Opposition Leader Peter Dutton says he wants to double the amount age pensioners can earn before their pensions are reduced in an effort to both fix staff shortages and help with the rising cost of living.

The $145 million proposal will see the pension income limit raised from the current amount of $300 to $600 a fortnight and still be able to receive the maximum age pension of $987.60 for singles and $1488.80 for couples.

In a statement released by Dutton, the Coalition leader said the policy would “help relieve pressure on a very tight labour market” as well as “put downward pressure on inflation and interest rates”.

“Employers can’t find staff – thousands of jobs across hospitality, agriculture, tourism and retail remain open. This policy ensures that pensioners and veterans, who want to work, are not financially penalised. It puts more money into their pocket,” Dutton said.

“There are around 80,000 age pensioners and veterans who are choosing to work who will likely benefit from this change.”

The Australian Retail Association (ARA) has also called for exemptions to the age pension income test to get older Australians back into the workforce, saying pensioners hold the key to relieving staff shortages.

ARA CEO Paul Zahra said “making changes that exempt employment income from the Age Pension income test going forward would benefit everyone in our economy”.

“It provides pensioners with the opportunity to supplement their income if they wish, retailers with access to a willing and capable workforce to assist amid ever-present labour shortages, and the wider economy with a more empowered pension group that will be mobilised to spend by newfound employment opportunities,” Zahra said in a statement.

“Additionally, those on the aged pension are interested in returning to work from a sense of social duty and responsibility as well. They are a group critical to the fabric of our communities, and this generous sense of social duty should be freely welcomed, rather than significantly constrained by mechanisms such as the Aged Pension income test.”

Australian radio presenter Neil Mitchell supported the calls for change to the pension income test, telling his 3AW listeners that the government should “stop punishing seniors and retirees for working”.

“Let pensioners, part pensioners even, let them earn real money as casual workers in these desperate industries, and don’t cut their pension for doing that,” Mitchell said.

“There are nearly four million retirees in this country on part or full pensions. There are 2.6 million on the aged pension, that is 62 per cent of the population over the age of 65. It is a huge resource which we should exploit — a hidden army.”