We're living longer. Get over it

Here's the good news: We're living longer. Here's the bad news: There isn't any.

The idea that living longer will make us infirmed for longer and a burden on society for longer has been central to the government's narrative about ever-rising health costs.

It started within months of the minister being sworn in. Preparing the ground for a Medicare co-payment Peter Dutton said health spending was on an "unsustainable path". The cost of the Medical Benefits Schedule (Medicare) was "spiraling".

"The use of MBS services increases as people get older, with those aged over 65 accessing an average of 33 MBS services in a year, while younger people access around 11 services per year," he told the the Committee for Economic Development of Australia.

Combined with talk of an ageing population it made it sound as if living longer was part of the problem, as did his wildly overstated talk about the increased incidence of dementia.

"The fact is 170 people per week today are being diagnosed with dementia, but in a number of years it'll be 7,500 a week," he told Lateline while trying to sell the co-payment.

The ABC fact checking unit ran its ruler over his claim and found that rather than increasing fortyfold over a number of years, as the minister had said dementia was set to treble over four decades...

We are certainly living much longer, and we're set to live longer still. But living longer isn't meaning living longer infirmed or hooked up to machines.

When the Australian Institute of Health and Welfare delivered the good news in the lead up to Christmas you might have  expected the health minister to trumpet it. I would have. It means we've little to fear from our extra years. We might get more bored or have more financial problems, but we are unlikely to be too much more incapacitated. Instead the minister said little, bunkering down yet again to find another way to get us to pay more for visits to the doctor.

Here's what the Institute found. Its report is entitled Healthy life expectancy in Australia: patterns and trends 1998 to 2012.

Between 1998 and 2012 the life expectancy for newborn boys grew from 75.9 years to 79.9 years - an extraordinary increase in such a short time. In little more than a decade Australian men gained an extra 4 years.

But how many of those extra years are good ones, disability free?

The Institute's remarkable finding is that men have gained an extra 4.4 years of disability-free life. Not only are Australian men set to live 4 years longer, but less of their lives are likely to be incapacitated.

It doesn't mean that medical expenses aren't climbing. They are climbing because more of us are getting old and also because medicine is getting more expensive. But it does mean that our longer lifespans aren't responsible for that much of the extra expenses. At least not for men.

For women the picture is (slightly) less rosy. Between 1998 and 2012 the expected life for a newborn girl climbed from 81.5 years to 84.3 years - an increase of 2.8 years.

The increase in the number of disability-free years was slightly less (2.4 years) meaning that most - but not not all - of the extra years were disability-free. In terms of value for money whatever is driving those extra years looks like a good deal, an even better deal for men.

Better still, the estimates of 79.9 years for men and 84.3 years for women almost certainly understate how long we will live. The government actuary points in a separate report that 60 per cent of newborn boys and girls live longer than their life expectancies, and that's before likely improvements in medical technologies over the course of their lives are taken into account. That's because life expectancies are averages, and the averages are weighed down the relatively large number of babies who die before they turn one.

The actuary says a boy born today can expect 85.6 years on a not-so-optimistic view about technology, 90.5 on a better view. A girl born today can expect 90 years or 92.2.

A man who is now 30 can expect 84 years or 88, a woman 88 or 90. A man who is about to turn 65 can expect 85 or 86, a women 88 or 88.6.

Around half of us will live longer than those estimates, and we'll do it without putting too much more strain on the health system.

Old age isn't a problem. It's what we are trying to achieve. Dutton's replacement Sussan Ley would get off to a good start by celebrating rather than demonising our incredible good fortune.

In The Age and Sydney Morning Herald


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Relax. Early retirement won't kill you

Even if financially it's not so good

It’s known as “quit and die” - the belief that men who retire early die sooner. And it is said to be backed up by evidence.

In one often-cited but rarely-seen study the Shell Corporation is said to found that its employees who retired at 55 were nearly twice as likely to die in the next decade as those who kept working.

But evidence of a solid link has been hard to find, in part because ill health is one of the reasons people retire early.

Now Australia’s Centre of Excellence in Population Aging Research believes its cracked the puzzle.

In new research released Tuesday it says there is no such effect. Men who retire early are no more likely to die at any age than those who stay working.

The lead Australian author John Piggott had to get around what he called “confounding influences”.

“Some people retire early because they are ill. Six months later they die. But they didn’t die because they retired early,” he says.

“Some people retire early because their firm has shut down. They are demoralised and depressed, they face financial stress and their social networks break down. But they didn’t necessarily die early because they retired early, it might have been because of the way it happened.”

Professor Piggott and researchers from Norway took advantage of an usual “natural experiment”...

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In 1989 Norway introduced an early retirement program that covered some firms and not others. Around half its private sector employers steadily cut the minimum age for access to retirement benefits from 67 to 62. The others did not. Many years on the data shows no statistically significant difference in death rates up to the age of 70.

“It means you can leave work without worrying about losing years; do whatever works for you,” Professor Piggott says.

For the government the implications are that it too needn’t worry about hastening death by encouraging people to work longer.

“If it were firmly established that working longer led to an earlier death policy makers would feel kind of mean,” he says.

Professor Piggott supports delaying the age at which Australians can gain access to tax-free superannuation, but not because of any concern about lifespan.

“Many people retire at 60, get $400,000 tax-free and then three years down the track have only $160,000 and need to get back into the workforce. That’s extraordinarily difficult at age 63, and they can’t get the pension. I would lift the age for access to tax-free super in line with increases in the age for access to the pension,” he says.

Professor Piggott served on the Henry Tax Review.

In The Sydney Morning Herald


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Mostly False. Abbott could create 2 million new jobs

Abolishing the carbon tax, the mining tax and getting productivity up could "produce 1 million new jobs in five years, 2 million new jobs in a decade"

Tony Abbott, August 8 2013, Devonport


Tony Abbott says he has a plan to create jobs.

As he put it on Thursday: “Abolish the carbon tax, abolish the mining tax, get productivity up”.

He said it could “produce 1 million new jobs in five years, 2 million new jobs in a decade”.

Two million is an extraordinarily big number to add to a workforce of 11.6 million. But it has happened before.

Supporting evidence

In fact it’s happening now. Australia has producing new jobs at the rate of 2 million workers per decade since December 2006. The latest figures show the number of Australians in jobs climbed 2.2 million in the decade to July. So it ought to be easy to continue.

But does it stack up?

Population growth should help. Bureau of Statistics projections have Australia's population growing by between 2.7 million and 4.2 million over the next decade.

But it’s not that simple. Although Australia’s total population will keep growing, its working-age population will not. Adelaide University demographer Graeme Hugo says Australia’s working age population is set to peak and stop growing within a decade as baby boomers become retirees and give up work.

It’ll make Tony Abbott’s target of 2 million more people in jobs much harder to achieve than history suggests, perhaps impossible.

(Perversely, it should make it far easier than it used to be for anyone who is of employable age to find a job.)

Except for this. It won’t be Abbott that creates those jobs.

Here’s his Treasury spokesman Joe Hockey three years ago this month, campaigning in the same town - Devonport.

“Governments don’t create jobs, business creates jobs. Employers employ people, not governments.”

He could have added that demography - especially immigration - has a lot to do with it too.

Abbott is wrong to say that his “economic plan can produce 1 million new jobs in five years, 2 million new jobs in a decade”.

Most of those jobs would be created anyway, even without his economic plan. And changing demographics will make that difficult.

Finding

Politifact rates the claim “mostly false”

Politifact and The Sydney Morning Herald

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Slimming down government. Why Abbott might be bolder than you think

What would Tony Abbott do? As with all potential prime ministers there’s no way to be sure. But thanks to an unusual instance of history repeating we’ve been given an unusually clear idea of what he’ll be told to do.

It is also what he wants to be told to do.

Abbott himself set up the link last March when he promised the “swift establishment of a Commission of Audit”. It will “examine the detail of what the Commonwealth government does and whether it could be done better and more cost-effectively”.

Implicit in such a task will be determining what the Commonwealth should not do - whether there are entire areas of government that should be abandoned altogether. We know this because it has already happened. The Howard government set up a Commission of Audit on taking office in 1996. The Commission’s impressively non-political report wasted not a second dealing with alleged failures of the previous government and instead turned its attention to the more fundamental questions of the what the government should not be doing, how it could perform its remaining roles more cheaply, and how it could stop the costs of its biggest payments from skyrocketing.

Its recommendations were timeless. That most were not accepted makes them no less relevant. In fact events since have made them more compelling.

Most of the time finance minister Penny Wong gives the impression things are under control. But she let down her guard briefly in the leadup to the 2011 tax summit telling delegates that “without action to curtail spending growth, the overall level of government spending under existing programs would, over the medium to long term, become unsustainable.”

The age pension is the government’s most expensive payment. Generously benchmarked to 25 per cent of male total average earnings, accessed at least in part by most retirees and set to balloon as the retired population grows, it was to climb from 2.7 per cent of the total value of Australian production to 3.9 per cent by the middle of the century. Spending on health was set to triple.

After this year’s budget the head of the Treasury secretary Martin Parkinson set out the problem starkly.

“We have a big gap between what the community demands of government and what it is prepared to pay,” he told business economists. “We have to think about savings, or new sources of revenue.”

The 1996 Commission of Audit was on to the problem early. Its report will be the first place Abbott’s commission looks...

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One of its simplest suggestions was to stop increasing the pension. It is traditionally lifted twice each year by either enough to keep it at the male earnings benchmark or by the increase in consumer prices, whichever is the greatest. The Commission suggested instead adjusting it only from time to time after reviews that would have to consider “all relevant circumstances, including budget pressures”.

Entire Commonwealth operations would be surrendered to the states. Health and aged care belong there, the report says. The states run the hospitals and their governments know the most about the quality of their aged care services. The Commonwealth would retain responsibility for Medicare and the pharmaceutical benefits scheme, but it would be more stingy, requiring all but the poorest to pay more to see the doctor and to pay more for prescriptions. Before surrendering aged care to the states the Commonwealth would defund the institutions, fund the users instead and jack up the users’ own (means tested) contribution.

Responsibility for education would go to the states, along with childcare. The exception would be tertiary education where Commonwealth would be notionally in charge but would be hands-off, funding the students rather than the institutions. It would hand out a limited number of scholarships to Year 12 students each year “redeemable at any accredited institution”.

The staff savings in the departments of health, education and environment (which would also go to the states) would be enormous. Targeted departments would be required to cut their running costs by at least 20 per cent over three years. All other departments (including the usually exempt defence department) would be required to cut their costs by 10 per cent.

The states would need more money. The 1996 Commission of Audit didn’t say much about where they would get it from but events since provide a ready made solution. The states have since been given the GST. They could lift it.

It would be tempting to think Tony Abbott wouldn’t necessarily welcome such a radical set of prescriptions. But it would be dead wrong.

When announcing plans for his own Commission of Audit last March he specifically charged it with examining questions such as “whether the federal health department really needs all 6000 of its current staff when the Commonwealth doesn’t actually run a single hospital”.

He knows what it will examine and he must know what it is likely to recommend. He is prepared to consider bold options.

In today's Sydney Morning Herald and Age


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Good news, and bad news. You're more likely to outlive your super

A decade ago an Australian man who had just turned 50 could expect to live another 29.9 years. Today the official figure is 32 years. Even the past year has made an enormous difference. A year ago a man turning 50 could officially expect an extra 31.7 rather than 32 years.

The extraordinary jump in longevity detailed in the new Bureau of Statistics life tables is playing havoc with Australia’s superannuation system. Australians who get their super in a lump sum are increasingly likely to exhaust it before they die, and even Australians who take it out gradually at recommended rates are facing the same fate.

Michael Sherris, professor of actuarial Studies at the University of New South Wales says financial planners don’t understand the risk.

“They’ll sell people what they call superannuation accounts because they let people draw down what they need, but they typically last fifteen, maybe twenty years. While twenty years is what the tables say retirees have left, longevity is improving all the time in a way not fully recognised in the tables and there’s enormous variability about the central figure.”

The life tables released Thursday say a girl born today can expect to live 84.2 years and a boy 79.7 years, but if they survive the first few relatively dangerous decades the figures and higher. Professor Sherris says generational changes and improvements in medicine mean a girl born today is quite likely to live to 100, with about half the girls born this year likely to live beyond 100.

“When their super runs out these people fall back on the pension. For some it’s a sudden drop in income. But they won’t buy lifetime annuities - so called longevity insurance - in part because the annual income it gives them is small.”

Jeremy Cooper who chaired the government’s inquiry into superannuation in 2010 is now an executive at Challenger Limited, one of the few firms selling lifetime support. He says most Australians prefer the “Holden Kingswood” - a product that pays them what they want, until it runs out.

“What they hell do you do when you turn 87?” he asks... “You are still spritely and you think you’ve been frugal, but the money’s just not there.”

“It isn’t so bad for Australians who grew up during the war - they are used to hardship. But for the next wave of retirees it’ll be an awful shock.”

“It’s the biggest problem in our superannuation system. We’re pretty good when it comes to accumulating money, but we mess it up at the end.”

Professor Sherris thinks one of the reasons Australians shy away from longevity insurance is that they get upset at thought they mightn’t live long enough to get what they could. “It’s an odd attitude. When we insure our cars we don’t much mind if they are not damaged and we don’t get a payout, but when we insure our lifetime income we seem to feel cheated if the insurance company keeps the money rather than our families.”

The figures show men born in the Australian Capital Territory likely to much longer than those born elsewhere with a boy born in Canberra facing an even chance of reaching 81 compared to 80.3 in Victoria and 79.8 in NSW. The difference is much less marked for women, with girls in most states likely to live between 84 and 84.5 years.

Indigenous Australians are more than twice as likely to die at any age as non Indigenous Australians. Australians in cities are the least likely to die suffering only 5.6 deaths per 1000 compared to 8.2 per thousand in very remote locations.

In NSW the death rate is the highest in Bourke, Brewarrina, Wellington and Central Darling local government areas. In Victoria, the worst areas are Ararat, Central Goldfields and Nurrindindi.

In today's Canberra Times, Sydney Morning Herald and Age


TECHNICAL NOTE: The ABS life tables are likely to underestimate actual life left in two ways.

1. They ignore cohort effects. They are prepared using death rates for people who have just been a certain age. But the next group of people to be that age will be from a younger cohort and likely to have a lower death rate because of changes in medical technology etc that have already taken place whether or not there are any further improvements in medical technology etc from here on.

2. There may be further improvements in medical technology etc from here on. (Or there might not be. There might even be outbreak of disease that sets things back, but there are usually improvements.)



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Parkinson: The Budget is no longer bringing in the money

Here's the killer graph:

The whole speech is great.

If we won't broaden the GST we'll have to broaden the payroll tax (and do much more).

It's all here.


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Elderly Australians: We don't have those $100 bills...

Well, we might have some of them

Older Australians hoard thousands of dollars in cash to pay for their funerals, but they don’t do it to get the pension says Seniors Australia, which has labelled the suggestion seniors use cash to defraud the pension system "unfounded and offensive".

Former senior Reserve Bank official Peter Mair has written to the governor of the Bank suggesting elderly Australians are behind the the extraordinarily high number of $100 notes in circulation.

Reserve Bank figures show there are ten $100 notes in circulation for each Australian compared to only seven $20 notes.

“In broad terms the average value of notes held by New Zealanders is about one third of the $A2000 held by Australians,” Mr Mair writes to governor. “An obvious explanation - means-test free age-pensions in New Zealand - points to the benefits some pension recipients in Australia unfairly take by holding undeclared assets masquerading as $100 notes.”

Mr Mair says the government should consider removing $50 and $100 notes from circulation to make hoarding more difficult.

National Seniors Australia chief executive Michael O'Neill said there was “no doubt” some senior Australians kept large amounts of cash in their homes.

"I know people who have $6000 or $7000 or $8000 put aside for their funeral,” he told the Herald... “They still have that attachment to the folding stuff. And I think part of the attitude is wanting to have money there to pay for the funeral, so the family won’t have to worry.”

But he said he had never heard from any of his members about hoarding high-denomination notes in order to get access to the pension and the prized Commonwealth Health Care Card.

“There' is a view folk strongly have that they have been taxed all their lives and that it is simply unfair that they don’t have access to the card.”

“I don't dispute that people go to their accountants and try and accommodate access, in entirely legitimate ways which they are entitled to provided it is legal. But in terms of large volumes of cash being hidden under the mattress, I find it difficult to accept.”

Finance minister Penny Wong said she had not been looking under pensioners’ beds lately, but that people were “required to declare their assets and their income in order to access the pension”.

In the six months to December only 44 people aged over sixty were convicted of social security fraud out of a total of 826.

Mr Mair has told the Bank he believes it is conflicted in dealing with Australia’s unusually large supplies of currency by the $1.5 billion plus annual profit it makes issuing currency. He will raise the question at the financial system inquiry promised by the Coalition after the election.

In today's Canberra Times, Sydney Morning Herald and Age


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The grey economy. Might pensioners have those $100 notes?

Elderly Australians committing welfare fraud on a massive scale are behind the extraordinarily high number of $100 notes in circulation in Australia, according to a former senior Reserve Bank official.

The Herald revealed yesterday there are now ten green $100 notes in circulation for each Australian, far more than the more-commonly seen orange $20 notes.

One popular explanation is that they are used for illegal transactions as part of the cash economy, something former Reserve official, Peter Mair, rejects as a “furphy”.

But, in a letter to Reserve governor Glenn Stevens dated July 4, Mr Mair laid the blame squarely on elderly people wanting to get the pension and hiding their income in cash to ensure they qualify for the means-tested benefit.

“The Bank is basically facilitating a tax avoidance scheme by issuing high denomination notes,” he told the Herald. “They are not needed for day-to-day transaction purposes, or even as reasonable stores of value."

His best guess is the average pensioner couple holds up to $50,000 in undeclared $50 and $100 notes in order to get access to the pension.

Mr Mair added that when the green plastic $100 note replaced the grey paper note in 1996, the Martin Place headquarters of the Reserve Bank received regular visits from retirees wanting to withdraw large quantities of the new notes. He said the commercial banks had sent them to the Reserve Bank because they didn't have enough $100 notes on hand.

Mr Mair says the return for an Australian close to getting the pension who holds $10,000 in cash, rather than declaring it, is “enormous”...

“If putting it under the bed or in a cupboard means you qualify for the pensioner card you get discounted council rates, discounted car registration, discounted phone rental - in percentage terms the return is enormous,” he said.

Mr Mair is a former senior Reserve Bank manager responsible for the payments system. He assisted both the Campbell and Wallis inquiries into the financial system.
He used comparisons of the per capita holdings of large denomination currency in Australia and New Zealand to back his argument.

“In broad terms the average value of notes held by New Zealanders is about one third of the $A2000 held by Australians - almost all of which by value is in the $50 and $100 denominations,” he wrote in his letter to the Reserve Bank governor.

“An obvious explanation for the difference is means-test free age-pensions in New Zealand.”

His letter to the governor proposes phasing out the $100 and $50 denominations which he says technology has rendered unnecessary.

“Cards and the internet have delivered a body blow to high denomination bank notes, they are redundant,” he told the Herald/Age. “There is no longer any point in issuing them except to facilitate tax dodging.”

“The authorities would announce that from, say, June 2015 every $100 and $50 note could be redeemed but no new notes would be issued. After June 2017 every note could only be redeemed at an annual discount of 10 per cent. It would mean that after two years each $100 note could only be redeemed for $80, and so on.”

The letter acknowledges the proposal would be “contentious” and says it should not be done “in any way precipitously” but says as retail payments become progressively more electronic it will become inevitable.

“What would remain in circulation are coins and a modestly expanded issue of currency notes in the $10 and $20 denominations: there is every reason to expect that a national currency issue of this character would soon be adequate to meet the reasonable needs of a community ever more exclusively making substantial payments electronically,” the letter says.

Mr Mair would also strip the Reserve Bank of authority for issuing notes, handing it back to the Treasury which had it until 1911.

“Treasury already issues our coins. If it issued our notes as well it would be much more interested than the Bank in making sure people didn't hoard them to load up on the pension, because it pays the pension.”

In today's Canberra Times, Sydney Morning Herald and Age

SOME FEEDBACK

...AND LETTERS


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'Ol 55? You're more likely to keep your job

Australians who have turned 55 can rest more easily. New Treasury calculations to be released today show they are more likely than ever to hang on to their jobs.

Treasurer Wayne Swan will tell a Sydney conference employment rates among mature age workers have grown solidly for the past ten years and particularly strongly during the past three years.

He will release calculations showing that over the past year all of Australia’s employment growth has been among mature age workers.

In the year to July employment among Australians aged 55 and over surged 3.9 per cent. During the same period employment among Australians aged 54 and under grew not at all.

In Victoria the difference was particularly pronounced. Employment among mature Australians jumped 4.8 per cent while employment among younger Australians slipped 0.5 per cent. Around 23,000 more senior Australians are employed than a year ago and 11,000 fewer young Australians.

Australian National University labour market Bob Gregory said it would be wrong to conclude life was getting easier for older Australians without jobs.

“It’s still much harder to find a job if you are over 55, he told The Age. “But if you are already employed and you pass 55 you are much more likely to stay employed."...

“It’s been moving that way for a decade. Part of it is the aging of the population. There are more Australians over 55 than there used to be. Also there has been a dramatic growth in the employment of women in the past decade. As those women turn 55 and stay in work they push up the proportion of over 55s in work.”

“And there’s something else. A decade ago the government tightened access to the disability pension. Before that if a man was declared invalid, both he and his wife got the disability pension. A rule change by the Howard government meant only the man got the pension. It effectively halved the payoff from being declared invalid.”

Professor Gregory says as a result of the change both women and men have been working longer. But he says they have also been working longer in other countries suggesting more universal forces have been at work.

“It is particularly so among unskilled workers. No-one quite knows why.”

In today’s speech Mr Swan will emphasise that the prospects for older Australians who lose their jobs remain bleak.

He will say the average duration of unemployment for Australians 45 and over is 62 weeks, compared to 34 weeks for Australians aged under 45 and 24 weeks for Australians aged under 25.

In today's Canberra Times, Sydney Morning Herald and Age






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Me on ABC Adelaide 891, July 25 2012

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Get real, you can't have it all - Parkinson

The next election will be austere if Treasury boss Martin Parkinson gets his way.

He told the Committee for the Economic Development of Australia in Canberra last night Australians to get real and realise they couldn’t “have it all”.

Ageing and rising expectations were likely to put “enormous pressure” on budgets. The taxation base was “weaker than had been imagined in the mid-noughties”.

“Much of the debate assumes we can have it all, with people simultaneously believing we can maintain or even reduce taxation levels while keeping the current range of social policy interventions with limited targeting and self-provision – and indeed adding to this with a long list of worthy, but expensive, new proposals,” he told the conference.

“The key point is that choices need to be explicitly debated. The examples of the United States and Europe, where decisions have repeatedly been put off in good times, are not models to emulate.”

Australia needed a “sensible discussion on what we expect governments to provide, and the tax system needed to support these expectations.”

Treasury will soon publicly release its methodologies for costing political promises, giving the community and political parties a clearer idea of how it evaluates policies. It was severely criticised by the Coalition after the 2010 election when it found what it said were up to $10.6 billion of errors in costings the Coalition had had certified by a two Perth accountants... The Coalition said the accountants were unable to replicate the Treasury’s methods because it had not made them public.

Treasury will also make the methodologies available to the new Parliamentary Budget Office which will independently cost political promises on request.

Dr Parkinson told the conference the typical Australian voter was ageing. By 2050 almost one quarter of Australians would be aged over 65.

“It is unclear what impact this will have on future Australian policy debates, but the experience in Europe and Japan hardly suggests that ageing populations are enthusiastic advocates of structural reform,” he said.

Australia’s economic success had been built on the “three pillars” of a floating exchange rate, an independent monetary policy and budget policy that aimed at running surpluses over the business cycle to build national savings.

“In the current environment of volatility and uncertainty with what can seem overwhelming global and domestic pressures, some have been tempted to suggest dismantling or undermining this framework,” Dr Parkinson said.

“I refer to a range of views – from questioning the value of the Reserve Bank’s current mandate, proposing a return to industry protection or exchange rate intervention, to significant restrictions on foreign investment while ignoring the role of foreign capital in raising Australian living standards.”

“It is our frameworks that have stood us in good stead through the global financial crisis and recent period of structural change, and they will continue to do so. And if you don’t believe this, ask yourself the following question: what would Australia look like today had any one of those policy pillars been missing in recent years?”

Dr Parkinson said he supported greater public reporting of foreign holdings of agricultural land, saying it could help dispel “myths and uncertainties”.

In today's Sydney Morning Herald


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Future Treasurers won't thank Wayne Swan

COMMENT

In yesterday’s address to the National Press Club Wayne Swan spoke of the “future” five times. But the measures in his budget appear to store up more financial problems than they solve.

The centrepiece is as good an example as any other. The “spreading the benefits of the boom” payments to families and Australians on welfare will cost around $1 billion per year, each and every year in perpetuity. The boom itself will end when demand for Australia’s minerals fades but the payments will continue ad infinitum.

The National Disability Insurance Scheme will cost just as few hundred million per year in the start-up phase approved in the budget, but eventually the cost will climb to an estimated $6 billion per year. If Wayne Swan or Penny Wong had any idea how they would meet the costs that will flow from the process they have begun, they haven’t shared it.

Our 30 per cent company tax rate, unaltered as a result of the decisions in the budget, will cost more than $1 billion per year to cut for each percentage point we tackle. Ken Henry wanted it cut to 25 per cent. It’ll have to be cut soon because as international tax rates continue to fall it will stick out like a sore thumb. Swan and Wong have put off the first step and appear to have no advice to offer their successors about where to find the money.

As our population ages we will need to collect more tax rather than less. We will need to collect it from the shrinking proportion of the population that is working in order to fund services for the growing proportion that is not.

Just last September in a paper prepared for the tax summit Penny Wong said by the middle of the century we would need to find an 2.75 per cent of gross domestic product...

The number Australians aged over 65 is set to double by the middle of the century. Spending on aged care is set to quadruple.

The states will also need topping up as goods and services tax turns out to be anything but the “growth tax” John Howard promised when he made it their sole source of untied grants at the turn of the century.

South Australian Treasurer Jack Snelling said said yesterday his state was facing the largest drop in revenue in its history. GST takings had been revised down $1.3 billion over four years, other takings $1.5 billion. The total - $2.8 billion - is what the state spends on schools.

The problems made worse by some of the measures in the budget will probably not become urgent for five or more years. The mining boom will most likely to continue, the National Disability Insurance Scheme will build up slowly. But beyond that, future Treasurers might not be thanking Swan and Wong. They might be thinking they were reckless about the future financial consequences of their actions.

In today's Sydney Morning Herald and Age


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How aging will change things

Me on ABC891, March 14, 2012

11 minutes, play or CLICK THEN CLICK AGAIN to download mp3



I'm on Adelaide's ABC 891 every Wednesday at 10.00 am AEDT, 9.30 am central time.


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How long have I got? Warning: life tables appended

We are less likely to die than ever before, but being indigenous, single or divorced or living outside living outside a city increases the risk.

The latest life tables from the Bureau of Statistics show an Australian girl born today can expect to live until 84, and to 84.3 if she survives her relatively dangerous first year. An indigenous Australian girl can expect ten years less. A boy born today can expect 79 years; an indigenous boy eleven years less.

In the past 20 years the average annual death rate has slipped from 8.6 per one thousand Australians to 5.7

The infant death rate has slid from 8.2 per one thousand live births to 4.1.

The least likely to die men live in Melbourne and on the Gold Coast. Both can expect 80.7 years. The least likely to die women live on Queensland’s Gold and Sunshine coasts. Both can expect just over 85 years.

The first-ever such analysis by the Bureau of Statistics finds cities far safer to live in than regional areas and a lot safer than in the bush with an average annual death rate of around 6 per one thousand compared to 8 in very remote locations.

Marriage seems to be a big help with married and widowed and divorced men and women far less likely to die at any age than men and women who have never been married...

The ABS report says married people "are less likely to participate in risky behaviour and more likely to nurture each other's health through promoting good diet and physical care", although it says it can't rule out the other possibility that healthy people are more likely to marry.

Australians born outside of the country have higher life expectancy in any given year than those within it, the highest being those born in Vietnam, who average only 2.8 chances in 1000 of dying at any age.

Although the ABS tables say a typical boy born today can expect 79 years, one of the highest life expectancies in the world, Australians already at that age needn't despair. The bureau says if you have reached 79 you can expect a further nine years. If you reach 100 you can expect a further two and a half.

Published in today's SMH and Age


HOW LONG HAVE I GOT?

Extra years of life expected

Born this year

Men: 79.5 Women: 84

Age 20

Men: 60.2 Women: 64.5

Age 40

Men: 41 Women: 44.9

Age 50

Men: 31.7 Women: 35.4

Age 60

Men: 23 Women: 26.2

Age 70

Men: 15 Women: 17.6

Age 80

Men: 8.5 Women: 10.1

Age 90

Men: 4.2 Women: 4.8

Age 100

Men: 2.5 Women: 2.7

ABS life tables



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3302.0

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Encouraging graph - those of us over 50 are getting full-time jobs

Which is what you would want and expect as the age mix changes.

What was that about a crisis?

From today's ABS Social Trends.


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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

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

I am not denying there will demographic changes - I am just saying we will easily deal with them, as we always have

Swan's report, Australia to 2050: Future Challenges  will be out at 12.30 AEDT.

His speech will be broadcast live on ABC TV at 12.30 local time in all states.

Gittins pours cold water on some of the handwringing you're about to hear.

I did so a half-decade ago in this personal account of my feelings about my daughter Grace, who is now aged seven.


THE future sounds frightening. Before the budget, the Treasurer, Peter Costello, warned that working-age Australians would soon have to support twice as many Australians aged over 65 as they do today. The changes are due to hit us in the next 40 years. And they can't be avoided. As the Treasurer likes to repeatedly remind us, "demography is destiny".

So why do I find myself not feeling worried? In fact, why do I find myself feeling actually grateful?

I've put myself in the position of my three-year-old daughter...

Grace will be in the middle of her working life in 40 years' time, when the changes talked about by Peter Costello hit with full force. I used to be worried that my children wouldn't be able to find meaningful or secure work. Nearly all of the one million or so extra jobs created since 1990 have been casual or part-time. Uncertainty has become the new permanence.

But it won't be in 2045. By then, instead of there being five people of working age to support each one over the retirement age, there will be fewer than 2½. Workers will be in demand. Employers won't be able to treat them casually.

The shortage of skilled workers provides a taste of what's in store. According to The Australian Financial Review, there are now four accountancy jobs on offer for every one applicant. As a result, it says, accountants in their mid-20s are being offered salaries of $100,000-plus, as well as cars, five weeks of annual leave, sign-on bonuses and subsidised gym memberships. It's the kind of future I want for my children.

It won't just be available to university graduates. If workers really do become scarce in the decades ahead, employers will start valuing them for what they can do rather than the pieces of paper they hold. Qualifications of dubious relevance will no longer be demanded as part of the selection process. Students will switch from four-year degrees to three-year ones or move straight into employment, picking up what they really need to know on the job or in employer-sponsored part-time training. The education that my daughter does get will be real and not part of a mind-numbing charade designed to get her a job.

The jobs will be better as well. What can be automated will be automated in an effort to economise on labour. My daughter's work is unlikely to be mind-numbing either.

And if ever she decides to leave the workforce for a while and come back in her 50s, she stands a good chance of success. Right now it can be employment suicide to admit that you are older than 50. Employers even try to screen you out over the phone.

A few years back, Lynne Bennington, a management specialist in Melbourne, employed actors to pretend to apply for real jobs. One in every four of the recruiters they phoned said unprompted they would prefer a younger rather than an older candidate. One in every five asked about the actor's age. Then, as now, it was illegal for employers to discriminate on the basis of age.

My daughter will quite probably never have to suffer the humiliation and the collapse of self-esteem that comes from being unable to work at the age when many of us have the most to give.

Employers might even find my daughter increasingly attractive as she ages. By 2050 one in every three Australians will be older than 55. They are more likely to want to be trained by or buy things from someone they can relate to. They might even want to see the TV news read by a woman their own age.

And when Grace finally does retire she'll join an incredibly powerful club. One in every three Australian voters will be older than 65. They will be the most influential voting bloc since the entry into politics of organised labour. Most likely free of the traditional party loyalties that my generation grew up with, the aged of the future will be able to sell their votes to the highest bidder.

If the over-65s don't want to work, no politician is going to risk forcing them. If they want affordable, high-quality health care they'll get Medicare Gold and its successors extended and improved in election after election.

Growing up I felt ashamed and powerless about the state of the nursing homes in which several of my elderly aunts spent their final days. I have no such concerns about the nursing homes that will await my daughter. Caring for the aged will rightly come to be regarded as one of the most important things society can do.

Will we be able to afford it? The Treasurer has used the Productivity Commission's report on ageing to suggest that unless something changes in the next 40 years his tax take will have to increase by about 20 per cent. But the Productivity Commission itself has made it clear it's a bill we will be able to afford. It says that by then the real income of each Australian is likely to be roughly double what it is today. And it's a bill we mightn't have to pay at all.

Last year two Treasury economists published projections examining what would happen if over the next 20 years Australia was able to lift its workforce participation rate up to the level of the best-performing countries in the OECD, among them New Zealand. They found that most of the predicted extra tax bill would vanish.

It's research of which the Treasurer is well aware. That's why he's been keen to use what may be his final budget to do everything possible to get more Australians into work, be they single parents, people older than 55 or those who have retired early on the disability pension. He is one of the few politicians who realises just how important that is.

An aged Australia won't be bleak by any means. I am looking forward to it. Peter Costello is trying to make the transition as smooth as possible.


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Expect the third Intergenerational Report Monday

The Treasurer has booked the Press Club.

Here's the first (2002) and the second (2007)


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Baby boomers get old?

The Beatles are set to replace Glenn Miller in retirement homes. Australia's first wave of baby boomers - those born from 1946 - become eligible for the pension from next week.

Official projections suggest up to 107,000 baby boomer women will reach the female pension age of 64 next year. A year later a further 100,000 baby boomer men will reach the male pension age of 65 as a further 120,000 women will reach pension age.

"The bulge will expand for 15 years," says David Knox, an actuary and worldwide partner at Mercer Consulting. "And these boomers will be living longer than did earlier pensioners."

Dr Knox was behind a push to gradually lift the pension age to 67, a decision implemented in the May Budget with the first increase to 65 years and six months due in 2017 and the final increase in 2023.

"I think we'll need more," he told The Herald... "I would like the pension age to keep increasing as life expectancy increases, not on a one-for-one basis, but by six months for every year that lives lengthen, so that the costs are shared."

The rapid aging of the Australian population brought on by the steady march of boomers into their upper sixties and early seventies will be a focus of both the Henry Review and the Treasury's third Intergenerational Report to be released early in the new year.

Current projections suggest that by the middle of the century almost one in four Australians will be aged 65 or older, roughly double the present 13 per cent.

The proportion aged 85 or older will triple from 1.7 per cent to 5 per cent.

In an early insight into the content of the report Treasurer Wayne Swan told the Australian Institute on Population Ageing Research in September it would find that Australia's population will be larger and somewhat younger than had been believed, driven by an unexpected jump in the birth rate and greater than expected immigration.

The challenge would be to encourage older Australians to continue to contribute to the community, as carers, volunteers and as ongoing workers.

The Budget eased the pension income test in order to make continued part-time work easier.

But David Knox said the reality was that most Australians retired well before the pension age, with retirement at 58 or 59 typical, although there were signs the age was increasing to 61.

"The global financial crisis has eaten into nest eggs forcing some people to postpone their retirement plans. And the recovery is going to encourage employers to hang on to their workers as they become scarce," he said.

The Henry Review has considered recommending slowly lifting the superannuation preservation age to 67, to bring it into line with the higher pension age from 2023, effectively making it impossible to get a retirement income before 67 without working or living off investments.

Australians live 23 years longer than they did when the aged pension was introduced in 1909.

Published in today's SMH  and Age 

Graphic: ALEXEI VELLA 




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And more on marriage

It makes us live longer by making us happier

Cahit Guven and Rudolph Saloumidis from Deakin University:

Why is the world getting older? The influence of happiness on mortality

"World life expectancy has risen by around 20 years in the last 50 years.
This period has also witnessed rising happiness levels around the world sug-
gesting that happiness might be one of the causes behind the decline in
mortality. We investigate the relationship between happiness and mortality
using the German Socio-Economic Panel. We consider doctor visits, self-
reported health, and presence of chronic illness as health measures. After
controlling for initial health conditions, we nd that happiness extends life
expectancy. 10 percent increase in happiness decreases probability of death
by four percent, and this e ect is more pronounced for men and younger
people. Happiness plays a more important role for chronically ill people in
decreasing mortality than for those who are not chronically ill. The positive
influence of happiness on mortality can o set the negative impact of chronic
illness. Marriage decreases mortality and this e ect appears to work through
increased happiness."

But more so for men - it's a fascinating paper.

Influence Happiness Mortality

Read more >>