Well, Mr Hockey has gazed into his crystal ball and what did he see?
On 5 March 2015, the Government released the 2015 Intergenerational Report (IGR). This report is produced every 5 years and looks at the challenges and opportunities Australia will face over the next 40 years.
As expected, the IGR focused heavily on the changing demographics. Australians are living longer, healthier lives and as a nation, we are getting older. Currently there are around 5,000 Australians aged 100 or older. By 2055, this number is projected to increase to 40,000. The King of the day will be very busy sending out birthday cards, or texts or Facebook messages – whatever is the preferred mode for exchanging birthday greetings in 2055!
A significant risk facing Australia is its reducing workforce. This may impact negatively on the economy. We need to increase participation in the workforce and improve productivity – that is, we must get more output from less input.
In 2015 we have approximately 4.5 people of working age (15 – 64) for every Australian aged 65+. By 2055, this is expected to fall to 2.7 people of working age for each person aged 65+.
Currently, around 12.9% of those aged 65+ retain some form of ongoing workplace participation. By 2055, this is expected to increase to more than 17%. Somehow, I think that figure might be even higher as retirees strive to generate sufficient income to support the retirement lifestyle of their dreams.
Future Australian budgets are going to see increased expenditure on the delivery of health care, due primarily to the ageing population. Today, the Government spends $2,830 per annum on delivering health care services to each and every Australian. By 2055, the annual health spend is projected to be $6,460 per person. And that is expressed in today’s dollars!
In 2015, the Government spends $1.1billion each day, but only receives $1bn in income, or revenue. That means we are spending $100m more each day, than we are collecting. As a country we need to live within our means or we can expect to have a very bleak future. Expect to see some belt-tightening in this, and future year’s budgets as the Governments of the day attempt to rein in expenditure. I am sure we are going to see some of the benefits we have always taken for granted, including the age pension and superannuation tax concessions, come under increasing pressure.
There is a lot of hard work to be done to ensure we are able to maintain our economy to enable us to enjoy a rich and vibrant lifestyle. Governments will be forced to make unpopular decisions from time to time but, as a nation, if we work together, we can continue to enjoy the lifestyle we have come to appreciate.3