Generations X and Y to work until 70

AUSTRALIANS born after 1965 will have to work until they are 70 before they are eligible for the age pension under changes announced by Joe Hockey, while the Treasurer has also warned there is "no such thing" as a free visit to a doctor or free welfare.

Joe Hockey.

Joe Hockey.

On Friday, Mr Hockey said nobody currently on the pension would be hit by the rise in the pension age in the federal budget but the change could struggle to pass through the Senate as Labor families spokeswoman Jenny Macklin accused Prime Minister Tony Abbott of breaking a pre-election promise not to touch pensions.

In what is expected to be his final major speech before handing down his first federal budget on May 13, Mr Hockey said the Coalition would deliver a document that is "not going to be an austerity budget, but it is going to be a prudent budget", which would prepare Australia for the demographic challenges posed by an ageing population.

"What we are going to do is to deliver a fairer system for the aged pension that is going to focus on the sustainability of the system with a reasonable quality of life," he said. "The aged pension expenditure today is currently more than we spend on defence.

"It's rising to $72 billion rapidly, that's over 6 per cent growth ... the pension kicks in currently at 65. When Labor increased it to 67 by 2023, we gave them bipartisan support.

"When we introduce legislation to increase it to 70 by July 2035, 2035, that's when it will go to 70 ... we expect that there will be bipartisan support."

But Ms Macklin said pensioners had been betrayed.

"The Prime Minister made it clear on no less than 30 occasions before the election that there would be no change to pensions and no cuts to pensions,'' she said.

"The Prime Minister has no mandate to make changes to pensions in this year's budget – regardless of when these measures commence."

The Treasurer told an Australia-Israel Chamber of Commerce lunch in Melbourne the government was carefully considering commission of audit recommendations to scale back the about $5 billion annually doled out in industry assistance and introduce some form of fee co-payment for GP visits.

The commission recommended $15, while a payment of $6 has also been mooted.

The retirement age is already scheduled to rise from 65 to 67 by 2023 under changes introduced by the former Labor government. The government's policy shift would ensure the age continues to slowly rise through until 2035. The rise to 70 by 2035 is quicker than the shift by 2053 suggested by the government's own commission.

Mr Hockey also took aim at duplication and waste in government agencies and services, an area highlighted by the commission of audit's report as it called for a reduction in the public service of 15,000 jobs and the abolition of government agencies and bodies, as well as the need to "redefine the role of government in society".

"Government services are somehow deemed to be magically free but, of course, they're not free, they are paid for by the taxpayer," Mr Hockey said. "And so asking those who use government services to at least make some contribution to their delivery seems a logical and equitable step. There is no such thing as a free visit to a doctor. There's no such thing as free welfare.

"The commission of audit identified a need to rebuild the institutions of government."

Some recommendations from the commission would be taken up immediately and others would be assessed against the backdrop of the coming tax white paper, financial system inquiry and an intergenerational report.

In the longer term, Mr Hockey re-committed the government to achieving a surplus of 1 per cent of gross domestic product by 2024 while paring back spending growth.

- James Massola, Daniel Flitton (The Age)

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