Comment
There are positives to population ageing
with Patricia Reeve, COTA
In this column last month I pointed out some overlooked ‘good news’ in the Productivity Commission draft report, ‘The Economic Implications of an Ageing Australia’. It is likely that the most pessimistic ideas will again be in the headlines when the final report goes to government this month. Since bad news seems to stick in everyone’s mind while good news is easily lost, I thought it worthwhile to look again at some of the positive aspects and debunk a widespread myth about the impact on younger generations.
First the good news:
o Population ageing (here and overseas) is a success story; increased life expectancy is the result of public health, economic, political and technological progress.
o Older people contribute to society in ways that are not reflected in narrow economic terms measured by the Gross Domestic Product (GDP). They contribute to families and communities through financial support, volunteer work and the payment of taxes and charges.
o In relation to age pensions Australia is much better off than many other OECD countries. Pensions are means tested, set at modest levels related to average wages and will increasingly be supplemented by superannuation because of the early introduction of superannuation reforms in the 1980s.
A persistent myth is that today’s older people, and the baby boomers, need to ‘pull their heads in’ by receiving less public support in the form of pensions, social welfare or health services so that they do not put an unfair burden on young people. Many fear that today’s younger generations will need to be so highly taxed that they will have lower standards of living than we have had. However, quoting the Victorian Government and other research, the Productivity Commission advises that the principles of intergenerational equity do not imply that there needs to be a substantial reduction. Their argument is based on the effect of productivity on wages. They expect that the average income of Australians in 2044 will be $35,000 more than 2003 even after allowing for inflation. An estimated $5000 per person in tax would be enough to meet any "ageing population" costs in that year, leaving them $25,000 in front of today’s average wage earner.
In a future column I will discuss some of the changes that Australia needs to make so that the wellbeing of all generations is enhanced and population ageing does not become a crisis.
Patricia Reeve is policy officer of COTA Alliance.
