The need for Australian’s to provide for themselves in retirement and seek good financial advice has been reinforced by a new report predicting the government is likely come under crippling pressure to support Australia’s aging population.
In a draft research report released today, the Productivity Commission projected that economic growth could half to around 1.25 per cent in 20 years time as more and more people drop out of the work force. It has also projected that a ‘fiscal gap’ of about 7 per cent of Gross Domestic Product (GDP) could open up by 2045 as the negative effects of lower productivity are enhanced by ageing-related pressures on welfare and healthcare.
“Economic growth will flag as the Australian workforce grows more slowly than the population,” Productivity Commission chairman Gary Banks said.
Despite predicting that household earnings would nearly double by 2045, the report stated that in the short term, taxes will have to be raised, Australian’s will have to work harder or more efficiently and healthcare will have to become more cost effective if Australia is to stand any chance of reducing the gap.
“Timely policy action would help adjustment and avoid the need for ‘big bang’ interventions. Population ageing can only be conceived of as a crisis if we let it become one,” said Banks.
The report also praised earlier government reforms, like the introduction of the superannuation guarantee, saying that these measures will put the Australian Government under less pressure to fund the aged pension than other developed countries.
Other projections made in the report included an estimation that one quarter of Australians would be aged 65 years or more by 2045 – about half the present population – and that health care costs would blow out to rise by about 5 percentage points of GDP in the same time frame.
