The Australian Government is about to release the third Intergenerational Report into the impact of population aging in Australia.
I covered the release of the second report Back in April 2007 in a brief note, Australia's Aging Population - Treasurer Costello releases second Intergenerational Report. The links in that post to both the 2007 report and then Treasurer Costello's speech still work.
The main difference between the first report in 2002 and the 2007 report is that a combination of higher than expected births and immigration had slightly reduced the aging impact. While this effect has continued, the projected aging is still dramatic. The Sydney Morning Herald's Dan Harrison writes:
Australia must dramatically raise productivity if it to meet the challenges of an ageing population, the Prime Minister, Kevin Rudd, said last night.
Speaking in Melbourne on the first day of a national tour in the lead-up to Australia Day, Mr Rudd said by 2050, there would be only 2.7 working-age Australians for every one aged 65 or more. There are now about five working-age Australians for each citizen over 65. Four decades ago there were 7.5.
The report's expected release comes at a time of renewed debate about the projected size of the Australian population, with many arguing that Australia simply cannot sustain a population of the size now projected. The word "sustain", by the way, is a slippery one when used in this context because it means different things to different people.
Given demographic trends, Mr Rudd argues (as did the previous Government) that productivity growth is the only way that Australia can manage such a shift in the proportion of working and non-working Australians.
In some of my past posts and in my professional advice, I have tried to point to the implications of an aging population in general and in specific sectors. I must say that I have found it difficult to get people to focus on the issues involved.
Mr Rudd's emphasis on the need for productivity improvement is important, although I am sceptical about the country's capacity to achieve this within current policy and institutional settings. However,we also need to recognise that the aggregate data used in the Intergenerational Reports actually conceals distributional impacts that are already with us. There is remarkably little discussion on those impacts.
Starting with a simple statistic, the NSW public sector workforce (public servants, nurses, teachers, police etc) has been getting older quite rapidly. Now, some fifty per cent are due to retire over the next ten years. That's a huge number. It cannot be accommodated through people working past the traditional retirement age (60 for women, 65 for men).
Compulsory retirement was abolished in the NSW public service some time ago. Many public sector workers (I am not sure of the exact proportion) are over 60, a growing number over 65. The effect of later retirement has just pushed the NSW public sector demographic time bomb a little to the right.
Many of the professions such as dentistry, law and medicine display a similar if less pronounced age skew. Here, as with the NSW public sector, past workforce planning decisions created an age skew. We simply didn't train enough people.
There are major geographic differences in the age structure of populations across Australia. At local and regional level, the projected national 2050 structures are already emerging. In some cases they have emerged.
Back in November 2006 in NSW Ten Year Plan - New England's needs I looked at some demographic trends from a purely regional perspective. Just to quote a few statistics from that post:
In the three and a bit years since that post was written, the trends identified have continued. As a simple example, we need to build age care facilities to meet immediate and emerging needs knowing that the facilities constructed may become redundant within decades.
As I write, Mr Rudd's speech on this issue is being reported on radio. He is again emphasising the need for improved national productivity. My argument is that while this is important, we have to drop below the macro aggregates to analyse the actual effects that are already on us.