Economic Implications of an Ageing Australia

Research report

This research report was released on 12 April 2005. The report presents the findings of the commissioned study which examined the productivity, labour supply and fiscal implications of likely demographic trends over the next 40 years, to further improve understanding of the challenges and opportunities resulting from an ageing Australia.

A number of minor errors have been detected in the report since it was printed. These principally relate to the treatment of future education costs. The errors have been corrected in the PDF and RTF files on this website, but remain in the printed copies. They make no qualitative difference to the conclusions reached.

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Contents

Preliminaries
Cover, Copyright, Foreword, Terms of reference, Abbreviations and explanations, Contents, Overview

1 Introduction
1.1 Scope of the study
1.2 Participation in the study
1.3 Structure of the report

2 Ageing of the Australian population
2.1 Introduction
2.2 The extent of the demographic transition
2.3 Mortality rates have been falling
2.4 Fertility has been falling
2.5 The role of migration in population ageing
2.6 Putting the jigsaw of effects together

3 Ageing and labour markets
3.1 Why ageing matter for the labour market?
3.2 The determinants of economic growth
3.3 Labour supply trends: the view backwards
3.4 Projections of Australia’s labour supply
3.5 Volunteering

4 Productivity and ageing
4.1 Introduction
4.2 Labour productivity assumptions used in previous studies
4.3 Past and future productivity growth
4.4 Relative productivity of current workers
4.5 Capital deepening, technical progress and ageing
4.6 Convergence or divergence in State and Territory productivity growth?

5 Economic growth implications
5.1 Economic growth over the next forty years
5.2 The role of ageing
5.3 Exploring other scenarios for Australia's economic future
5.4 Placing these projections in context

6 Health expenditure
6.1 Government expenditure on health
6.2 Influences on health care expenditure: what role for ageing?
6.3 Projecting government health expenditure

7 Aged care expenditure and carer payments
7.1 Expenditure on aged care
7.2 Payments to carers

8 Personal benefit payments
8.1 Nature and magnitude of payments
8.2 Benefits are strongly age-related
8.3 Method for projections
8.4 The projected growth in payments

9 Education expenditure and ageing
9.1 Structure of education and funding
9.2 Method for projecting government expenditure
9.3 Projected education expenditures

10 Other expenditure
10.1 Housing assistance trends
10.2 Spending on transport services
10.3 Law and order
10.4 State and Territory government concessions
10.5 Superannuation expenditure

11 Revenue
11.1 Relevant features of the tax system
11.2 Whither Australian Government taxes?
11.3 What about State taxation revenues?
11.4 Summing up

12 Local government and regional impacts
12.1 Demographic change at the regional level
12.2 Economic implications of ageing for local government
12.3 Other regional impacts

13 Implications of population ageing
13.1 Introduction
13.2 Ageing and fiscal pressures
13.3 Uncertainties surrounding the projections
13.4 The ageing ‘problem’ in perspective
13.5 Implications of financing the fiscal gap
13.6 Addressing the fiscal drivers
13.7 Summing up

A Submissions and consultations
A.1 Submissions received
A.2 Consultations

B Education and labour force participation

C Health expenditure projection methods and sensitivity analysis
C.1 Method
C.2 Alternative projection methods

D Non - demographic growth in health expenditure

E Voluntary work
E.1 Volunteers
E.2 Volunteering in an ageing population

F Fiscal risks for governments
F.1 The vertical fiscal imbalance and fiscal pressure
F.2 What payments are at risk?
F.3 Fiscal pressures for the ‘Combined States’ compared with the Australian Government
F.4 Relative fiscal risks for individual States compared with each other

References