The Morrison government's decision to back down on raising the pension age to 70 will cost $5 billion over the medium term, as the Coalition scrambles to rid itself of unpopular policies and win over older voters ahead of the next federal election.
The surprise pre-cabinet announcement on morning television comes as Prime Minister Scott Morrison looks to get ahead of a wave of policy leaks that threaten to destabilise his political initiative.
Economists have panned the switch, describing it as a populist decision that is not in Australia's long-term national interest. They have warned it will become exponentially more expensive for a future government as the population ages.
Mr Morrison defended his record on the policy, which includes voting seven times to increase the pension age from 67 to 70 since the move was first announced in Joe Hockey's final budget.
He warned the policy was needed to make the pension sustainable and feared Australia would end up like Greece "with pensioners on the street," unless the eligibility age was increased.
That position was formally abandoned on Wednesday.
"I have respected the policies that were put in place and that was first introduced in the 2014-15 budget," he said.
"I believe that measure is no longer necessary. It will remain no longer necessary so long as we continue to keep the strong economic policies that sees the growth continue."
Mr Morrison said there was no cost to the budget over the next four years and the medium-term cost would be reconciled.
Labor, whose position Mr Morrison adopted on Wednesday, has costed the policy at $5 billion in the next decade. The hit to the budget will only start in 2025 when the gradual increase from 67 to 70 was due to begin.
Mr Morrison's announcement of an election-shifting policy in response to questions on Channel Nine has fuelled internal speculation that it was designed to get ahead of another damaging policy leak.
There have been three consecutive days of key policy revelations from the dying days of the Turnbull government. Among them, billions of dollars in infrastructure, a Catholic school funding deal and a $3.6 billion plan to accelerate small business company tax cuts.
The latest shift was designed to give the government more room to attack Labor over its changes to dividend imputation refunds that will largely affect valuable older voters.
But former Treasury official turned Deloitte Access Economics partner Chris Richardson has lashed the move.
"I get it, the new Prime Minister is behind in the polls and is rapidly chipping off barnacles, everything from company tax cuts, to the pension," he said.
"In terms of politics its not merely understandable, it's downright sensible. But that doesn't mean it's the right thing to do for Australia."
The backlash follows years of broad economic consensus from the Productivity Commission to the Centre for Independent Studies that raising the eligibility age was necessary to prevent rising intergenerational inequality.
Mr Richardson said whatever age the pension was set at was going to be inappropriate for some people - such as those doing manual work - but stronger unemployment benefits should be used to account for that, not a unilateral adjustment of the pension age.
By 2054/55, the number of Australians aged over 65 will double to more than 8.9 million, or one-fifth of the total population, putting increasing pressure on the age pension system and blowing out the total cost of the increase well beyond the more immediate $5 billion estimate.
"Every time we do the populist thing today it just makes it harder for a future government," said Mr Richardson.
"The underlying question is, is Australia a mature enough society to accept that even if something is unpopular it is still the right thing to do?"