Former PM says 2% or 3% of wages could go to a national insurance scheme to guarantee people over 80 income and care

Paul Keating says Australia needs a new government insurance scheme for people aged over 80, which would guarantee elderly people income support, aged care and aged accommodation for the remainder of their lives.



The former prime minister told the ABC’s Lateline program the insurance scheme was necessary because superannuation savings were insufficient to sustain people living well into their 90s. The growing cohort of people aged between 80 and 100 required a new phase of policy thinking about retirement incomes.

He said a national insurance scheme should be funded by taxpayers through a “longevity levy of a kind – 2 or 3% of wages”.

Keating, who crafted the superannuation system, argued its adequacy needed to be addressed, and that meant super guarantee contributions needed to increase from 9% to 12% quickly. The government also had to move more people off dependence on the aged pension.

But he said inexorable demographic change required more than just these measures, it required something more fundamental – it required “superannuation mark two”.

“For people on an ordinary income all their lives – having 80, 100, 120 or $200,000 or more in a lump sum gives them that little bit of comfort in retirement that there’s something to rely on, something to get them out of trouble if they get really sick, support their kids if they have to – all the things that they do,” Keating told the ABC.

“But we can’t try and pretend that like a piece of Indian rubber – we can stretch the accumulation from [age] 65 to 95,” he said.

“There’s not enough of it now, and it can't go for 30 years, so we have to have, I believe, a commonwealth insurance scheme for the 80 to 100s with a calibrated precise product which guarantees people income support, aged care and aged accommodation.”

“It's a classic model for an insurance scheme, but it's got to be done in the 80 to 100 cohort while we continue to build [superannuation] accumulations between 60 and 80.”

Keating said it needed to be a government scheme because “no commercial insurer can insure across generations and no insurer can pool this like the commonwealth”.

He was dismissive of concerns from welfare groups that tax concessions for superannuation are too generous, entrenching inequities. When you look across a range of measures – “transfer payments, family assistance, support for kids at school and the rest, we've got a much more even society in Australia than say the United States, than Great Britain or any of these countries – so these sort of mealy-mouthed claims by the welfare lobby about superannuation are fundamentally false”.

Keating also gave the Treasury a belt for being antagonistic “to every tax expenditure that exists including superannuation. The Treasury is a great department but has not a scintilla of imagination.”

He contended if there weren’t generous concessions for super, people would chase concessions elsewhere: “They would negatively gear a house, buy shares in Westpac or BHP or the Commonwealth Bank and doing tax-preferred thing.”

He said Treasury had massively overestimated and overinflated the cost of superannuation in terms of forgone revenue because of its philosophical antagonism towards the tax concessions. “I mean, look, if I was still around I would have massacred them for this,” he said. “Massacred them.”

Of the budget task ahead for the Coalition, Keating said the government should focus on delivering structural reform.

“One of the first things Bob Hawke and I did in 1984 was to put an assets test on the pension to sit beside the income test. In those days the pension was only income-tested, you could have a house worth $3m or 5m and you still got a full pension, so we put an assets test,” he said.

“It's those kind of structural changes which produce a medium-term change in the budget trajectory and that's what is needed now – that is, we're not going to remedy this in 12 months, we're going to remedy it over time.”

He said governments should focus on structural reform which induced behavioural change “to change the spending side of the budget” and then rely on economic growth to boost revenue collection while the government reduced outlays.

Keating was cool on notions such as extending the GST.

“You can't build a society where the low- to middle-income people carry the greater burden of the tax system,” he said.