The Government intends to change the indexation of the Age Pension from September 2017. If their legislation passes through the Senate, the pension will be indexed to the Consumer Price Index (CPI), (the same as Newstart). At the moment the pension is indexed to the higher of the CPI, the Pensioner and Beneficiary Living Cost Index or Male Total Average Weekly Earnings. The latter has tended to increase faster than CPI in recent decades.

The higher indexing of the Age Pension compared with Newstart has seen an increasing gap between the two benefits, with Newstart recipients experiencing greater disadvantage. There is also a disadvantage amongst pension recipients, depending on an individual or couple’s housing circumstances. The full pension payment received by home-owners is more than 50 per cent above the poverty line, whereas renters only receive between 15 per cent (for individuals) and 16 per cent (couples) more than the poverty line income.

Unemployment benefits have been trending downwards relative to the poverty line since 1992. At June 2012, Newstart payments were 20 per cent below the poverty line. Indexing the Age Pension to the CPI will mean a similar impact on age pensioners. The gap to the poverty line of between 15 and 16 per cent for pensioners who do not own their own home means they can expect to find their benefits falling below the poverty line a decade after the planned change in indexation.