As Canadian politicians debate changes to the CPP, Australia has expanded pension coverage while reducing strain on government pension spending, notes a study by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“The Australian government began significant pension reform in the 1990s, and now the Australian pension system is frequently cited by experts as among the best in the world,” says Sean Speer, associate director of fiscal studies at the Fraser Institute.
Australia, which has no CPP equivalent, requires employers to contribute to retirement savings accounts for their employees and offer tax incentives for voluntary contributions by individuals. About 90% of the workforce is covered by these private pension accounts. In addition, Australia provides a basic public pension, a safety net similar to Canada’s OAS program, that phases out as an individual’s income grows.
“Australia’s approach to retirement savings, which, unlike the Canadian system, requires private savings rather than public savings, has served Australia well. Since Canada and Australia share a similar history, culture and economy, Canadian policymakers should consider the pension system in Australia before making any changes to the CPP,” Speer says.
In addition to pension reform, the study also spotlights Australian fiscal and labour reform, enacted by successive governments, which vastly improved Australia’s public finances. Australia began balancing budgets in 1996 to 1997 and the Australian unemployment rate fell to 4% in 2008, from 11.2% in 1992 during this period of labour reform.