Cost of Living and Superannuation Update CE Tim Terrell, AM—PNGAA Representative, ACPSRO
This information aims to bring you up to date on the recent activities of the Australian Council of Public Sector Retiree Organisations (ACPSRO), of which PNGAA is a member and to which I have been PNGAA’s representative for several years.
Over much of this time, ACPSRO’s primary focus has been on seeking change in the way in which the pensions of public sector retirees are indexed. This affects both retirees from the old PNG Superannuation schemes and anyone else on CSS and State pensions. Indexation of these pensions has been tied for decades to the Consumer Price Index (CPI), which has resulted in pensions paid having failed to keep up with the cost of living as experienced by Australians in contemporary markets. This is because of changes that were made to how the CPI is calculated in the late 1990s.
This deficiency has been identified and recognised by a wide range of enquiries and reports, including two senate reports, which ACPSRO has been supporting and sponsoring. All, however, have been rejected by governments of both persuasions on any or all of the following grounds:
• a change would be too expensive and could not be accommodated in the Budget;
• public sector superannuation schemes are generous when compared to those in the private sector and there is no justification for making them more generous;
• to the extent that increases in public sector salaries are related to market factors, there is no obligation on governments to maintain the same equivalence;
• the public sector ‘fat cats’ are already well rewarded and do not deserve any further reward;
• CPI measures by how much the economy changes in value and this is therefore the appropriate index to use in superannuation changes.
ACPSRO and its member organisation have spent years disputing these claims and attitudes, but so far to no avail. While in no way resiling from its opposition to these arguments, ACPSRO is now focused on the last—the appropriateness or otherwise of using CPI as a tool for indexation.
A wide range of recurrent payments governments and other entities are required to make, need adjustments to provide year by year for changes in the value of money in future years. CPI is often used for this purpose, but is by no means the only measure by which these changes are estimated. The justification for the measure used is often opaque and open to question.
The need for an economy-wide investigation into how and why indexation measures are used in Australia has been recognised by ACPSRO as the essential first step needed to bring rationality into the issue. It has therefore launched a campaign with this as its objective.
Such an investigation may or may not establish that the CPI is an inadequate and inappropriate means of calculating changes from year to year in the cost of living, if such be the objective of indexation. If it should not be the objective, then the objective will need to be specified and the best way of achieving it identified.
ACPSRO is glad to note that the Australian Securities and Investment Commission (ASIC) has recently published a requirement for providers of retirement calculators to take into account changes in the cost of living on top of the CPI. This confirms the long-held belief by ACPSRO that the CPI by itself is inadequate for this purpose, and looks forward to the general application of ASIC’s ruling by not only private sector retirement providers, but public sector ones as well.
PNGAA members are encouraged to pursue any opportunity they may have to take this matter forward.
Note from Editor:
Not all PNGAA members may be aware of the background to PNGAA. It was previously known as the Retired Officers’ Association of Papua New Guinea, being formally constituted in 1951. The Association owed its genesis to the concerns of retired officers who had served in the Public Service of Papua (then an Australian possession) and New Guinea (then a Mandated Territory under the League of Nations) prior to the outbreak of World War II, in the Provisional Administration of Papua New Guinea immediately after World War II or in the combined Public Service of Papua and New Guinea. Their concerns related to the maintenance of superannuation entitlements and retirement benefits affecting both themselves and their dependants.