Last week we saw on this blog a glimpse into the population future of the United States. By 2060 the USA is going to be older, more diverse and much larger than it is today. Something similar is being predicted for Australia we learned last week as the Aussie government released its fourth intergenerational report. This is a report that is produced by the Federal Government which must be released every five years. It looks at the long range impacts of population and government policy on the federal budget.
This year's report was billed by Australian Treasurer, Joe Hockey as quite exciting: indeed he predicted that it would make people “fall off their chairs” which is quite dramatic. Now, I did fall off my chair when I heard about the findings in the report, but I can be forgiven since I write a blog on demography. I'm not sure what the effect will be on you, dear reader, but perhaps you should strap yourself down before reading any further. Or you might like to sit on the floor instead.
Some of the highlights of the report include a prediction that the population of Australia will be just shy of 40 million in 2055 (up from just under 24 million now) and there will be 40,000 people celebrating their 100th birthdays that year (the poor Queen will be signing lots of telegraphs if she is still around then – she'll only be 129 herself!) For those Australians born in 2055, the boys will be expected to live until 95, the women to 96. The number of Australians over the age of 65 is projected to more than double (it currently stands at around 15% of the population). This means that the proportion of working-age Australians to those aged over 65 will decline to just 2.7 in 2055.
This is obviously a problem for the Government and its finances, and the report notes that the ageing population will have “important implications for the tax base and ability of future governments to deliver services.” The health budget is expected to skyrocket along with the average age of the population with the average cost per person of healthcare to rise tenfold to $6,460 (5.5% of GDP). Spending on age care and pensions is predicted to jump as well; the cost of the pension is predicted to rise from 2.9% to 3.6% of GDP.
Added to the ageing population is a predicted fall in the work force participation from 64.6% to 62.4%. On the other hand, the disability support pension, the family and child care payments are all set to drop. Further, 70% of women will be doing paid work and the workforce participation of older Australians will increase from 12.9% to 17.3%. This increased use of the elderly in the workforce will become more essential as their numbers grow I would imagine.
Overall, the report predicts that the economy will grow by an average of 2.8% per annum over the next 40 years and that the annual average income will increase from $66,400 to $117,300 in the same period.
These predictions should be taken with a fairly large pinch of salt, and the report itself acknowledges that “all projections are inherently uncertain”. Having said that however, it is clear that governments in many western countries are getting more indications from their advisors that they will have to deal with an ageing workforce, and that some family friendly policies to encourage people to have more babies (who are of course our future citizens and taxpayers and producers) might be in order.
To that end, Mr Hockey announced that the Government would shortly announce a families package to address rising child care costs and the difficulty families faced in accessing appropriate care for their children. Whether that will make any difference remains to be seen.