The Inquiry

Demographic shifts—the policy challenge

1. Australia’s population is ageing. The Productivity Commission described it as ‘the quiet transformation, because it is gradual, but also unremitting and ultimately pervasive’.^[1] The Commission estimated that by 2044–45, almost one in four Australians will be aged 65 years and over;^[2] and in every year between 2012–2028, ‘the aged share of the Australian population is projected to increase by more than 0.35 percentage points—an increase around 4 times the long-term average’.^[3]

2. Such shifts have significant economic implications. The 2005 study of the Productivity Commission, Economic Implications of an Ageing Australia, described them as ‘far-reaching’:

It will slow Australia’s workforce and economic growth, at the very time that burgeoning demands are placed on Australia’s health and aged care systems. Unless offsetting action is taken, a gap will open between Government revenue and spending that will need to be closed. Every jurisdiction in Australia is affected in different ways, depending on their specific responsibilities and capacity for raising revenue. Population ageing will require new policy approaches at all levels of government.^[4]

3. The Productivity Commission also found that ageing pressures were accelerating as the baby boomer generation retires and that ageing ‘will reduce economic growth at the same time that it intensifies demands for public services, such as health, aged care and the age pension’:

With present policy settings, age-related spending will exceed the growth of tax revenue. This will open a fiscal gap equal to around 6½ per cent of GDP by 2044–45.^[5]

4. In a report of December 2011 prepared for the Consultative Forum on Mature Age Participation, Ageing and the Barriers to Labour Force Participation in Australia,^[6] it was commented that the demographic shift in Australia’s population ‘implies a greater role for mature age Australians both economically and in society more generally’.^[7]

5. The initiation of this Inquiry forms part of the Australian Government response to population ageing. On 7 March 2012, the Attorney-General of Australia, the Hon Nicola Roxon MP, asked the Australian Law Reform Commission (ALRC) to inquire into and report on Commonwealth legal barriers to older persons participating in the workforce or other productive work. The final Report is to be delivered by 31 March 2013.

Request for submissions

6. This Issues Paper has been released to form a basis for consultation. It is intended to encourage informed community participation in the Inquiry by providing some background information and highlighting the issues so far identified by the ALRC as relevant with respect to each of the areas listed in the Terms of Reference. The Issues Paper may be downloaded free of charge from the ALRC website, <www.alrc.gov.au>. Hard copies may be obtained on request by contacting the ALRC on (02) 8238 6333.

7. The Issues Paper will be followed by the publication of a Discussion Paper later in 2012. The Discussion Paper will contain a more detailed treatment of the issues, and will indicate the ALRC’s current thinking in the form of specific proposals for reform. The ALRC will then seek further submissions and undertake another round of national consultations in relation to these proposals before preparing the final Report.

8. The ALRC invites individuals and organisations to make submissions in response to specific questions, or to any of the background material and analysis provided.

9. There is no specified format for submissions, although the questions provided in this document are intended to provide guidance for respondents. The ALRC welcomes submissions, which may be made in writing, by email or using the ALRC’s online submission form. Submissions made using the online submission form are preferred. Generally, submissions will be published on the ALRC website, unless marked confidential. Confidential submissions may still be the subject of a request for access under the Freedom of Information Act 1982 (Cth). In the absence of a clear indication that a submission is intended to be confidential, the ALRC will treat the submission as public. The ALRC does not publish anonymous submissions.

Terms of Reference

10. The Terms of Reference^[8] direct the ALRC to consider Commonwealth legislation and related legal frameworks that either directly, or indirectly, impose limitations or barriers that could discourage older persons from participating, or continuing to participate, in the workforce or other productive work, including:

• superannuation law;
• family assistance, child support and social security law;
• employment law;
• insurance law;
• compensation laws; and
• any other relevant Commonwealth legislation exempt under the Age Discrimination Act 2004 (Cth).

Terminology

11. Older persons.The Terms of Reference define ‘older persons’ as anyone over the age of 45 years, which is consistent with the definition of ‘mature age worker’ used by the Australian Bureau of Statistics.

12. Barriers to work. The Terms of Reference focus on Commonwealth law and age-based limitations on, or disincentives to, participation in the workforce or other productive work. The ALRC considers that this requires the identification of:

• limitations on participation;
• disincentives to participation (and incentives to leave); and
• incentives to remain in the workforce.

13. Other productive work.The Terms of Reference require the ALRC to consider barriers to participation in the workforce ‘or other productive work’. Under this expanded scope, the ALRC will be considering participation in volunteer work. In its 2010 General Social Survey, the Australian Bureau of Statistics found that 38% of the adult population (6.4 million people) had undertaken some voluntary work in the previous 12 months and, of these, the group aged 45 to 54 years reported the highest rate of doing so (44%) and 32.5% were aged 55 years and over.^[9] As noted by Volunteering Australia, the work undertaken by the nearly 2 million volunteers in the plus 55 category, ‘represents a significant social and economic contribution to this nation’.^[10]

14. Another type of contribution that may be considered ‘productive work’, but which the ALRC will not be considering in this Inquiry, is in the nature of ‘informal care’—unpaid care provided by family members.^[11] Such care includes the care of adult children, children with disability, the care of elderly, care of persons with long-term health conditions or viabilities, the care of spouses and parents, and the care of grandchildren.^[12] The ALRC recognises that the provision of such care is an important economic and social contribution to Australian society, being estimated to be in the value of in excess of $40 billion annually.^[13]

15. The ALRC acknowledges that providing informal care can have a significant impact on a person’s ability to enter and maintain employment in the workforce. There is also evidence that this impact disproportionately affects women.^[14] However, in defining the scope of ‘productive work’ in this Inquiry, the ALRC is focusing on barriers to more formal working arrangements, in addition to paid employment, such as volunteering and civic duties.

16. Legal frameworks.The Terms of Reference direct the ALRC to consider ‘all relevant Commonwealth legislation and related legal frameworks’. In this context, the idea of ‘frameworks’ extends beyond law in the form of legislative instruments to include policy and practice guides, codes of conduct, standards, education, information sharing and other related matters.

Other inquiries

17. In conducting the Inquiry, the ALRC is directed to have regard to the work undertaken by:

• the Advisory Panel on the Economic Potential of Senior Australians including its initial, second and final reports;^[15] and
• the Consultative Forum on Mature Age Participation and any recommendations made in the Forum’s interim report and final reports.^[16]

18. In addition, the ALRC is to have regard to:

• the work to be undertaken during 2012 by Safe Work Australia to investigate options to address age discrimination in workers’ compensation legislation; and
• the work being undertaken by the Attorney-General’s Department to consolidate Commonwealth anti-discrimination laws into a single Act.

19. Consolidation of anti-discrimination laws. With respect to the last item in this list, in September 2011, the Australian Government released a discussion paper seeking submissions in relation to the consolidation of Commonwealth anti-discrimination law. The project to consolidate existing Commonwealth anti-discrimination law into a single Act is a key component of Australia’s Human Rights Framework.^[17] Submissions on the issues raised in the discussion paper closed on 1 February 2012 and a draft bill is due to be released for further public consultation in mid-2012.

20. The Age Discrimination Act 2004 (Cth) (ADA) is one of the pieces of legislation being examined as part of the consolidation process. Some of the key issues being considered in the course of the consolidation project that are relevant in the context of this Inquiry, include: the definition of discrimination; the protection of voluntary workers; and exemptions.

21. By way of example, s 37 of the ADA provides an exemption in relation to age-based discrimination in the terms and conditions on which an annuity, insurance policy or membership of a superannuation scheme is offered or refused, where the discrimination: is based upon actuarial or statistical data on which it is reasonable for the discriminator to rely; and is reasonable having regard to the matter of the data and other relevant factors; or in a case where no such actuarial or statistic data is available, and cannot reasonably be obtained—the discrimination is reasonable having regard to any other relevant factors. The ALRC is interested in whether this exemption will remain under any consolidated Act, or whether the draft consolidated Act will include a general exemptions provision. In light of the above, the ALRC will consider issues of age discrimination under the ADA or any consolidated Act in more detail following the release of the draft legislation.

22. Age Pension, Tax and Superannuation reviews.In addition to the ongoing work noted above, there have been the significant reviews in relation to superannuation, tax and the age pension. In 2008–09 the Australian Government initiated the Australia’s Future Tax System Review, chaired by Dr Ken Henry AC (‘the Tax Review’); the superannuation systems review, chaired by Mr Jeremy Cooper (‘the Super System Review’); and the Pension Review, chaired by Dr Jeff Harmer AO.

23. The Tax Review examined the retirement income system, including the superannuation system, as a key part of the ‘tax-transfer system’—the combination of Australia’s tax and social security systems.^[18] The Super System Review addressed the governance, efficiency, structure and operation of Australia’s superannuation system. The Pension Review examined measures to strengthen the financial security of older Australians, carers and people with disability. These reviews made a number of recommendations for reform.

Framing principles

24. In the context of Australia’s ageing population, the Government’s overarching objective is to keep people in work, and paying taxes, longer—rather than being in receipt of old age pensions—and to support people into self-funded retirement.

25. In this Inquiry the ALRC considers that, in defining the new policy settings in the form of specific framing principles for the Inquiry, assistance may be derived from both the international and domestic arenas.^[19] The ALRC considers that six interlinking principles are strongly evident: participation; independence; self-agency; system stability; system coherence; and fairness.

26. ‘Participation’ reflects the Australian Government’s ‘Social Inclusion Agenda’:

The Australian Government’s vision of a socially inclusive society is one in which all Australians feel valued and have the opportunity to participate fully in the life of our society.^[20]

27. The principle of ‘participation’ has a number of elements. First, it involves having the opportunity to work. Secondly, participation involves the ability to contribute towards the formulation and implementation of policies affecting older people. Thirdly, older persons should be able to serve the community by working in a voluntary or philanthropic capacity.

28. The Social Inclusion Agenda emphasises the opportunity of all Australians to

• Learn by participating in education and training;
• Work by participating in employment, in voluntary work and in family and caring;
• Engage by connecting with people and using their local community’s resources; and
• Have a voice so that they can influence decisions that affect them.^[21]

29. The ‘Social Inclusion Principles’ emphasise that ‘maximum participation in economic, social and community life is a defining characteristic of an inclusive society’:

Achieving this outcome for all Australians means delivering policies and programs which support people to learn and strengthen their ability to participate actively in the labour market and in their communities.^[22]

30. The principle of ‘independence’ includes the aspects of participation above, recognising that ‘supporting people to take independent decisions and to negotiate priorities through participation’ is critical to ‘capacity building’.^[23] It also embodies the idea of being able to determine when and at what pace withdrawal from work takes place.^[24] Independence also involves having access to appropriate training to support work participation.

31. The principle of ‘self-agency’ was a key principle identified in the ALRC’s inquiry into family violence and Commonwealth laws—that an individual needed to be respected in the right to make decisions about matters affecting him or her.^[25] The principle of self-agency is one that underpins the idea of ‘independence’ and of ‘participation’. It also embodies the importance of being treated with dignity and respect, as reflected in the National Statement on Social Inclusion.^[26]

32. The principle of ‘system stability’ is particularly relevant in areas like superannuation. The Super System Review identified as a key principle that:

Superannuation is a large and complex system with an increasingly important social and macroeconomic dimension. It must be regulated and administered coherently and rule changes, including to taxation rules, should be made sparingly and in a way that engenders member confidence.^[27]

33. Concerns about the pace of change in the area of superannuation were also noted in the Tax Review.^[28]

34. Other key principles are ‘fairness’ and ‘coherence’, which may be seen as aspects of a stable system, but also go further—concerning how it operates in terms of impact on those affected and more broadly within the Australian community.

35. The Tax Review identified ‘system coherence’ as a priority for targeted assistance, by which was meant system consistency, simplicity and transparency for individuals.^[29] ‘Fairness’ can be a consequence of coherence, consistency and the stability of the relevant systems involved. It can also reflect a commitment to a fair distribution of national resources and a balancing of responsibility between individuals and government. In reflecting upon the ‘three-pillar architecture’ of Australia’s retirement income system, consisting of the means-tested Age Pension, compulsory saving through mandatory superannuation contributions (‘Superannuation Guarantee’) and voluntary saving for retirement, the panel advocated that:

The three-pillar architecture should be founded on the presumption that the responsibility for providing for retirement is shared between government and individuals.

Governments should provide for minimum and essential needs and facilitate self-provision. Each of these goals should be pursued in an equitable and targeted way.

Individuals should save or insure during their working lives to provide resources in their retirement. Inevitably under this approach, retirement outcomes will differ for different people, depending on the extent to which they can and do make self-provision.^[30]