Australia’s population demographics are changing dramatically and the financial services industry will need to alter its policies and procedures to suit, an expert has cautioned.
Speaking at the Self-Managed Superannuation Fund Professionals’ Association of Australia (SPAA) conference in Brisbane last Thursday, Graeme Hugo, a University of Adelaide professor and director of the National Centre for Social Applications of Geographic Information Systems (GIS), said that Australia’s population is aging rapidly, with the number of people aged 65-plus expected to double within the next two to three decades.
But although Australians are living longer, Hugo said they generally are not any healthier, either physically or financially.
“Although we’re living longer, we’re not living longer as healthy individuals. [Medical breakthroughs] mean we’re able to rescue people from death, people who would otherwise have died from cancer or heart attacks for example.”
Hugo said these factors would not only have a negative impact on individuals — physically and financially — but on the nation’s health system and economy.
He said he firmly believes that Jean Philippe, the OECD chief economist, was right in saying that nothing will impact OECD economies more profoundly over the next couple of decades than demographic trends and, chief among them, ageing.
Hugo said the fact that more and more people are heading into retirement without long-term partners and/or sufficient savings is also a concern and that government policymakers need to address this urgently.
“Baby boomers are more cashed-up than previous generations, but this hides the fact that resources aren’t distributed evenly,” he said.
“There’s a real danger of increasing inequity in old age. There’s a small group of people who have been able to save for a comfortable retirement, but others will [spend retirement] in relative poverty.”
According to Hugo, the key challenge for financial services professionals will be to develop effective financial plans for these types of clients, some of whom may be unable to work because of poor health. He expects the growing number of overweight and obese Australians to also have long-term implications for the industry and the economy.
In his view, Australia needs to work out how it will take care of its ageing population and help younger people to juggle saving for retirement with saving for a property, building wealth and repaying debt.
He said that more needs to be done to help women — who generally earn less and take more time out of the workforce to care for family — to save for their retirements, particularly now they are less likely to retire with a partner.
“The ageing issues in Australia are manageable. We’re not in as dire straits as Europe or Japan — we have a bit of breathing space — but we need to act immediately. Increasing inequity in old age is a real and present danger, but we don’t have to go down that path if we start planning now.”
