Keeping population growth strong could help the federal government support an ageing nation as the pension age sticks at 67, an economist says.

Prime Minister Scott Morrison announced he was dumping plans to lift the pension age to 70 beyond 2035 on Wednesday.

Commsec senior economist Ryan Felsman has told AAP he suspects Mr Morrison felt able to make the change as the budget’s bottom line has been improving.

But the prime minister would still need to consider government spending going forward, he said.

“Obviously we have to contend with an ageing population and increasing spending around social services and transfer payments going forward,” Mr Felsman told AAP.

Mr Felsman said three key elements of economic growth investigated in 2015’s intergenerational report offer a blueprint as to how the government can handle the issue.

They are keeping population growth strong, including through offshore migration, boosting workforce participation and improving the productivity rate.


“We’ll need to at least continue to have a reasonable population intake going forward,” he said.

The pension age plan was first announced by the Abbott government under then-treasurer Joe Hockey in 2014 but was never legislated.

Under the original proposal, the qualifying age for the pension would have increased by six months every two years until reaching 70 years in 2035.

It was expected to save the budget about $3.6 billion over four years.

Treasurer Josh Frydenberg said the change would not affect the budget in the short term.

“This is one of those 2014/15 budget measures which had no hope of getting through the parliament,” he told reporters.



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