VANCOUVER, BRITISH COLUMBIA--(Marketwired - Dec. 3, 2013) - As Canadian politicians debate changes to the Canada Pension Plan (CPP), Australia has expanded pension coverage while reducing strain on government pension spending, notes a new study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
In Policy reforms in Australia and what they mean for Canada, Fraser Institute senior fellow Stephen Kirchner looks at pension reform in Australia, in addition to fiscal and labour reforms undertaken over the past 20 years.
"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," said 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 per cent 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 Old Age Security 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 said.
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 1996-97 and the Australian unemployment rate fell to four per cent in 2008 from 11.2 per cent in 1992 during this period of labour reform.
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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org.