"Labor has delivered the biggest increase to the pension in more than a century."
Jenny Macklin on Thursday, May 23, 2013 in a press release
The biggest age pension rise in more than a century
(Editor's note: On Wednesday May 29, we rated this statement as Half True. This was based on checking information provided by the minister's office and expanded on by her department. We have subsequently gained a more detailed appreciation of the relevant data and the analysis of Peter Whiteford, an academic cited in the original article. We have also spoken to Paul Gerrans, from the University of Western Australia. Both academics and their work lend support to Macklin's claim. We have re-rated that statement as True.)
It must have been a relief for those nearing and at retirement to hear the age pension has just had its biggest rise in more than 100 years.
Getting diverse interest groups on side is a political art and looking after those of pension age is a growing task.
Australia has, like many nations in the western world, an ageing community with more than 3 million people now aged 65 or more. By 2047, a quarter of the population will be in that category.
Jenny Macklin, the Minister for Families, Community Services and Indigenous Affairs, said: "Labor has delivered the biggest increase to the pension in more than a century."
Sounds good but is it really the biggest increase in a century? PolitiFact Australia decided to have a close look at the numbers.
When we contacted Macklin’s office we were referred to the department whose media officer Kahlia Beichert sent a clarifying statement: "The pension increase paid to single pensioners in September 2009 was, in nominal dollars, the largest increase paid to single pensioners in the 100 year history of the Age Pension."
Macklin’s original press release made no mention of ‘nominal dollars’, which is the actual raw dollar amount and doesn't take into account inflation. Nor did it say only ‘single pensioners’ are included in the calculation for the biggest increase in 100 years.
We found that in September 2009, the single basic pensioner rate rose to $16,010.80 a year from $14,307.80 in March 2009, a rise in ‘nominal dollars’ of $1,703 or nearly 12 per cent.
Looking over more than a century, we couldn’t find a greater actual dollar rise.
We did find bigger percentage rises over similar or smaller periods. For example, between April 1974 and August 1974, the annual pension increased to $1,612 from $1,352, a rise of $260 or 19 per cent.
And over longer periods, there were substantial jumps.
Between 1971 and 1975, which includes the Whitlam government years, single pension payments increased 125 per cent and couple pensions went up 111 per cent.
Post World War II, age pensions jumped between August 1943 and Oct 1955 by 196 per cent for single pension payments.
Charmaine Crowe, Senior Policy Advisor at the Combined Pensioners & Superannuants Association of NSW, said there have been larger percentage increases than the one in 2009.
However, those other rises came off the back of no rises for at least 12 months and sometimes two years. "The 2009 rise percentage is based on a six-month term. Furthermore, in dollar terms, the 2009 rise dwarfs all others."
The age pension started in 1909 when the Commonwealth delivered ten shillings per week. As of March this year, the annual the basic age pension single rate is $19,076.20 and the partner rate $14,380.60. That’s $366.85 and $276.55 per week.
If you add in the pension supplement and the clean energy payment, the maximum pensions are now $404.20 per week for singles and $304.70 per week for partners, or $808.40 and $609.40 in fortnightly payments.
Age pensions increase as a percentage of average weekly earnings or rises in prices, whichever is the greatest.
Of course the pension isn’t the only benefit for the aged. Others include healthcare, rent assistance and various state and federal discounts.
This financial year the federal government will spend $50.984 billion on assistance to the aged, according to the budget papers. This is forecast to rise to $66.251 billion in 2016-17.
In 1909, the budget was $408,000 a year, a tiny sum in ‘nominal dollar’ terms compared to today. Of course, a dollar then would buy a lot more than now. That's inflation.
But are we better off now than at any time since the age pension started?
Professor Peter Whiteford at the Crawford School of Public Policy at the ANU said: "There is no doubt in my mind that the real value of the pension is much higher now than at any time previously."
After calculating the real value of the aged pension over the years, Whiteford says the 2009 pension increase was "the biggest rise in real terms after adjusting for inflation".
Whiteford’s calculations show that, adjusting to 2012 dollar values, the rise in 2009 was to $18,552 from $16,010.41 or nearly $2,500 per year.
Using the same adjustment to 2012 values, the big percentage rise in 1974 was to $11,214.73 from $10,290.22 or just under $1,000 a year.
"The earlier increase was a larger percentage, but that is because the real value was much lower."
Paul Gerrans, professor of finance at the University of WA, also says 2009 was the largest increase in a century in ‘absolute nominal and real dollar terms’.
He says the increase in August 1974 was larger in percentage terms, coming off a smaller base.
Has the pension kept pace with the cost of living?
Gerrans says: "Over the past decade it has been the adjustments due to Male Total Average Weekly Earnings that have mostly accounted for changes in pension payments and these have exceeded CPI changes."
He says the current way to adjust pension payments, the Pensioner Beneficiary Living Cost Index, hasn't differed hugely from the CPI but it remains to be seen whether it will in the future.
Macklin’s original press release made no mention of qualifiers later produced to support the statement of the biggest increase in the pension in more than a century.
Missing from Macklin’s press release: that this statement applies to the single pension rate; and that ‘biggest’ is defined as nominal dollars, the actual dollars with no allowances for inflation over time.
Relying on nominal dollars ignores the fact that there have been larger percentage rises. A 12 per cent rise over a six month period is certainly large but there have been bigger.
However, experts say the 2009 rise was the biggest across the century in real terms. There have been larger percentage increases but when adjusting for inflation the 2009 rise comes out on top.
We rate this claim True.
Published: Wednesday, May 29, 2013 at 3:01 p.m.
Jenny Macklin, Press release, May 21, 2013
Maximum Basic Rates of Pension - July 1909 to Present Date, Department of Families, Housing, Community Services and Indigenous Affairs, May 29, 2013
Email exchange, Combined Pensioners & Superannuants Association of NSW, May 29, 2013
Email exchanges with Professor Peter Whiteford, May 29, May 31, June 2, 2013
Email exchange, Professor Paul Gerrans, Accounting and Finance, University of Western Australia, June 3, 2013
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