Tuesday, March 10, 2009

IMF Wants To Punish The Victims

The latest advice from the International Monetary Fund has suggested that Australia should combat rising welfare costs by cutting entitlements to such luxury items as healthcare, and increasing the retirement age. The IMF has identified the very real problem that the dramatic drop in the value of the sharemarket has impacted on superannuation, increasing the number of people who will be seeking government pensions. This fallout from the Global Financial Crisis has compounded the already existing problem posed by the ageing population, and it has made the need for welfare reform more urgent. In what might be considered an alarmist warning the IMF has indicated that if budgetary pressures were to threaten the solvency of governments then the financial markets would be at risk of what it describes as “a complete meltdown”.

While it is true that there is increasing pressure on government resources, Australia is not yet at the point where it needs to start denying people healthcare. Unfortunately, the IMF seems to have a habit of offering policy solutions to economic problems, rather than offering economic solutions to policy objectives. They are very good at going around the world telling governments what they ought to do, when perhaps they should have been paying more attention to the regulation of the world’s capital markets so that we could have avoided the GFC in the first place.

Retired Australians, whether on a pension or funded by superannuation, are not responsible for bringing about the GFC. Instead, they are the victims of it, as are the workers who may lose their jobs, or who may be required to reduce their hours. Any suggestion that they should also have their entitlements to healthcare removed is an insult added to the injuries they have already suffered. But that’s not something that the highly paid boffins at the IMF are likely to understand.

Instead, our government must remain committed to improving the retirement incomes of those who rely solely on the pension and deliver a significant increase in the May budget as promised. Our government must remain committed to building up the superannuation system to provide for the future needs of successive generations of Australians as they grow older and retire. And our government must remain committed to a guarantee of universal healthcare available to all regardless of status. These things all represent triumphant achievements of the Australian way of life and must not be abandoned now.

In order to ensure that these commitments are met it will be necessary to make some changes. When the base pension is increased in May, don’t be surprised to see that self funded retirees may find it more difficult to get a part pension. But the trade off should be to bolster superannuation so that ultimately fewer people will need the pension. At present the system is designed in such a way as to encourage people to dispose of assets just to qualify for a concession card. Instead, people should be encouraged to preserve their assets so as to be better able to fend for themselves.

Simply cutting access to welfare isn’t going to solve the GFC. In fact, it is punishing the victims. It is inflicting the damage on those who were not responsible for causing it, and who are the most vulnerable to the impact, while allowing the corporate buccaneers to float away on their golden parachutes.

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