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Pensions and Wages Trickery

Retirement incomes and ageing Australia's predicament have now seen both government and opposition make major statements. The attempt by the government to divert attention with the "$8 billion pension hole" from what appears a more considered response from the opposition than the government, has unmasked a con trick on pensioners dating back to 1997. This seems to have been hidden from even the long time opposition spokesman on the issue until now.

In 1997, shortly after the current government came to power, age pensions were indexed to CPI but subject to a new revolutionary provision of not being lower than 25% of "average weekly earnings". Historically age pensions had been compared to 25% of AWOTE (Average Weekly Ordinary Time Earnings for full time adults). This is one of nine different series compiled by the ABS and is the one used in superannuation tax law for pension RBL's and contribution limits. AWOTE is a reasonably stable earnings series because it's for standard hours(no overtime which is variable). Historically (pre 1982) a males only based AWOTE was in use and this was better still because female participation rates are quite variable - but that's harder to argue a case for in a modern non-sexist world.

Anyway when this revolutionary protection was legislated in 1997 a new term was introduced (not an ABS standard term). This term was MTAWE (Male Total Average Weekly Earnings). At first glance you might think this "Total" figure must be higher than "Ordinary" old AWOTE. Well it turns out the really significant effect of MTAWE is that it groups together full time and part time employees in an "All Employees" figure. As part time earnings are much lower than full time, the 25% MTAWE is lower than what everyone thought was 25% of Average Weekly Earnings(AWOTE) - 4.4% lower in fact. The Single Age Pension is currently $226.40 which is 24.58% of AWOTE. So if it were indexed to 25% AWOTE it really should be $230.25 (25% of AWOTE) or $200pa extra for singles.

Posted Thursday, 18 March 2004

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