In the 2009 budget, then Treasurer Wayne Swan set out plans to phase in an increase of the pension age from 65 to 67 (this phasing in finally began last year – since 1 July 2017, the pension age has been increasing by 6 months every two years, and it will reach 67 by 1 July 2023).

However, the first budget of the Abbott government went further. Treasurer Joe Hockey announced it would increase to 70 by 2035. Hockey said that the increase was to “celebrate the act that Australians are living longer but we must prepare for the adjustments in our society”.

Pension policy origins

The proposal was a recommendation of the National Commission of Audit (NCA), a commission that was established in the early days of the Abbott government to develop policy proposals that would move the Australian budget into surplus within a decade.

The NCA’s recommendation was drawn from a paper by the Productivity Commission, “An Ageing Australia: Preparing for the Future”.

The Productivity Commission estimated that increasing the pension age from 67 to 70 years between 2023 and 2035 would "yield increasingly larger fiscal savings, rising up to about 0.15% of GDP in the later 2030s". The accumulated total savings between 2025/26 and 2059/60 would be around $150bn.

The PM's policy reversal

Scott Morrison said that the plan to scrap the decision would be formally presented to cabinet when parliament returns.

“Next week cabinet will be ratifying a decision to reverse taking the retirement age to 70. It will remain at 67, which is what Labor increased it to. In this year’s budget I announced a whole package of measures to help Australians live a longer, healthier, more active life and that included things like the pension work bonus and supporting people who are older to actually get access to the pension when they are running a business. I don’t think we need that measure any longer when it comes to raising the pension age, and it is one of things I will be changing pretty quickly. I’ve talked to my colleagues about it. We’ll ratify it next week.”

How has the policy been welcomed?

The policy shift has been seen by commentators as the new PM ridding himself of an unpopular policy inherited by his predecessor in order to prepare for fresh elections.

Economists have criticised the decision as “populist”. The decision will cost $5bn over the medium term, but get exponentially move expensive as the Australian population ages.

But other groups have welcomed the decision, with Eva Scheerlick of the Australian Institute of Superannuation Trustees praising the move.