We Aussies are a successful bunch. Whether that be economically, on the sporting field or even how we get on with each other, we do most things really well. Treasury’s 2015 Intergenerational Report (IGR) spells out how successful we have been in the most important area of all – staying alive.
Thanks to skilled health care and a high standard of living, we just don’t die like we used to. In the future, we’ll be living even longer. The IGR says in 40 years’ time, life expectancy will be 95+ for men and 96+ for woman. Two million of us will be aged over 85. 40,000 of us will be over 100 - compared with 5,000 now and just 125 in 1975. Holy smoke, this really is the lucky country!!
But the IGR is not just all good news, our expected longevity comes with its problems. It shows we need to be very wary of this success causing failure in other areas.
Did you know that when the age pension was introduced in 1908, life expectancy for a man was just 63? So it wasn't a huge burden on taxpayers. Today, with the average Aussie retiring at 60 or 65, he or she will live 25 or 30 years (hopefully more) in retirement – mostly, living off those still working. Someone has to pay for it.
That someone will be our future workers. The question is, will we have enough?
40 years ago, there were 7.3 Australians of working age for every one over 65. Today, there are 4.5. In 40 years’ time, there will be 2.7.
By 2055, estimates are that the number of Australians aged over 65 will double to 9 million - a quarter of total population. There will be 2.0 million aged 85 and over, up from 500,000 now.
Older people are huge consumers of health services, residential care and pensions. The cost of health services is also increasing fast due to increasingly expensive technology and pharmaceuticals. Combine the two, and by 2055 the government will be spending seven times as much on healthcare of the over-65s as we do now.
Don’t get me wrong, older people deserve to be looked after properly. After all, they have supported previous generations through their taxes. But how will we pay for it all?
Well, we will need more people working. We will have to work longer. We will need to increase the value of our work (what the economists call "productivity"). Maybe tax increases are necessary. Or must we find savings in other areas such as education, welfare and defence? One thing is for sure and that is there will be more pressure on those things many older Australians take for granted - health care, residential aged care, pharmaceuticals, social security.
None of these changes will be popular. The challenges are immense.
So now is time for strong leadership. We need a mature, political debate. Let’s leave ideology at the door, just this once. This is after all, not actually about us and the size of our pensions. Our decisions now will directly impact the future prosperity of our kids and our grand kids.
This is a big deal. Do we leave this place better than we found it?
So maybe the starting point is actually with us - a shift in social attitudes about entitlement. What is realistic and what is not?
Whichever way you look at it, there's some work to do.
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