Australia urged to adopt 'New Zealand-style' reforms to get more pensioners back to work

The Australian government should consider implementing "New Zealand-style" reforms to encourage more pensioners to return to the workforce and ease the labour shortage, according to a think tank.

The Institute of Public Affairs (IPA) said the high labour participation rate among pensioners in New Zealand has helped in its job vacancy recovery.

The case is different in Australia, where only three per cent of Australian pensioners get to work, despite surveys showing that 20% of them would be willing to get back to the labour force.

The IPA attributed this situation to the 69% tax rate imposed on pensioners and veterans in Australia who are earning an income. This is much higher than the 10.5% tax rate imposed by New Zealand.

"At a time when one in five Australian businesses are struggling to find the workers they need to grow, the federal government should implement New Zealand-style reforms so our pensioners, veterans, and students can work without facing marginal tax rates which cruels incentive," said Saxon Davidson, research fellow at the IPA, in a statement.

400,000 job vacancies nationwide

Doing so could result up to 520,000 more Australians participating in the labour force, according to the IPA.

"With almost 400,000 job vacancies nationwide, it is completely short-sighted to rely on unplanned mass-migration to fill these vacancies when there are Australians who want to work. The present policy settings are only adding to the housing and cost-of-living crisis," Davidson said.

The IPA's recommendation underscores its previous calls to the government to remove all tax and red tape barriers on pensioners, veterans, and students who want to work.

"The current tax debate in Canberra has failed to notice that Australian pensioners and veterans face an effective marginal tax rate of 69% if they choose to work. Without reform, Australia will not solve its worker shortage crisis," Davidson said.