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National Report

Australia

Terry Carney

LL.B(Hons), Dip. Crim. (Melb),Ph.D. (Mon)Professor of Law

The University of SydneyE-mail: [email protected]

Sonya Sceats

BA(Hons), LL.B (ANU)Independent researcher specialising in human rights and international law.

International Society for Labour and Social Security Law8th Asian Regional Congress

The National Report : Australia------------------------------------------------------------------------------------------------------------------------------------

October 31~ November 3, 2005 - Taipei, TaiwanA. Demography and Labour Market Trends.

1. Population Trends.

Australia’s historically delayed (and slightly unpredictable) conversion from being an artificially youthful society to one comprising mature proportions of older people (Borowski and Hugo, 1997), is a product of many things―the flow-through effect of the post-war cohort of ageing baby boomers, reductions in migration and birth rates, medical advances, and other factors (Kendig and McCallum, 1986: 5-7; McCallum, 1997).

By 2021 the number of Australians over 65 years of age is expected to increase by 73 per cent from its 2001 figures (or from 2.4 million to 4.2 million). Over 65s will then comprise 18 per cent rather than the current 12.7 per cent of the population (AIHW, 2003: 280). Proportionate increases for people aged over 80 will be steeper, while the growth in the proportion of people of workforce age is expected to slow to zero around 2040. Visually, whereas Australia’s demographic profile has resembled a pyramid or ‘beehive’ (with larger younger cohorts and smaller sized aged cohorts) it is altering to resemble a ‘coffin’ to use the Productivity Commission’s (slightly insensitive) metaphor (ProductivityCommission, 2004: 6).

Of course the combined ‘dependency ratios’ of young and old partly offset each other. Declining proportions of dependent children reduce taxpayer pressures, though at a slower rate than the more rapid rise in numbers of aged people, creating difficulties in forecasting shifts in economic burdens. Even on these projections, however, the aged ratio will only be similar to that already experienced in Europe for some time; it is a trajectory which matches the US, but falls short of say Japan or Sweden (Kendig and McCallum, 1986: 3; AustraliaTreasury, 2004a). So even by 2050 Australia will rank 53rd of 193 countries in terms of high age ratios (ProductivityCommission, 2004: 11).

2. Fertility, Mortality and Life Expectancy Trends.

Fertility

Fertility in Australia has declined steadily ever since the post war ‘baby-boom’ generation, so most of its impact is already in the pipeline.

In 1921 fertility stood at 3.1 births for each woman of child bearing age, dropping to 2.1 in the Great Depression and built to a peak of 3.6 in 1961 (ProductivityCommission, 2004: 19). Consequently, fertility decline, rather than the ageing of the baby-boomers (whose presence delayed the ageing of the demographic profile) is principally responsible for the projected ageing of the profile over the next 40 years (ibid, 20).

Current fertility rates of 1.7 births are predicted to decline slightly to 1.6 births by 2011, and then stabilise at that level (ProductivityCommission, 2004: 3). This means that

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Terry Carney Sonya Sceats 2


death rates are magnified (due to lack of an off-setting birth), rising by over 60 per cent per 1,000 population over the next 40 years (ProductivityCommission, 2004: xxxvii).

Death R ates

Death rates themselves have been falling for a long time.

Crude death rates (not adjusted for the demographic profile) have dropped from 12.2 per 1,000 in 1901 to 6.6 per 1,000 in 2001; and when adjusted for the rising numbers of older people in the population (the ‘standardised death rate’), it almost halved in the last 30 years alone (down from 10.5 in 1971 to 5.4 in 2001) mainly due to declining infant mortality (ProductivityCommission, 2004: 13).

Life E xpectancy

Consequently, life expectancy has increased by 30 years since the 1880s (ibid).

As the Productivity Commission pointed out, but for increased longevity, the aged dependency ratio would merely double by 2050, rather than roughly quadruple as anticipated (ProductivityCommission, 2004: 15).

3. Labour Force Participation Trends.

Because older workers have lower labourforce participation rates, the ageing of the demographic profile (and expected doubling of those over 65 by 2044-5 to comprise around a quarter of all Australians) will see aggregate participation rates decline.

It is predicted that the current participation rate of 63.5 per cent may decline 8 points to around 55.4 per cent (ProductivityCommission, 2004: xviii. xxvii), or 11 points below where it would be projected to be were it not for the ‘ageing effect’ (ibid, xxvi).

These trends necessarily narrow the size of the group of working age taxpayers available to carry the cost of paying for whatever services may be needed by retirees or other dependent members of the community.

4. Labour Force Composition Trends.

Labour force composition trends are very difficult to predict.

Certainly, mature workers currently face significant barriers to accessing the labour market (Encel, 2000), or in using the new Job-network to assist in a job search (AgeCounts, 2000). Research confirms that age discrimination is both subtle and complex, varying with age and gender of workers and employers.

However the most important compositional trends lie on the labourforce supply side. Here Australia has concentrated on its disability and sole parent populations, with their

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strong growth rates (of 4 per cent per annum for disability payments in the 4 years to 2002). Indeed, over the previous decade numbers had risen by 66 per cent (Treasury, 2004: 8). Workforce participation also was very low, as it was for sole parents (ibid).

During the 1990s, Australia’s growth rate in disability payments (DSP) slowed somewhat, but was still the highest in the OECD. There were slightly fewer than 50,000 disability pensioners at the beginning of the 1970s but 650,000 by 2002 (Treasury, 2004: 9). While reversal of these trends has been the subject of policy initiatives since the 1980s (Carney, 1991; 2002), without much impact, Government control of the upper house from July 2005 is likely to see passage of measures to tighten DSP. Measures which the Government argued in 2002/3 would see 650,000 rather than a projected 870,000 DSP recipients within the decade (Australia, 2002).

5. Unemployment, Retirement Ages and Productivity.

Unemployment

Unemployment rates should decline, but the rate of growth in labour supply will drop away.

Even so, the ‘ratio of employees to population in 2050 will still be higher than at almost any time in the past century’ (ProductivityCommission, 2004: xxix).

Retirement A ge T rends

Australia had much higher rates of early retirement by workers aged 55-64 in the period 1974-1981 than did Japan or the USA (declining 15 per cent against 2 and 6 per cent respectively).

Reasons included the greater financial security conferred by the post-war boom, liberalisation of pension and war service pensions, and declining economic opportunities for older workers due to recessions and structural changes (Stricker and Sheehan, 1981; Kendig and McCallum, 1986: 28-29).

Policies described elsewhere are designed to encourage later retirement.

GDP

GDP growth is predicted to fall from recent levels of a little over 4 per cent (and the 3 per cent forecast for 2005), dropping to 1.25 per cent by the mid 2020s on current assumptions (ProductivityCommission, 2004: xxxii).

Although some education and other welfare expenses on the young will decline, and although superannuation reforms will ease pressure on the aged pension―fiscal outlays will rise, mainly due to rising health and aged care expenditure (ibid, xxxiv). Thus health care costs as a proportion of GDP are predicted to rise from 6 to nearly 11 per cent (ibid,

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xxxvi). Aged care (mainly utilised by people over 80) is also likely to climb by between 180 per cent (if disability rates drop) and 250 per cent; or from 0.85 to 2.1 per cent of GDP (ibid, xxxix).

If assumptions remain unchanged, this would result in a 7 per cent GDP ‘gap’ between revenue and outlays, or around AUD 2,200billion of unfunded liabilities over the next forty years (ibid, xxxl).

6. Living Arrangement Trends.

‘Ageing in P lace’

Contrary to popular perceptions, the majority of older Australians continue to live in private dwellings.

In 2001, only 13 per cent of those aged 75 and over lived in non-private dwellings including residential aged care facilities and nursing homes (ABS, 2004b: 2). These figures reflect the desire of older Australians to live independently and to ‘age in place’ rather than in dedicated institutions (AIHW, 2002a: 6). Recent government policies aim to promote this preference ‘through the linking of care and support services to the places where older people prefer to live’ (s 2-1 (1) (j) Aged Care Act 1997 (Cth)).

Home O wnership’

Older Australians enjoy exceptionally high levels of home ownership.

In 1999, 91 per cent of older persons living in a couple-only household owned their own home, with 88 per cent owning their home outright. Those living alone, usually widows and widowers, enjoyed an ownership rate of 76 per cent, with an outright ownership rate of 73 per cent (ABS, 2001: 180). In the United Kingdom, by contrast, 68 per cent of elderly households owned their own home during 1998, with 61 per cent owning their home outright (OfficeofNationalStatistics, 2000: 9).

Rise in L one P erson H ouseholds

Australians are increasingly living alone.

Between 1971 and 1996, the proportion of lone person households grew from 13.6 per cent to 22.1 per cent of all households (ABS, 1998a: 158). Further increases are projected due to the ageing population and the propensity of older women to live alone (ABS, 2004b: 1). Currently, 34 per cent of those aged 75 and over live alone, with an increase of up to 5 percentage points expected by 2026 (ABS, 2004b: 2).

B. Legal Framework.

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Australia began as a British colony, before the self-governing States came together in a federation in 1901. This resulted in two tiers of government―a national (the ‘Commonwealth’) government and State (and ‘territory’) governments―each level having its own legislative, executive and judicial branches of government. Since federation (and before) all levels of government now follow the ‘Westminster’ model, and are elected by full adult suffrage.

Australia is a common law country. A peak court (the High Court of Australia), adjudicates on constitutional matters, including defining the content and boundaries of the respective powers of the Commonwealth and state governments; it is also the final court of appeal on all legal questions, hearing appeals from the peak courts of the states or territories (called ‘Supreme’ courts). There is no state or federal Bill of Rights, other than the Human Rights Act 2004 in the Australian Capital Territory.

Since the 1970s there has been an extensive (and popular) system of administrative review of departmental decisions about citizens’ entitlements to government largess; reviews heard on the merits (that is to say ‘stepping into the shoes’ of the original decisionmaker) are undertaken by independent, multi-disciplinary tribunals, with minimal cost to applicants (Carney, 1996).

1. Constitutional Powers.

Under the Australian Constitution, the Commonwealth Government is responsible only for defined functions, including defence, foreign relations, customs, taxation, trade and commerce, and certain other matters. Unless the topic is one of those listed in the Constitution, only the States can make a valid law about it. However, if the Constitution does allocate a topic to the Commonwealth, then its laws will prevail over any inconsistent State laws.

Until 1946 the Commonwealth Parliament was mainly restricted in the field of social welfare to making laws about age and disability pensions, and veterans affairs. Following passage of a referendum to amend the Constitution in that year, the Commonwealth acquired additional power to make laws about

S 51 (xxiiiA) The provision of maternity allowances, widows' pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorize any form of civil conscription), benefits to students and family allowances.

2. Legislative Provision.

Current income transfer programs such as the age pension or carer payments are now mainly grounded in this head of federal power (Carney, 2001: Ch 1), which supports the enactment of the Social Security Act 1991 (Cth) and the Social Security (Administration) Act 1999 (Cth) which make provision for such payments.

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Other areas of community services, such as Commonwealth involvement in aged care and education, rely on the power to attach conditions to financial grants (Carney & Hanks, 1986). This is the basis for the Aged Care Act 1997 (Cth) which regulates the terms on which residential aged care is funded.

States and Territories, exercising their otherwise plenary powers for the ‘peace and good order’ of their citizens, are able to pass laws in other spheres, such as those regulating retirement villages, or those providing Australia’s highly successful tribunal-based system of adult guardianship laws (Carney and Tait, 1997).

States and Territories are also responsible for provisions for private planning of affairs through ‘enduring’ powers of attorney or of personal guardianship (Carney, 1999a).

3. Common Law Provision.

In Australia the common law does not speak extensively to retirement policy issues, other than in clarifying the meaning of major legislative initiatives such as those outlawing discrimination on the basis of age, or imposition of mandatory retirement ages.

The main areas where the common law does have potential influence include the equitable doctrines which allow the courts to set aside oppressive contracts or other transactions entered into by people with vulnerable mental capacity or under unreasonable pressure (Burns, 2002; 2003; Lewis, 2004: Ch 4).

C. Income Security.

Australia’s historic reliance on social security income transfer payments as by far the principal source of income support in retirement is slowly altering due to the growth in private superannuation coverage promoted by government incentives, or mandatory requirements for employers to contribute. However the levels of superannuation entitlement are too low for there to be a dramatic switch away from reliance on social security over the next several decades. Instead, superannuation income is a supplementary payment for most Australians on average incomes.

The Australian model of social security has however long been characterised by flat rate (not earning-related) levels of benefits, and rigorous ‘needs-targeting’ through tight means testing of most payments (Carney & Hanks, 1994: Ch 4; Carney, 1999). Australia’s retirement income policy is currently built on three ‘pillars’ of a needs-tested pension, compulsory superannuation and voluntary private contributions and savings (AustraliaTreasury, 2004b: 1). This implements the call by the World Bank in 1994 for three pillars of savings, redistribution and insurance (WorldBank, 1994: 10).

Public sector cash transfer programs like the age pension (and until new grants ceased in 1995, also ‘wife pension’) provided the principal retirement incomes for three quarters of all income units with an aged member during the 1999/00 year (AIHW, 2003: 283-84).

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Any private savings still mainly served as bridging income for those voluntary (and increasingly involuntary) pre-retirees who became casualties of constriction and structural change in the labour-market (as jobs are redistributed away from older workers).

Occupational superannuation had long been fostered by generous taxation concession policies, but until quite recently it accrued mainly to a small section of privileged workers. This began to change with the introduction of compulsory superannuation in 1985.

1. Public Pensions.

Australia was at the forefront of moves to provide publicly funded retirement incomes for the aged, after Germany’s contributory pension in 1889 and non-contributory pensions in Denmark (1891/2) and New Zealand (1898).

Responding to public pressure to look after ‘founders’, aged pensions were introduced in Victoria and New South Wales prior to federation, followed by Queensland (Kewley, 1973: Chs 2, 3). State schemes lacked universality (Victoria turned first to family: Gunn, 1989). But this limitation was abandoned by the 1909 national scheme with its means-tested flat rate pension payable irrespective of family support (Kewley, 1973: 74).

Age pension was legislated for in 1908 and began to be payable in 1909. Although until 1974 pensions were in theory subjected to a test of ‘good character’ and acceptance of social obligations (such as maintenance of dependents: see Carney & Hanks, 1994: 30), the conditions for qualification were otherwise straightforward: meeting an age threshold and demonstrating a residential connection (See now: Carney, 2001: Ch 3, Part C). A period of 10 years residence was and still is insisted on, and an income and assets test confines eligibility to needier claimants (McCallum, 1984). Originally the qualifying age for males was set at 65 years and for women at 60. In 1994 provision was made to phase in a raising of the women’s pension age to 65 years. Women born before July 1935 continued to be eligible at age 60, while those born on or after 1 January 1949 qualify only on turning 65. Between those birthdates the age pension age increased in 6 monthly intervals.

By the 1950s, pension coverage had been liberalised from an initial one third to three quarters of the aged population (McCallum, 1990: 60). High rates of home ownership partly offset the impoverishing effect of rather austere levels of those payments by international standards (Manning, 1990: 74-75). The aged pension delivers comparative security and basic adequacy of benefits (cf: Olson, 1994), based on low pension rates combined with a strict income test promoting a policy of looking after the most needy.

The re-introduction of an assets test in 1985 unsettled some sectors, such as farmers, but the system remained fairly stable despite the rough edges of means tests. Means tests imperfectly measure social need (equity) since ownership (the key under the law) and enjoyment of property (the socially relevant issue) do not always coincide (Carney and Hanks, 1994: Ch 6; Carney, 1999b; 2001: Ch 4, Part C). They also generally ignore moral obligations of pensioners―such where children of a pensioner earn a part-living from a farm (Voyce, 1993; 1999), or occupy property in return for provision of domiciliary care.

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The law allows those excluded from full pension under the assets test to make up the difference between their income and a full pension rate by taking out a ‘reverse-mortgage’ loan, secured against their assets and realised on death (Howe and Healy, 2005). This ‘pensioner loan scheme’ has not proved highly popular however, due to strong sentiments on the part of the aged that they should leave property intact for the benefit of children or grandchildren.

2. Employer Superannuation.

Superannuation is deferred private provision, funded from present income and providing benefits tailored to capacity to pay, thus mirroring wage relativities. It boosts, and ultimately replaces, age pension retirement income if contributions are sufficiently high over a whole working life―at least 12 per cent of salary (Shirlow, 1992: 3). While it now covers 90 per cent of all employees, superannuation is too recent a policy, and contributions are too low for it to become the principal retirement income for most people; currently it is the principal income for only 8 per cent of aged income units (AIHW, 2003: 283-84).

Plans of successive conservative governments during the middle third of the 20th

century for contributory schemes, including plans for the aged, failed (Carney and Hanks, 1994: Ch 2). In the mid-1960s to early 1970s, leading economists, Richard Downing and Ronald Gates, advocated national superannuation schemes, with revenue-funded floor entitlements for the poor, plus a contributory element (Senate, 1988: 329-335). The majority report of the 1974 Superannuation Inquiry endorsed this idea of a guaranteed floor and a contributory pension, with revenue-funded supplements for the poor until contributions built sufficiently. Government support was lacking, however, so attention turned to the private sector schemes which then only covered around four in ten employees.

The 3 per cent superannuation levy in 1985 (raised to 9 per cent by 2002) introduced a mainstay of European social security―lifecycle preservation of income relativities. Prior to its defeat, the Labor Party’s 1995 Budget target was for a 15 per cent levy by 2002, made up of another 3 per cent from employees, matched by government (CommonwealthofAustralia, 1995: 21). The incoming Government abandoned the plan however, and projected retirement incomes from superannuation remain too low. Even if replacement of personal spending (not former personal income) is the test, 30 years of full contributions achieves only 76 per cent replacement levels (AustraliaTreasury, 2004b: 5), or just 52 per cent of final salary (AUD 18,000 pa), for a person earning AUD 35,000 (Sampson, 2004: 8).

In terms of public savings objectives, the lack of a truly viable superannuation policy therefore remains one of the largest policy flaws (Uren and Browne, 2004: 19). The rules providing mildly favourable treatment of retirement income streams for the purpose of age pension means tests are described more fully elsewhere (Carney, 2001: Ch 4, Part B, Div 3-5).

3. Private Superannuation.

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Tax concessions for superannuation contributions have a long history in Australia, and are projected to cost AUD 11 billion (compared to outlays on the age pension of AUD 19 billion) in 2004 (Steketee, 2004: 22).

Until July 1983, taxation treatment of retirement benefits in Australia was quite perverse. Lump sums were taxed at a token 5 per cent, exactly the same tax levy placed on a pension or annuity. So there was no incentive for people to prefer pensions over lump sum payouts. Superannuation funds were often run by employers as a ‘tax sink’ or as a source of business operating capital. Funds and employers received the remaining tax concessions. Undistributed fund earnings were entirely tax free, and employer contributions to approved funds were tax deductible. Employee benefits were not vested (‘owned’), and nor were benefits ‘preserved’ for retirement. Women, low-income and part-time workers fared least well: scarce work-income was locked up, only to be later offset against the pension; contributions could not be made during spells of unemployment or child rearing; and inefficiencies of manageing multiple small entitlements in different funds, eroded nest eggs (Rosenman and Winocur, 1991).

Pre 1983 tax policies changed slowly, and only for future contributions (to avoid upsetting prior plans). First, tax rates on lump sums were increased from July 1983 on amounts not ‘rolled over’ into a pension or annuity. New accumulations in genuine retirement schemes were taxed at payout at 15 per cent on the first AUD 55,000 and 30 per cent for the balance; or 30 per cent for the whole sum if drawn down before age 55. Then, in 1988, a dual-stream collection arrangement was made for ‘funded’ schemes' (unfunded public sector schemes were unchanged).

For the first time, fund earnings were taxed (at 15 per cent pa, against a corporate rate of 33 per cent), and a 15 per cent pa advance collection was levied on funds as an up-front ‘contributions tax’ (paid on behalf of contributors, based on contributions made in the tax period), to be off-set by a rebate of that amount on pay-out. This changed taxation of the ‘contributor’s share’ from an original 15 or 30 per cent rate at payout, by bringing forward taxes otherwise levied only on retirement up to 40 years later. Imputation credits (freeing tax on dividends from previously taxed income), previously not needed on un-taxed funds, were provided for the first time, removing a market distortion for investment choices otherwise attractive for tax minimisation.

Finally, ‘reasonable benefit limits’ (RBLs) introduced in the 1960s to serve a tax avoidance goal (O'Neill, 1989), were expanded to promote greater equity. A 1985 tax ruling capping lump sum payments qualifying for deductions at seven times the person’s final average salary, irrespective of affluence, was altered in 1988 to minimise discrimination against low-income earners. A sliding scale of (diminishing) benefits was phased in over 5 years for incomes over AUD 35,000 (indexed); together with a differential (and more generous) treatment of annuities (allowing a ratio of 11.5 times the base for these contributions, provided at least 50 per cent was taken as a pension).

Private superannuation savings have continued to be encouraged in various other ways, including currently by matching (up to a cap of AUD 1,000) contributions made by

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lower and middle income earners, and by permitting voluntary super contributions to be made up to age 75 (AustraliaTreasury, 2004b: 14). A February 2004 reform package also eased the ability to make tax concession qualifying superannuation contributions between the ages of 18 and 65, irrespective of having a work history in the previous 2 years (removing the former 'work test' precondition: AustraliaTreasury, 2004b; Costello, 2004a: 8) and it provided new contributions and cash-out rules for those aged 65-74.

4. Civil Society.

Originally Australia emphasised family provision for ageing, with a very residual state safety net in the form of public ‘asylums’ (institutional care) or regulation and subsidies for charitable activities (Sax, 1990: 23).

Filial support of parents is commonly still an element of Islamic and Asian legal systems (McDonald and Soriano, 1994: 114), but it is not part of the law in Australia, though exhaustion of close family support was once a precondition to payment of state aged pensions in the 1890s, which were the precursor of the federal law (Carney, 1997).

Informal transfers of support across the generations are quite varied. Contrary to common understandings that the aged are a ‘drain’ on following generations, aggregate wealth transfers made by the aged exceed those received by them, as gifts made to grandchildren or children, assistance with housing deposits and other such assistance is provided over their lifetime. For example, a survey conducted by the Australian Institute of Family Studies in 1996-7 found that over two-thirds of adults provide financial assistance to their adult children, while less than one-half of adults provide financial assistance to their parents (Batrouney and Stone, 1998: 19-20). This ‘generational inequity’ in favour of the younger generations is confirmed by other studies exploring direct financial support in addition to other means of intra-family support including accommodation support, regular assistance with transport, home help and child care (de Vaus and Lixia Qu, 1998).

Conversely, it is not uncommon for near relatives to contribute to the income stream or capital base required when an aged homeowner of otherwise modest means enters level 2 (or ‘hostel’ care) and becomes liable to pay an ‘aged care bond’ which can average AUD 100,000 (no bond applies to level 1 nursing home care). The interest on this sum is available to the home throughout the person’s stay, and a small portion of the capital is also able to be retained by the facility during the first five years of aged care residence. But such family contributions generally serve to avoid the need to immediately sell the family home of the person entering care, and will later be substantially recouped on distribution of assets on death. It is important to note in this regard that Australia now imposes neither death nor inheritance taxes.

Civil society continues to make some small contribution to the care of the aged, in various ways. Originally charitable not-for-profit religious agencies were mainly responsible for raising or allocating part of the funds for construction and operation of aged care facilities (Carney and Hanks, 1986), but the sector is now dominated by for-profit providers. Not-for-profit providers continue to operate and retain the potential to provide a

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slightly higher quality of care, but their need to fund capital replenishment limits that advantage. Consequently the main contribution made by civil society is the time volunteered by the many non-government agencies which work with the aged in some way, such as the volunteers who deliver ‘meals-on-wheels’ sustenance to people living at home but unable to cook for themselves on a regular basis, or through the myriad of voluntary organisations assisting with visits, fundraising or in-kind support.

Some businesses make commercial decisions to focus on older people, such as by advertising that they offer the lowest rates (or a ‘discount’) on premiums for motor vehicle or household home and contents insurance.

D. Employment Security.

Statutory ages of retirement and qualification for social security (formerly 65 for males and 60 for women, from 1994 progressively rising to 65 for women by the year 2004) historically recognised the moral claims to support from aged people whose hard work laid the foundations for current prosperity (Kewley, 1973: 61; Encel, 1996). Such measures are now seen as too blunt and a denial of human rights. They have been replaced by legislative bans on compulsory retirement or inclusion of age as a prohibited ground of discrimination.

1. Age Discrimination Protections.

Australia debated age discrimination in the 1975 Poverty Inquiry (Encel: 124), but progress was slow and patchy. The NSW Upper house defeated a 1977 bill to make age a prohibited ground of discrimination (Encel, 2004: 2), and a 1980 Anti-Discrimination Board report supported making age a ground but opposed banning retirement ages (ADB, 1980: 189). However banning mandatory retirement proved to be the first priority for the legislature.

Age was made a prohibited ground of discrimination by South Australia (1990), Queensland (1991), New South Wales, Victoria and the Australian Capital Territory (1994), Western Australia and the Northern Territory (1995), and Tasmania (1998).1

Commonwealth action was slowest, with full equal opportunity legislation delayed until June 2004 (Encel, 2004: 6-7). Such legislation makes it unlawful to discriminate (directly or indirectly) on the basis of age in areas such as work, access to places and vehicles, education, provision of goods and services, accommodation, and registered clubs. There are many exceptions, however.

In 2004, the federal Age Discrimination Act made it unlawful to discriminate either directly or indirectly on the basis of age, including within the workplace. The Industrial Relations Reform Act 1993 had previously made age a basis for a much narrower protection

1 Anti-Discrimination Act 1977 (NSW) Part 4G; Equal Opportunity Act 1984 (SA) s 85A; Equal Opportunity Act 1984 (WA) Part IVB; Discrimination Act 1991 (ACT) s 7(1)(ib); Equal Opportunity Act 1995 (Vic) s 6(a); Anti-Discrimination Act 1998 (Tas) s 16(b); Anti-Discrimination Act 1991 (QLD) s 7(1)(f); Anti-Discrimination Act 1992 (NT) s 19(1)(d).

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against unfair termination of employment, and had required the Commission to renovate awards to remove any provisions which ‘discriminate against an employee because of, or for reasons including ... age ...’ (s 150A(2)(b); later, Workplace Relations Act 1996 s 170CK(2)(f) (Encel, 2004: 4).

Compared to other forms of discrimination, most notably discrimination on the basis of either sex or race, focus on age discrimination is a recent phenomenon (Encel, 2004, 1), as the infancy of these legislative schemes demonstrates. As a consequence, age discrimination case law is still in an early developmental state across Australian jurisdictions. The most significant case to have come before the Australian courts involved a Qantas pilot who was dismissed at age 60 as a result of international aviation rules permitting states to exclude pilots aged 60 and above from entering their air space. The High Court accepted Qantas’ argument that because pilots aged 60 and above were excluded from the majority of its flight paths, the company’s requirement that pilots be aged below 60 was ‘inherent’ to the position and thus permissible under the relevant federal legislation.2 A powerful dissenting judgment was entered by Kirby J who argued that since all of Qantas’ domestic flights and a small number of its international flights were not subject to the so-called ‘Rule of 60,’ the age restriction could not be described as an ‘inherent requirement’ of the position. His Honour noted that there is in the relevant legislation ‘no mention of bona fides. There is no reference to reasonableness. There is no consideration of business necessity. Operational requirements are not an excuse.’3 This interpretation, although compelling, was not however adopted by the majority.

2. Retirement Protections.

California outlawed compulsory retirement in the 1950s and another two dozen states followed before Congress legislated in 1967 and in 1975 precluded discrimination in federally funded projects (Encel, 1993: 125). Australia debated the issue as well in its 1975 Poverty Inquiry (Encel: 124), but again progress was slow and patchy. As mentioned, a 1980 NSW Anti-Discrimination Board report supported making age a ground but opposed banning retirement ages (ADB, 1980: 189). However, as in the US, banning mandatory retirement proved to be the first priority.

New South Wales and Western Australia foreshadowed a ban in 1989, and South Australia set up an enquiry. New South Wales phased in a ban on retirement ages (except in industrial awards) by 1993 and South Australia passed legislation the same year. In 1990 the Victorian Law Reform Commission proposed banning retirement ages two years after making age a ground of discrimination (VLRC, 1990: 11), but ultimately both were achieved in 1995 amendments (with only a limited 12 month moratorium for some retirement ages). Western Australia followed the dual model in 1995 and the Australian Capital Territory enacted the Discrimination (Amendment) Act in 1994.

Other jurisdictions mainly followed the dual model summarised above.

2 Qantas Airways v Christie (1988) 152 ALR 365.3 Ibid at 413.

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3. Older-Worker Incentives.

Over the last several years, Government has offered incentives to encourage people over pension age to remain in the workforce.

One such measure was the July 2000 expansion of the tax off-set for people who continue working beyond 65 (eliminating tax for a single person on incomes up to AUD 20,500, with reduced rates up to AUD 38,340: AustraliaTreasury, 2004b: 13). The reduction in the severity of the claw-back of pension by liberalising the income test taper (from 50 to 40 per cent) when the goods and services tax was introduced in 2000, also favoured greater workforce participation. As did the earlier 1998 initiative of a lump sum ‘bonus’ for people who defer claiming once becoming eligible (AustraliaTreasury, 2004b: 13). Likewise the 1997 measure allowing employer superannuation guarantee contributions to be made between age 65 and 70 (AustraliaTreasury, 2004b: 14), to encourage working beyond retirement age (Encel, 2001).

The 2004 Election added a further monetary incentive, in the form of a ‘mature age’ worker tax-offset (of AUD 500 pa for workers over 55 earning up to AUD 48,000pa), a measure estimated to be worth AUD 1billion over 4 years (Gittens, 2004). For self-funded retirees, a once a year AUD 200 lump sum ‘utilities payment’ was also announced during the campaign (with AUD 100 payable for those on pension), at a cost of around AUD 900 million over four years.

Policy impacts can be difficult to anticipate however. Unintended outcomes can arise. Thus in February 2004 the Government was obliged to announce a liberalisation of the rule precluding access to superannuation by a person between the ‘preservation’ age (55 if born before July 1960 and 60 for those born after July 1964) and the age of retirement when they had not permanently left the workforce. Originally designed to clamp down on people prematurely accessing their superannuation, the rule had the unintended consequence that it pushed some people into premature ‘retirement’ solely in order to win access to needed ‘savings’. To overcome this perverse effect, from July 2005 superannuation in the form of an annuity will be able to be combined with work income once a person reaches the preservation age (AustraliaTreasury, 2004b: 10; Costello, 2004b), thus helping to break down the sharp dichotomy between work and retirement. At the same time, the Government tightened the previous rules which allowed withdrawal without penalty of redundancy payouts ‘rolled over’ (at a concessional tax rate) into superannuation. Withdrawal undermined the goal of boosting superannuation provision. However the reform may make matters worse rather than better, should people now decide not to roll over a redundancy in the first place (Uren and Browne, 2004: 22).

The upper age limit on the availability of incentives to work beyond retirement age also posed problems. Previously, policy capped the ability to take advantage of work/retirement combination concessions once a person turned 75. Exceptions were made where an industrial award dealt with superannuation above that age, or where the person worked more than 30 hours a week. As had happened many times previously―most notoriously with the former ‘type of retirement product’ rules―the tax avoidance industry

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took advantage of this exception to lock monies up in such contributions for estate planning purposes. To address this, from July 2004 it became mandatory for funds to begin to disgorge entitlements either as a pension or lump sum, once a person reaches 75 (AustraliaTreasury, 2004b: 8).

E. Medical and Aged Residential Care Security.

1. Medical Care.

Australia operates a publicly-funded, universal system of medical benefits, known as Medicare, principally funded by the federal government which reimburses medical providers a ‘scheduled fee’ component of medical costs, and which funds state and territory governments under a cost-sharing agreement to provide hospitals and other infrastructure. Special provisions apply to very costly procedures like medical imageing and other diagnostic or therapeutic technologies.

The universality of Medicare is secured by a very wide definition of persons eligible for these payments. An ‘eligible person’ covers both Australian residents and certain non-residents. Australian residents include Australian citizens as well as the holders of permanent visas and people on temporary visas in the course of applying for a permanent visa, and their family members (Health Insurance Act 1973 (Cth): s 3(a), (b), (f)). Classes of people can be added to this list by Ministerial order (s 6), and arrangements can be made to extend all, or all except designated medical services to holders of temporary visas, or for a stipulated time (s 6A), and coverage extends to illness on a domestic journey within Australia which was destined to end overseas (s 10(1)-(1B)). New Zealand citizens are covered while lawfully in Australia (s 3(c)) and reciprocal agreements may be entered between Australia and other countries for mutual provision of medical care to residents of the other country (s 7). Reciprocal arrangements have been concluded with countries including the United Kingdom, Italy and Sweden.

The scheme reimburses 85 per cent of the scheduled fee for the service, subject to a ‘cap’ on the gap between that reimbursement and that scheduled fee (s 10(2)-(5)). Recent reforms have increased the reimbursement to 100 per cent of the scheduled fee for visits to a general practitioner (Health Insurance Amendment (100% Medicare Rebate & Other Measures) Act 2004 (Cth)). Treatment at public hospitals is billed directly to Medicare. Under a ‘bulk-billing’ arrangement practitioners also may charge Medicare directly, provided they accept the Medicare reimbursement as full payment for their service. In recent years, dissatisfaction with scheduled fee levels has caused a sharp decline in bulk-billing rates, particularly in rural and regional areas, with practitioners increasingly seeking up-front or contribution payments from their patients. Responding to widespread criticism, the Government in 2003 announced a system of incentive payments for practitioners providing bulk-billing to holders of Commonwealth concession cards and children under 16 years of age. Higher incentive rates apply in non-metropolitan areas, certain urban areas and Tasmania. Currently, the bulk-billing rate for people aged 65 and over stands at 82 per cent (Metherell, 2004: 3).

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The growing distinction between bulk-billed concessional patients and those required to pay in full or in part for their medical treatment has been interpreted as a retreat from the philosophy of universalism towards a ‘welfare’ approach to health care (Senate, 2003: xiii). Simultaneously, Australians are being strongly encouraged, via a generous tax rebate among other things, to take out private health insurance. As at June 2004, 42.9 per cent of the population possessed private hospital cover, with those aged 65 or over representing 12.2 per cent of this total figure (PHIAC, 2004: 14). Others must rely on a safety net system providing 80 per cent of the gap between the Medicare reimbursement and the fee charged by the practitioner. Concession card holders and families with dependent children must pay the first AUD 306.90 in gap fees before the safety net is triggered, and others pay the first AUD 716.10.

The Government also subsidises the costs of a wide variety of medications through the Pharmaceutical Benefits Scheme. Commonwealth concession card holders, including social security recipients and others on low incomes, pay the nominal rate of AUD 4.60 for most medications while general patients pay AUD 28.60. A safety net system also operates in relation to pharmaceutical benefits, making medications purchased in excess of relevant thresholds either very cheap or free.

2. Aged Care.

Traditionally, aged care policies in Australia have been controlled by an inter-generational model splitting costs between the national budget and user payments connected to the Age pension (Howe and Healy, 2005). However, increased emphasis on self-financing through hostel bonds and nursing home charges among other things have eroded this model in recent years, and commentators suggest that, like other countries including the United Kingdom, Australia is gradually moving towards intra-generational funding of aged care (Howe and Healy, 2005).

The federal government funds two types of Australian aged residential care facilities: nursing homes and aged care hostels (now called ‘level 1’ residential care and ‘level 2’ aged care respectively). Providers must be approved, including compliance with ‘aged care principles’ and other conditions under Part 2.1 of the Aged Care Act 1997 (Cth), along with the ‘certification’ process set out in Part 2.6, and quality accreditation standards in Part 4.1. Facilities are built and operated by for-profit or not-for-profit charitable (mainly religious) organisations. Low income residents such as those on full rate age pension without home or other assets, are fully funded for their care. To ensure some mix of incomes, all facilities must offer a proportion of beds to these ‘concessional’ residents, and an additional subsidy loading is paid to providers (ss 44.6-44.7).

Access to approved facilities is regulated by a multi-disciplinary ‘aged care assessment team’ (ACAT), which determines the level of medical need and capacity for community based care (s 22.4) in accordance with Ministerial guidelines called the ‘Approval of care recipient’s principles’ (s 19.2) and other requirements of Part 2.3 of the Act. Classification of the requisite level of care (and associated subsidy entitlement) is regulated by classification principles and procedures laid down in Part 2.4 of the legislation. Apart from

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provision for direct capital grants to providers (s 3.5 and Chapter 5), the main government subsidy is paid as a ‘residential care subsidy’, worked out for each resident in accordance with Part 3.1 of the Act. The rate calculator for this subsidy (s 44.2) includes supplements for certain types of resident (eg concessional residents) or residential care needs, and reductions in the level of subsidy based on income testing wealthier residents (ss 44.21-44.26).

All residents must pay a daily residential fee (commonly called the ‘daily care fee’) in an amount equivalent to 85 per cent of the full rate of age pension, or currently just over AUD 27 per day (s 58.3), but a person not on income support pays an income tested higher daily care fee (s 58.2). Entrants to level 2 ‘hostels’ must also pay an entry bond in accordance with Part 4.2, Div 57 of the Act, but no bond is required for entry to level 1 ‘nursing home’ care. Entry bonds apply only where the aged person’s assets exceed prescribed figures, but, unlike the asset test applying to social security, the person’s former home is included among their assets (s 44.10). Commonly a person of comparatively modest means who is entitled to a full rate age pension (because they have few assets or savings other than their home) will be liable to pay an entry bond in respect of hostel care.

The entry bond is the basis for providing hostel operators with some access to funds for future capital works, and an additional revenue source to meet operating costs. This is achieved by allowing a portion of the bond to be permanently ‘retained’ for each of the first 5 years of residence (s 57.20), and by entitling the hostel to keep all of the interest earned on the whole of the bond for the duration of the person’s residence in the facility (s 57.18). The size of bonds, retention amounts and interest rates are regulated by Government (eg ss 57.12-57.15). All residents liable to pay a bond have the option of making periodic payments which put the aged care hostel in the same financial position as would have been the case had the bond been paid (s 57.17). A mix of a part bond and periodic payments may also be made. All the choices are entirely at the election of the aged resident. Agreements are portable should the resident choose to shift from one operator to another.

Level 1 residential care (‘nursing’) homes cannot impose an entry bond. Their schedule of Federal payments to meet the costs of care are more generous than is the case for hostels, and there is provision for an accommodation charge to be levied on patients with means above the ‘concessional’ level (s 57A.2). This payment is similar in character to the periodic payments made by residents in hostel care in lieu of paying an entry bond. Both are in addition to the residential charge set at 85 per cent of the pension. However, due to government regulation of its level, the accommodation charge for nursing home residents will be less than half the amount of the common level of such periodic payments for an equivalent hostel resident. Accordingly, operators of nursing homes are disadvantaged to some degree by these arrangements, though the ‘ageing in place’ policy means that nursing home level subsidies will be provided where necessary in a hostel setting, while the hostel operator continues to receive the benefits of the bond (or bond equivalent) arrangements entered into before the resident required the higher levels of aged care services. Higher income earners resident in hostels or nursing homes can agree to purchase ‘extras’ (s 58.5). The prices of these additional benefits are not regulated by government.

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Funding of capital works and development of aged care places remains a challenge for Government, as an independently commissioned review raised questions about the economics of residential aged care operations (Hogan, 2004). As a partial response to this issue the federal Government announced during 2004 an AUD 2.2 billion package of funding measures: Investing in Australia’s Aged Care: More Places, Better Care package (Bishop, 2004). Among other measures, the package injects AUD 878 million over 4 yrs to boost the real (after inflation) value of daily residential care subsidies paid to operators by government: By 2007/8 this is estimated to lead to a 7 per cent real adjustment in residential care subsidies (the average subsidy of AUD 30,500 per resident will rise to AUD 35,380). Another AUD 468 million has been allocated over 4 yrs to boost the number of places from 100 per 1,000 people aged 70 years or over, to 108 places per 1,000. This is estimated to create 27,900 new places over 3 yrs. To address the costs of caring for the poorest aged care residents (the so-called ‘concessional’ residents) the Government also announced that the current concessional resident supplement of AUD 13.49 per resident per day, would be raised to AUD 16.25 per day. It also proposed to remove the 5 year limitation on the period of time for which the wealthier group of residents can be asked to make a contribution towards capital costs by way of interest on and retention of portion of a bond, or by a direct contribution in place of such a bond.

People who are able to live within the community are assisted by ‘community aged care packages’ funded by the federal government but administered at state and local government level. The Home and Community Care Program (HACC), and the expanding Aged and Community Care Programs (ACCP) cover a variety of home help, food, maintenance and other support services. ACAT teams also have a role in prioritising access to this assistance. Congruent with ‘ageing in place’ policies and the associated shift away from residential care towards community care, home-based care represented the largest growth in government expenditure during the 1990s (8.6 per cent real average annual growth: AIHW, 2002b: 61), a trend that is projected to continue over the next 10 to 15 years (ProductivityCommission, 2004: 5 of section 7.1).

Over the last few decades the popularity of purpose designed ‘retirement village’ accommodation has seen a rise in the numbers of aged people living in residences better designed for people with restricted mobility or other needs. Very minimal services are available however. These private sector initiatives were sometimes exploitive, since contractual rather than proprietary rights predominated, leading to insecurity of tenure, harsh provisions for forfeiture of deposits or portion of the sale price on realisation, and loss of control over marketing. State and territory laws now offer some protection against the worst excesses of these practices (Lewis, 2004: 235-259). In New South Wales, for example, variations to and terminations of village contracts are now void unless accompanied by a written certificate, signed by a legal practitioner, confirming that the resident has been informed of, understands and consents to the changes (s 29 Retirement Villages Act 1999 (NSW)). Moreover, a new charter of resident rights guarantees non-interference with a resident’s rights to privacy and autonomy, among other things, and provides a right to compensation in the event of non-compliance (s 66 Retirement Villages Act 1999 (NSW)).

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Consumer rights are an issue in federal aged care services as well. In the case of hostels and nursing homes, aged applicants and their families now struggle to grasp the complexity of the implications of consumer choices and contracts for residential aged care (Wilson, Setterlund and Tilse, 2003). This is a by-product of a shift from government provision to arms length ‘market’ provision of services. Neoliberal reforms which rely unduly on market provision have been shown to struggle to promote quality (Hardy and Wistow, 1998). They also render entitlement rules ‘fuzzy’ and hide decisionmaking from public gaze, or from public accountability systems such as merits reviews or appeals (Diller, 2000; Gilman, 2001; Cimini, 2002). This diminishes the political constituency for debate and lobbying about aged care issues (Stoesz and Karger, 1991:169), arguably recreating a disempowerment or ‘dormouse’ status reminiscent of the Poor Law (Gibson, 1985: 58).

3. Private Care.

The new emphasis on community care has entailed a shift in responsibilities away from the public sector towards families and friends providing care for the aged on an unpaid basis (Minichiello and Coulson, 1999). Families are by far the most significant provider of care to the aged, with 80 per cent of care being provided by family members living in the same household as the care recipient (Millward, Wolcott, de Vaus and Soriano, 1997: 116). Almost half of those receiving informal care are aided by partners, although adult children also provide significant assistance with tasks including property maintenance, health care, transport, housework, mobility and personal care (ABS, 2004a: 9).

In 2003, there were almost 2.6 million unpaid carers in the Australian community, the majority of whom were women (ABS, 2004a: 10-11). However, the ageing population combined with the increasing workforce participation of women mean a large discrepancy is likely between the number of people requiring care and the number of informal carers available to meet these needs. Between 2001 and 2031, the number of aged persons likely to require care because of a severe or profound disability is projected to rise by 160 per cent, with the number of carers for this same period expected to increase by only 57 per cent (NATSEM, 2004: 26, 28). This anticipated shortfall is likely to increase reliance on formal community care and/or various forms of residential care (ProductivityCommission, 2004: 7 of 7.7).

The Government provides financial support to carers via the social security ‘carer payment’ and the ‘carer allowance’ schemes (Carney, 2001: Ch 3, Part D, Divi 4 and 5). The carer payment is an income support for those who, because of their caring responsibilities, are unable to work full-time. It is paid at the same rate as other social security pensions. The carer allowance is available to those providing daily care to a person with a disability. This allowance is not subject to means-testing and may be used in combination with the carer payment and other social security payments.

Private for-profit organizations also provide significant care for the aged. According to the 1998 Australian Bureau of Statistics’ Disability, Ageing and Carers Survey, 61 per cent

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of older Australians receive assistance from formal providers including doctors, nurses and gardeners (ABS, 1998b), a figure which had declined to 53 per cent by the time of the 2004 survey (ABS, 2004a).

F. The Future.

Ageing has risen in political importance in recent years.

In 2001 the Australian government adopted a ‘national strategy’ on ageing, with a focus on promoting aged participation in society (AIHW, 2003: 282). The 2002/3 Budget also included a major analysis of the economic implications of ageing (AIHW, 2003: 275) and in February 2004, new policies were announced (and others opened for discussion) to address some of those challenges (AustraliaTreasury, 2004b).

Law has a limited but important part to play in establishing contemporary policy settings appropriate to societies characterised by their ‘new longevity’ (Ellison, Schetzer, Mullins, Perry and Wong, 2004), as adjustments are made to the demographic shifts, alterations in family formation/dissolution, growth in the incidence of dementia due to population ageing (AccessEconomics, 2003), and compositional changes in the workforce―each with their consequent impact on the ability for civil society (previously code for women, or ‘daughters’) to undertake the burden of informal care and support witnessed in previous generations (Hancock, 2002).

As revealed in this report, laws take different forms: including protective, supportive, preventive, or empowering forms (Doran, 2003). Some laws take a ‘protective’ form. The common law about relief from enforcement of oppressive contracts is an example of the protective form (Burns, 2002; 2003; Lewis, 2004: Ch 4), while adult guardianship laws also include this as one of their goals (Carney and Singer, 1986; Carney and Tait, 1997). Other laws comprise a web of supportive assistance, such as social security provisions and measures to provide community based care. A prime example of a preventive law is the enduring (or durable) power of attorney which allows a person to anticipate future loss of competence or ability to manage their affairs, and to leave advance authority for the way this is to be handled in that eventuality (Creyke, 1993; Carney, 1999a). For its part, empowerment finds expression in laws such as those about residents’ rights in aged care (Howe, 1997; Whitton, 2001).

Many laws have ‘mixed’ objectives of course. Indeed adult guardianship has both a protective as well as its mainly ‘facilitating/empowerment’ function (Carney and Singer, 1986; Carney and Tait, 1997), while the same is true of durable powers of attorney (Carney, 1999a). This may suggest disadvantages of the alternative of more pragmatic typologies which only distinguish between constitutional laws (where Australia lacks an equivalence for the US Bill of Rights), statutory laws, and the common law (Kapp, 1996: 467-68). As we have seen, the vast bulk of Australian law is statutory, with very minor contributions from the common law, and no counterpart for the US distinction between laws sourced in the so-called ‘police power’ (in the interests of the health and safety of citizens generally)

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and the protective parens patriae power which underpins their guardianship or committal laws (Kapp, 1996: 468).

The only resonance is with Kapp’s functional distinctions between the different roles of law (Kapp, 1996: 469). His taxonomy distinguished between prevention and harm-mitigation (eg controlling research on demented patients); financing programs (like medical or aged care services); controlling and regulating human resources (by educating or licensing/accrediting staff); ensuring acceptable quality of services (as under Australia’s aged care laws); and securing personal rights (eg the right to give advance instructions anticipating future loss of capacity, or laws protecting informed consent). However this taxonomy is too bland to be of much assistance in charting the future in the social world of the ‘new longevity’.

Certainly it may assist in assessing the extent to which the patterns of laws continue to express the ‘security’ and support characteristic of a ‘welfare state’. Or alternatively serve to place the weight of responsibility on personal provision, and family support. Doran’s more ‘goal oriented’ classification on the other hand (Doran, 2003) seems better suited to the social policy analysis of the balance between respect for individual autonomy (eg the option to engage in private planning through superannuation or powers of attorney) and the security and support which the aged in Australia have historically regarded as their birthright in the ‘wage earner’s welfare state’ (Castles, 1994). An entitlement to adequate retirement income through the pension system, universal health care and affordable pharmaceuticals, adequate community-based and residential aged care, and cost-free access to protective assistance from a guardianship tribunal in the event that the person is no longer able to manage their finances or their personal affairs.

Despite the challenges of an ageing society, Australian policy settings appear to strike the right balance and to be fiscally responsible and robust. Neoliberal market reforms already hold significant sway in key areas of policy, and the case for their further expansion is less than compelling.

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References

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