Super to Shrink Pension Costs as Australia Ages, Treasury Report Says

Superannuation will keep shrinking the taxpayer-funded cost of the Age Pension even as the number of Australians hitting retirement age nearly doubles over the next 40 years, the government's newest Intergenerational Report shows.

The finding lands squarely in an election-year fight over a One Nation plan to let workers dip into that same super early.

Treasurer Jim Chalmers released the seventh Intergenerational Report at the Australian National University on Monday. Treasury projects spending on the Age Pension will fall from 2.3 per cent of GDP today to 1.8 per cent by 2066.

That decline comes even as the number of Australians above pension age climbs to roughly nine million. The share of that group relying on government income support is projected to drop from 66 per cent to 52 per cent over the same period.

In real terms, the report projects Australia's economy will more than double in size by 2066, with average incomes about 55 per cent higher than today.

Australia's pension trajectory stands out internationally. Spending is projected to reach close to 10 per cent of GDP in the United Kingdom by 2060, 8 per cent in Canada, 7 per cent in New Zealand and 6 per cent in the United States.

Since the last Intergenerational Report in 2023, the Super Guarantee, the minimum employers must pay into workers' retirement accounts, has risen from 11 per cent to 12 per cent.

Modelling by the Super Members Council, an industry body representing super funds, estimates last year's 0.5 percentage point rise alone could leave a typical 30-year-old with $22,000 more super at retirement. The full rise from 9 per cent to 12 per cent over the past decade could add up to $132,000.

"That's an extraordinary achievement and something very few countries can match," council chief executive Misha Schubert said of Australia's pension trajectory.

The report's release coincides with a bitter dispute over superannuation policy. One Nation announced a plan on 7 September that would let workers redirect a quarter of their employer's compulsory super contributions, worth 3 percentage points of the 12 per cent guarantee, into take-home pay for up to three years.

Party leader Pauline Hanson has pitched it as relief from rents, mortgages and grocery bills, and says existing balances would be untouched.

For a full-time worker earning around $90,500, the plan would mean roughly $2,300 a year in extra take-home pay, or $44 a week, according to figures released alongside the policy. Nationals MP Barnaby Joyce dismissed calls to model the proposal's broader economic effects. "It's your own money," he said.

The Super Members Council modelled the same scenario differently. It found a median full-time worker who used the option for three years would end up about $25,000 worse off at retirement.

The council's modelling also put an extra $14,000 in Age Pension costs on taxpayers over that worker's lifetime, an outcome Schubert called a "double whammy" of inflation pressure and a bigger bill for government services.

Chalmers has framed the stakes starkly, telling the Super Members Council the coming election will be "super's existential moment."

Not every voice in Monday's commentary matched the government's framing. RMIT University economist Dr Meg Elkins cautioned that Intergenerational Reports have a track record of overly optimistic assumptions.

The 2023 report's downward revision of long-term productivity growth, from 1.5 per cent to 1.2 per cent, wiped roughly 9.5 per cent off the economy's projected size by 2063, she said.

Elkins also pointed to fiscal drag, the effect of un-indexed tax brackets pushing wage earners into higher tax rates over time, as a quiet revenue driver the tax-cut debate tends to ignore.

She noted life expectancy is projected to reach 86 for men and almost 90 for women by 2066, while Australia's fertility rate is forecast to keep falling, from 1.48 births per woman now to 1.34 by 2066, after 50 years below replacement level.

"Debt is the figure the tax-cut narrative struggles to explain," Elkins said, pointing to gross federal debt passing $1 trillion in August 2026.

Neither the government nor One Nation has signalled any softening of its position. With the next federal election still to be called, superannuation access looks set to remain one of the sharpest dividing lines between the two camps.