A Critique of Leith van Onselen's Argument Against Raising Australia's Retirement Age, By Paul Walker

Leith van Onselen's piece (link below), offers a passionate and pragmatic takedown of the idea that Australia should hike its retirement age, currently set at 67 for Age Pension eligibility, to tackle ageing demographics and labour shortages. Drawing parallels to Germany's controversial push toward 70 or even 73, he argues that such a move would be politically toxic, physically punishing for manual workers, and slow to implement. Instead, he champions scrapping the income means test on the Age Pension to unleash the untapped potential of working retirees, citing New Zealand's higher senior participation rates as proof. It's a compelling case for incremental reform over blunt force, but it has blind spots: it underplays the fiscal maths of demographics, glosses over equity trade-offs in a universal pension model, and risks overhyping the "silver tsunami" of retiree labour without addressing health realities. Let's break it down.

Strengths: A Sharp Diagnosis of Means-Testing's Hidden Costs

Van Onselen's core insight, that Australia's pension rules act like a "tax on work" for over-65s, is spot-on and backed by solid evidence. The current system claws back 50 cents of every dollar earned beyond a modest threshold (recently bumped to $227/week via the Work Bonus), pushing effective marginal tax rates (EMTRs) to 60-80% for many pensioners. This isn't just dry policy wonkery; it's a disincentive that keeps people sidelined when the economy craves their skills.

His New Zealand comparison lands like a gut punch: Kiwi seniors make up 25% of the labour force versus Australia's paltry 14%, with only 3% of Aussie pensioners working at all. Why? NZ Super is universal, no income or assets test, so working grannies and grandpas keep their full payout and just pay income tax on earnings. No cliff-edge penalties. Research from National Seniors Australia echoes this: Ditching the income test could lure 400,000 more retirees into the workforce, filling shortages without the chaos of mass migration. Van Onselen smartly meets this halfway, suggesting to keep the assets test (targeting the wealthy) while exempting work income. It's a low-hanging fruit: Cost-neutral per Deloitte modelings if participation hits 8%, and it sidesteps the housing/infrastructure squeeze from immigration overload.

This isn't pie-in-the-sky idealism. Quotes from HESTA's Debby Blakey highlight the human side, retirees craving purpose, not just paycheques, and align with broader trends. In Denmark and the Netherlands, universal or defined-benefit pensions correlate with higher senior employment, proving means-testing can be a self-fulfilling prophecy of idleness. Van Onselen's pitch reframes retirees as an asset, not a burden, and it's refreshingly anti-paternalistic: Let people choose to work without the system's boot on their neck.

Weaknesses: Dismissing the Age Hike Too Hastily, and Ignoring the German Nuance

Where van Onselen stumbles is in torching the retirement age increase as a non-starter, especially by hyper-focusing on Germany's "absurd" 73 proposal. Yes, 73 sounds dystopian, a "work until you drop" edict that could turn life's golden years into endless overtime, eroding the very point of toiling in youth. With Germany's life expectancy at 81.2, that's barely eight years of rest after decades of grind.If the system's rigged so you never clock out, why bother? It breeds nihilism, not productivity, and unfairly hammers blue-collar types whose bodies betray them by 60.

But the German story isn't quite the Mad Max scenario van Onselen paints. The 73 target is a gradual climb from 67 by 2060, tied to life expectancy trends, not an overnight guillotine. It's one advisory panel's alarm bell amid stagnation and a worker-to-pensioner ratio plummeting to 2:1. Even the milder 70 suggestion from Economy Minister Katharina Reiche has sparked backlash, but alternatives like taxing the self-employed or boosting childcare (to get more parents contributing) show it's part of a toolkit, not a solo fix. Van Onselen nods to unpopularity and delays (fair cop), but he doesn't grapple with the demographics maths: Australia's over-65s will double by 2050, straining the budget unless more contribute longer. His means-test tweak might add 400,000 workers, but that's a drop against projected shortages, immigration's flaws notwithstanding.

Australia isn't Germany (yet), with no active proposals to budge from 67. But calls for occupation-based tweaks, earlier access for miners or nurses, later for desk jockeys, are bubbling up, recognizing that one-size-fits-all ignores the toll of physical jobs. Van Onselen dismisses age hikes as penalising manual workers, but his alternative doesn't fully shield them either, if poverty pushes them to work anyway, high EMTRs just salt the wound. A hybrid (e.g., phased increases with opt-outs for health reasons) could thread the needle, but he waves it off too quickly.

Broader Blind Spots: Equity, Savings, and the NZ Envy Trap

Van Onselen's NZ love-in is persuasive on participation, but it skips the equity flip side. Universal pensions sound egalitarian, but they funnel public dollars to millionaires who don't need them, NZ Super costs 5.5% of GDP by 2050, versus Australia's leaner 2.1% on the Age Pension (offset by super tax breaks). Aussies save more compulsorily via super, building buffers that means-testing protects for the vulnerable. Ditching income tests wholesale (even partially) could swell the bill, hitting younger taxpayers harder. And while 3% of Aussie pensioners work now, is that apathy or affluence? NZ's model works because wages are stagnant, Kiwis have to hustle post-65.

Finally, the piece romanticises retiree labour without the fine print: Health stats show many over-65s can't work, not won't. Chronic conditions spike post-60, and forcing (or incentivising) gruelling shifts could tank well-being and productivity. Van Onselen's migration critique is valid, high inflows have indeed crushed housing, but pinning all shortages on retirees ignores upskilling youth or AI efficiencies.

The Verdict: Solid Reform, But Don't Burn the Bridge

Van Onselen's argument is a winner on tactics: Abolishing the income means test is a no-brainer fix, simple, humane, and pro-growth, that could plug gaps without the sledgehammer of age hikes. It beats endless immigration band aids and echoes successful models abroad. But it's no silver bullet against the demographic deluge. Dismissing age adjustments as "pointless toil" risks complacency; a tailored rise (say to 69 by 2040, with carve-outs) paired with his means-test reform could balance books without despair. Germany's 73 is a warning flare, not destiny, Australia can (and should) chart smarter waters. In the end, the real absurdity isn't working longer; it's a system that punishes you for wanting to. Let's fix that first, then eye the horizon.

https://www.macrobusiness.com.au/2025/10/should-australia-lift-its-retirement-age/