Now here’s an interesting test for Kevin Rudd.

Momentum is gathering for an aged pension rise or one-off handout to pensioners of some kind in 2008-09, before the current review by Jeff Harmer lands in February.

Let’s be blunt here. People on the aged pension are an interest group like any other. Their claims to taxpayer dollars should be evaluated, like any others, critically, and based on evidence.

Of course, if you’re foolish enough to say that on radio, like I was, you’ll cop plenty, but it’s true nonetheless. There are other groups – homeless people, remote indigenous communities spring to mind — that arguably are a higher priority for taxpayer dollars than many pensioners. And even the smallest changes to the pension carry significant fiscal impacts. Saying that is not evidence of malice toward the aged, merely that we can’t afford to not think carefully about this.

I noted during the election campaign, back in my early, funny Crikey articles, that the electoral muscle of the grey lobby was growing rapidly and it would mean politicians would throw more and more money at them.

This is quite separate from the reality that the aged pension — particularly for single women — is barely sufficient for a dignified existence. We need to keep the policy and politics separate here.

When pension groups complained — utterly incorrectly and unreasonably — that they had missed out in the 2008 Budget, the Prime Minister and the Treasurer swiftly declared that retirement incomes had been part of the Henry review all the time, and that it would report by February. The sort of timing that meant it would feed into the 2009 budget.

It worked for a while, but it’s starting to come apart. First Wayne Swan, then Julia Gillard, then Lindsay Tanner and now Kevin Rudd, have admitted they couldn’t live on a pension. It’s become the question du jour. I can’t wait for someone to ask Brendan Nelson if he could live on a pension. He’ll probably cry when he answers. Peter Costello, it should be noted, will probably be able to live quite nicely on his pension, thanks very much. If only he’d sod off and take it.

This week, Labor backbencher Brett Raguse — a name surely crying out for a career in a three-star French restaurant — weighed in on the issue. He too couldn’t live on a pension, and he told the ABC “special attention” should be given to “people who are really feeling the pinch right now”.

Later, in the doubtless intimidating presence of the Prime Minister himself, he backtracked and said that he didn’t want an extra payment right now. South Australia’s Steve Georganas, however, was making similar noises.

Hitherto, the Opposition has been reluctant as well. Margaret May got a mugging from Malcolm Turnbull for proposing a pension increase earlier this year, and Brendan Nelson, who never normally never met a populist cause he didn’t like, referred the matter to an internal party review.

But Nelson’s desperation is finally getting the better of him, because he’s now calling for a one-off handout this year (i.e., another one, in addition to the one already budgeted) and is apparently considering proposing a significant pension increase. He also wants the pension indexed by a higher rate than CPI, a position endorsed by the Greens.

Mal Brough had something to say about this last year, when he explained that the Howard Government had linked the aged pension not merely to CPI but to Male Total Average Weekly Earnings – it can’t fall below 25% of that figure. As Brough noted, this meant considerable increases above CPI since 1997 when the link was established, amounting to nearly $3000 pa for a couple.

Presumably Nelson isn’t aware of that, or he thinks his own Government’s policy was a dud.

Possibly the former — Crikey has been told Nelson’s pension plan was cobbled together quickly, and without input from either of the relevant shadows — Tony Abbott and Malcolm Turnbull — whose offices only found out when Nelson chief of staff Peter Hendy rang them last night in anticipation of the ABC revealing it.

The only consistent long-term advocates of a pension increase have been the Greens, who have argued for a $30 a week increase, which would cost $3-4b p.a. All part of the Greens’ campaign to develop into a full-fledged political party, not just a protest vote-based environmental group.

But Rudd’s approach is the right one. We bag the Government for ceaseless reviews, inquiries and Green Papers, but when dealing with such vast sums of public money, well-evidenced policy, rather than anecdotes — and we all have anecdotes about how insufficient the pension is — is necessary.

Access to the pension, the role of lump sum payments, the interaction with superannuation, who is most in need of an increase — are all critical issues that need to be worked through. And another one-off payment this year would perpetuate the Howard Government’s handout-based policy approach, which Brendan Nelson seems unable to quite shake off despite no longer being in government.

But whether Rudd can hold out against the pressure to Do Something about pensions before next year is the question. If the Opposition tips over into arguing for an increase, Rudd, Swan and Jenny Macklin will find themselves under the hammer.

Rudd wants to concentrate on big-picture reform, but it’s the retail politics that keep tripping him up. We saw it with petrol and grocery prices and it’s happening again with pensions. There’s no option for Pensionerwatch here. There are no easy options at all — just very expensive ones.

Peter Fray

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