Latest newsletter #153 Click to read online

The Aging of Australia

Pension and superannuation ages need to be raised to 70 years and indexed to longevity, the Productivity Commission, the government’s premier economic advisory body has warned, in a report that reveals the ageing of the population is a much bigger threat than previous Treasury reports have suggested. Calling for an urgent commitment to reform, the Commission's report states any return to surplus will be shortlived with permanent and growing deficits beyond 2020 reaching 5.9% of GDP by 2060. In today's dollars that would be equivalent to a deficit of $100 billion. The Commission calculates taxes would have to rise 21% unless steps are taken to reduce the impact of the ageing population.
The Commission's deficit forecasts are much more alarming than those included in Treasury's 2010 intergenerational report which examined the effect of ageing and envisaged the deficit reaching 2.7% of GDP by 2050. The Commission calculates that by the end of the century there will be as many centenarians as babies born each year.
And there's the clue as to why our budget forecasts spell so much trouble - it is too few babies. The ageing population will bring a steady reduction in the working share of the adult population from 64% to 59%. Super funds and other interest groups have called on the Federal government to face up to the dramatic ageing shift foreshadowed in the Commission's report. All of the suggested solutions by the Commission and other stakeholders are unpalatable - raising the pension age to 70 or compelling retirees to draw on the equity in their homes to support themselves.
Neither the Productivity Commission nor any of the other interest groups has suggested a way to deal with the shortage of babies who are the future workers and taxpayers of Australia, and that would be to decrease the incidence of induced abortion in this country. An abortion rate of 90,000 or more every year is simply unsustainable in terms of economic survival, let alone any “right to life” implications.
The statistics from the USA and Iran - two countries very different culturally and economically - are sobering. In 1945, there were 42 working Americans paying payroll taxes for every retiree receiving Social Security benefits. By 1960, the ratio was about 5 to 1. Today it is about 3 to 1. Like us, Americans are living longer but having fewer children, and it is one reason why the US economy is in the doldrums.
Iran with a birth rate of l.6, according to a new UN report, also has a rapidly ageing population which will heavily tax Iran's public health infrastructure and social security network. A generation hence, there will be two elderly dependents for every three workers, compared to seven elderly dependents for every 93 workers today. That is a death sentence for a poor country, and looks virtually irreversible.
Our Federal government shows little sign of heeding these alarming statistics. All the emphasis is on getting mothers into the paid workforce, with no recognition that those mothers who remain out of the workforce because they have more than the average l.9 childen are performing a valuable service to the nation. Discrimination against the single-income family (see p. 2) means that those couples who want to have more children feel they cannot afford to do so.
It is a tragedy that politicians cannot see that babies grow to be our most useful economic assets and are not mere problems to be disposed of as clinic waste.

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