Business Daily Media

Men's Weekly

.

Intergenerational report to show Australia older, smaller and more in debt

  • Written by Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

Australia will be smaller and older than previously expected in 40 years time after the first downward revision of official projections in an intergenerational report in 20 years.

The much lower projections in Monday’s fifth five-yearly intergenerational report will mean indefinite budget deficits with no surplus projected for 40 years, only 2.7 Australians of traditional working age for each Australian over 65 (down from four) and average annual economic growth of 2.6%, down from 3%.

“Intergenerational reports always deliver sobering news, that is their role,” Treasurer Josh Frydenberg will say launching the report Monday morning. “The economic impact of COVID-19 is not short lived.”

The report says the pandemic has slowed both Australia’s birth rate and inflow of migrants.

The 2015 intergenerational report[1] projected an Australian population of almost 40 million by 2054-55. The 2021 update projects 38.8 million by 2060-61.

As a result in 2060-61, about 23% of the population is projected to be over 65, up from 16% at present and 13% in 2002.

Intergenerational report to show Australia older, smaller and more in debt Although in the future increased superannuation would take pressure off the age pension, superannuation attracts favourable tax treatment which cuts government revenue. The combined total of age pension spending and superannuation tax concessions was projected to grow from around 4.5% of gross domestic product to 5% by 2061. Real per person health spending is projected to more than double over the next 40 years, largely due to the costs of new health technologies. By 2060-61 health is expected to be the largest component of government spending, eclipsing social security and accounting for 26% of all spending. Aged care spending is projected to nearly double as a share of the economy, largely due to population ageing. Read more: No Barnaby, 2050 isn't far away. Next week's intergenerational report deals with 2061[2] Mr Frydenberg will say that even in the face of these demands the government remains committed to its promise to limit the tax take to 23.9% of GDP. Tax receipts are not expected to reach this level until 2035-36. “Growing the economy is Australia’s pathway to budget repair, not austerity or higher taxes. This is why we remain committed to our tax to GDP cap, ensuring our COVID support is temporary and persuing productivity-enhancing reforms.” Intergenerational report to show Australia older, smaller and more in debt Net debt is projected to peak at 40.9% of GDP in 2024-25, before falling to 28.2% in 2044-45 and then climbing again to 34.4% by 2060-61. While Australia’s population will be smaller and older, and debt levels higher as a result of the pandemic, had the government not spent at unprecedented levels to support the economy a generation of Australians might have been condemned to long term unemployment, seriously damaging the budget longer-term. Other projections have real GDP per person a measure of living standards, growing at an annual average of 1.5%, down from an earlier-projected 1.6% Intergenerational report to show Australia older, smaller and more in debt The result will still be a near-doubling of real GDP per person, from $76,700 in today’s dollars to $140,900 in today’s dollars in 2060-61. Behind that projection lies an assumed lift in annual labour productivity growth to 1.5%. In the decades before the pandemic, annual productivity growth had been averaging 1.2% and had slumped to 0.4% in the year during the pandemic? Read more: Why productivity growth stalled in 2005 (and isn't about to improve)[3] The lift in productivity assisted by government policies that will help individuals and businesses “take advantage of new innovations and technologies” is expected to take ten years. Not included in the extracts from Monday’s report released by the treasurer late Sunday are the closely-watched projections for net overseas migration and for spending on the national disability insurance scheme.

Authors: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

Read more https://theconversation.com/intergenerational-report-to-show-australia-older-smaller-and-more-in-debt-163474

Minns Labor Government shutting down the Business Connect program

The NSW Opposition is concerned that the Labor government will shut down a support program that has assisted New South Wales businesses. In a media ...

Samsara Eco appoints Dr. Lars Kissau as General Manager for Asia

Australian biotech innovator Samsara Eco has announced the appointment of Dr Lars Kissau as its first General Manager of Asia. Based in Singapore...

From the first bounce to the final siren - small business lessons from the AFL Grand Final

The AFL Grand Final is one of the most anticipated days on the sporting calendar. This Saturday, the Geelong Cats and Brisbane Lions will battle i...

Australia’s top finance leaders recognised as CFO role expands

Amid surging regulatory demands and rapidly evolving industry, Australia’s most influential Chief Financial Officers will be honoured at the inaug...

Why outdated security leaves small businesses exposed to crime

Small and medium businesses in Australia are under increasing pressure to address security gaps that criminals readily exploit. An unlocked door, an...

Why it’s time telcos rethink location and put customer experience first

Maurice Zicman, Vice President - CX Strategy at TP in Australia unpacks why the telco industry must rethink old assumptions and focus on digital-f...