Liberal Party colleagues are describing the move as "sensible" and "pragmatic."
But some economists are warning tough decisions to have to be made to cope with an aging population.
While mingling with young Australians this week, Prime Minister Scott Morrison also had a welcome message for those approaching retirement age.
"For senior Australians, the retirement age will stay at 67. It will not go to 70. In this year's Budget, I made a series of announcements which were supporting older Australians to be able to live longer, healthier and more active into their senior years."
In 2014, then-Treasurer Joe Hockey had announced the Abbott-era plan to move towards a retirement age of 70, but it was never legislated.
The proposal was to start lifting the pension age in 2025, raise it by six months every two years and eventually reach 70 in 2035.
It would have led to Australia having one of the oldest pension ages in the developed world but would have saved about $3.6 billion over its first four years.
Now the Government has dropped the plan, Opposition Leader Bill Shorten is accusing the new Prime Minister of being untrustworthy.
"Labor opposed increasing the retirement age to 70 from the very first time it was suggested. Now Mr. Morrison's temporarily borrowing Labor policy – that’s good -- but the real issue is, if you were three years as Treasurer and believed that we should increase the retirement age to 70, and, in the last 13 days, he's been prime minister and now he doesn’t believe it, what does Scott Morrison really believe?"
Some economists argue measures such as the retirement age need to change as the population ages.
Deloitte Access Economist Chris Richardson says, while some Australians will be exempt, the retirement age for most people will eventually have to rise.
"You have to pay for it somehow. You need some split between an increase in a pension age and an increase in the number of years in which we'll be in retirement."
Australian Council of Social Services chief executive Cassandra Goldie says she hopes other welfare measures will also be increased.
"We know that there are already far too many people, including a lot of people who are older, who are struggling to get into the labor market. They are living on a woefully inadequate new-start allowance, which must be increased. That's the thing the Government needs to do now."
Sunil Abbott is President of Club Sixty, which works for the welfare of aging Indian Australian population. He says elderly people should have the freedom to choose to retire at the age they prefer rather than forcing them to work till 70.
