Tuesday, February 2, 2010

Intergenerational Forecast Is Fair Warning

The third and latest Intergenerational Report, released yesterday, tells us a number of thing sthat we already know. But it does hammer home the need to actually do something to plan for the future while we still can. It has been well publicized that the Australian population is projected to reach 36 million by the middle of the century, and that one quarter of that population will be over 65 as compared to just 13% at present. What this means is that health and social welfare costs will increase dramatically while tax receipts from a proportionally shrinking workforce will be falling on a per capita basis.

Some have questioned whether it is possible to make accurate forecasts over such a long period, and to use those forecasts as a basis for planning. But that misses the point. The Treasurer Wayne Swan has made this clear by saying that “It is important to keep in mind that these numbers are not carved in stone, and they are not targets.” His point is that this is not a crystal ball prediction. Instead it is a projection of where things are likely to go if nothing is done to change the way we are doing things now. The point is that it is an opportunity to create a future, not be condemned to it.

That being the case there are some things that need to be addressed urgently. One is the matter of national savings, both at the individual level and the community level. The superannuation system, along with the way it interacts with the tax and welfare system, must be reformed to ensure that in the ordinary course of events retirement incomes are adequately funded. That means making the tax treatment of super fairer for low income earners, reducing the excessive fees and commissions which deplete super savings, and increasing the money going into contributions in the first place.

Another urgent issue is health reform, especially in the field of aged care. The sheer numbers of people expected to be requiring residential aged care by mid century mean that there is a need for a dramatic increase in the number of nurses and aged care professionals. While cash incentives have been provided to attract more people into nursing, the unfortunate fact is that they aren’t working, and potential nurses are staying away in droves. While the money is important, obviously there are other factors that are also discouraging people from entering the profession, such as working conditions and professional status. These issues must be addressed now or it will be too late.

As for the sheer size of a population reaching 36 million, many people are concerned that the potential impact upon the environment is unsustainable and unacceptable. Water is just one issue. Food is another. Many people worry that we don’t have enough of either to accommodate such a large population. Decisions have to be made, and either we take steps to prevent the population expanding so rapidly, or we must do something about water and agriculture infrastructure. Given that Australia has a poor record in developing such infrastructure, having basically done nothing since the snowy river scheme, it might be a good idea to stop and ask if we really want that many people living here at all.

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