The government hopes pension increases will help lift seniors out of poverty, after a report found Australia has the fourth highest poverty rate for people aged over 65.
A report by the Organisation for Economic Cooperation and Development (OECD) shows close to 27 per cent of people aged over 65 have incomes below the poverty line.
According to the report, only Ireland, Korea and Mexico have higher rates.
Based on 2006 figures, the report shows that 3.5 per cent of Australia's national income is spent on pensions.
This compares to an average of seven per cent of GDP in other OECD countries.
The report says the poverty levels of older Australians "is mainly due to the relatively low level of the aged pension" which is around $280 a week for singles.
"The OECD welcomes the government's increases in the age pension to address this problem," the report said.
Families and Community Services Minister Jenny Macklin said pension reform was long overdue.
"The reforms ... will improve adequacy, make it simpler and more responsive to pensioners needs and secure the sustainability of the pension system as the population ages," she said in a statement.
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