Tuesday, February 02, 2010

The real intergenerational change

By 2050 our buying power will be almost twice as high

Health spending will double as a share of GDP and the chunk of the Budget set aside for health, aged pensions and aged care will hit 50 per cent in dramatic projections in the Intergenerational Report for the year 2050 that have spurred the Treasurer to launch a $43 million dollar package of grants and programs to encourage elderly Australians to stay in work.

Announcing grants for 50 "Golden Guru" organisations to connect retired and semi-retired Australians with employers of apprentices and a "transition to new employment program" for seniors Mr Swan said that as the proportion of the population of traditional working age shrank Australia could "not afford to waste the potential" of its seniors.

Whereas today there are 2 Australians of traditional working-age for each 1 person of dependent age, by 2050 there will be only 1.5 for each dependent-age Australian. Whereas today 13 per cent of the population are over the age of 65, by 2050 the share will approach 23 per cent. Whereas today only 2 per cent of Australians are older than 85, by 2050 the proportion will have more than doubled to 5 per cent.

But the economic challenges outlined in the report are not new. Treasury calculations prepared for The Age but not included in the report show that in 1960 there were 1.6 Australians of working age for each Australian of dependent age, about the same as projected for 2050. But by 2050 the dependent Australians will be predominantly old rather than predominantly young as they were in the 1960s.

The projected budget strain also has a precedent. The report predicts a budget deficit of 2.75 per cent of GDP by 2050, an easier funding task than that facing Australia at present where projected deficit for 2009-10 exceeds 4 per cent of the GDP of as a result of stimulus measures used to fight the financial crisis.

A separate Treasury projection prepared for The Age has incomes growing the point where GDP per head will be 81 per cent higher than at present, suggesting that Australians will be well placed to pay the extra taxes needed to support the aging population....

Challenged as to whether higher taxes would be needed Mr Swan he was committed to keeping Australia's tax take at or below the level he inherited from the Coalition. "If we can lift our productivity we can lift our economic growth and we can lift our revenue without lifting tax as a proportion of GDP," he told the National Press Club.

The report has Australia's population climbing from 22 million to 37 million, a figure Mr Swan said was not "a target" but a projection based on the long-term immigration rate of 0.6 per cent per annum and the long-time fertility rate of 1.9 babies per women.

Opposition immigration spokesman Scott Morrison said the government had abrogated its responsibility. "The projections have become its policy because it has no intention of engaging in a debate about what Australia's sustainable population should be," he said. "It sees the report as the end of the of the process, not the start."

Shadow Treasurer Joe Hockey said Mr Swan had squibbed hard decisions.

"I remember the last Intergenerational Report and the one before that where the government made hard decisions that cost the budget, including the Baby Bonus, and savings measures such as the pharmaceutical benefits scheme."

"Kevin Rudd and Wayne Swan thought it so important to address the great demographic challenge of our time that they brought out the report two years early. What's the biggest takeout? A $43 million call centre."

Mr Swan asked the head of National Seniors Australia, Everald Crompton to chair a consultative forum on ways to get more older Australians into work.

A former Coalition staffer, Mr Crompton told The Age he put the idea to the previous Prime Minister Mr Howard five years ago but that "nothing happened."


Published in today's Age

Graphic: The Age


Related Posts

. Today's Intergenerational Report - don't let it get to you

. Baby boomers get old?

. Why Australia's 'aging timebomb' is fizzing


2 comments:

carbonsink said...

AFAIK national income per capita fell during the GFC, and I don't know that its recovered. This was one of the great unreported stories of Australia's recent economic miracle. Has anyone got the latest numbers?

Of course, if (when?) the China bubble bursts our national income will take a huge hit. Frankly 40 year forecasts on this kind of thing are just silly. Who would have predicted the resources boom in 2000 when Australia was "old economy"? Who saw the crash in out terms-of-trade coming in 2007?

Peter Martin said...

Of course 40 year forecasts are silly.

They assume away economic cycles.

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