report

For further enquiries: John Daley, CEO
T. +61 (0)3 8344 3637 E. media@grattan.edu.au