The Government is required to produce an Intergenerational Report every five years to assess the long-term sustainability of government policies and how changes to Australia’s population size and age profile may impact on economic growth as well as workforce and public finances over the next 40 years.
The Report provides a snapshot of where we are and the challenges and opportunities that must be responded to if Australians are to continue to enjoy improvements in their quality of life.
Dealers may be interested in a summary of the report, including what it means for them as the population ages and consumer buying behaviours change.
Population and life expectancy
Australian men have one of the longest life expectancies in the world. Australia ranks equal first along with Iceland in terms of male life expectancy. Australian women have the fifth longest life expectancy after Japan, Spain, France and Italy.
Male life expectancy is projected to increase from 91.5 years today to 95.1 years in 2055, and female life expectancy is projected to increase from 93.6 years to 96.6 in 2055.
The number of Australians aged 65 and over is projected to more than double by 2055 compared with today. Meanwhile, fertility is assumed to remain at around the 2013 rate of 1.9 births per woman.
Australia’s population is projected to be 39.7 million in 2055.
Australia’s future growth and prosperity relies on having a sufficient workforce to fill the jobs of tomorrow. The challenge is to increase workforce participation as our community ages. Australians aged over 65 participating in the workforce will increase from 12.9 per cent in 2014-15 to 17.3 per cent in 2054-55.
In Canada, the female participation rate is around four percentage points higher than in Australia. If Australia’s female participation rate could reach Canada’s level, it is estimated that our GDP would be a permanent $25 billion higher. If Australia’s participation rates of people aged 65 and over could match those of New Zealand, our GDP would be higher.
Productivity is not about working longer and harder, it is about producing more for the same effort. During the 1990s Australia’s productivity growth was high with an estimated average of 2.2 per cent growth per year.
Today, Australians produce twice as much in goods and services for each hour worked as they did in the early 1970s.
The past 40 years included an unprecedented 23 year stretch of unbroken economic growth matched by one other advanced country, the Netherlands, which experienced close to a 27 year stretch of unbroken growth.
Economic growth is projected to be 2.8 per cent per annum on average over the next 40 years with annual growth per person of 1.5 per cent. This would see the annual income of the average Australian rise from $66,400 today to $117,300 by 2055.
The Australian Government is spending over $100 million more per day than it collects and is borrowing to meet the shortfall. Interest on this spending amounts to $40 million per day. Gross debt is around $360 billion equivalent to around 22 per cent of GDP.
Revenue projections are being revised due to falling commodity prices and tax collections.
Health spending per person in today’s dollars is projected to more than double from around $2,800 to around $6,500.
In 2014-15 the Government will spend around $150 billion on social services and welfare or around 35 per cent of the Commonwealth Budget. This includes spending on pensions, aged care, payments to families and individuals, and the National Disability Insurance Scheme.
The economy (as well as incomes) are projected to grow, but at a slightly lower rate than over the past 40 years.
Over the long run, domestic prices are projected to grow by 2.5 per cent per year. Wages are projected to grow by four per cent consistent with domestic inflation and productivity growth of 1.5 per cent.
Online services, disruptive technologies, self-navigating vehicles, mobile devices, social networking, cloud computing and other technologies are transforming relationships between businesses and their customers.
Ultimately, consumers are becoming more powerful.