Australia Faces Uncertain Future
Thursday, 5th March 2015 at 3:59 pm
Economic reform is needed to tackle the unprecedented strain the Australian economy will be under from a growing and aging population, Federal Treasurer Joe Hockey has said.
In releasing his Intergenerational Report (IGR) Hockey said that Australia was facing record debt levels.
“The Report projects that over the next 40 years the Australian economy will grow at 2.8 per cent per annum, slightly less than the 3.1 per cent per annum we saw over the past 40 years – but still a level of growth that would see Australia’s prosperity rise significantly,” Hockey said.
“To achieve this growth, the Report highlights that we need to take the steps now to be more productive and encourage greater workforce participation.
“The Report shows that if we made no changes to policies left in place by the former government the deficit was on a path to reach $533 billion in today’s dollars, and net debt would have been almost $5.6 trillion by 2055.”
The report predicted that by 2055 the Australian population will have grown to 39.7 million. Some 40,000 people will be over the age of 100 and two million people will be over the age of 85, while 17.5 per cent of over-65s will still be working and aged care spending as a proportion of GDP will grow from 0.9 per cent to 1.7 per cent.
Members of the social sector, such as the Australian Council for Social Services (ACOSS), said the IGR released highlighted the choices Australia faces to fund the services it wants in the future.
"It's time to lay to rest the rejected elements of the 2014 Budget strategy that reduced income support for the poorest and shifted the costs of essential services to those who need them,” ACOSS CEO Dr Cassandra Goldie said.
“It is unrealistic for the Government to factor these measures into the IGR. To index social security payments to the CPI only leaves a quarter of the population falling behind everyone else. To index health funding to the CPI is also unrealistic and unsustainable.”
Goldie said Australia needs an honest and well informed discussion about the benefits and services people want and how to pay for them.
"Australia has a choice in dealing with the impact of population ageing: Do we restore the Budget by shrinking pensions and essential services or ask those who can, to retire later, and pay their fair share through taxation?” Goldie said.
"The compact between Governments and taxpayers, and between the generations, is breaking down. Less than one in four people of pension age pays any income tax. The superannuation system and other special tax breaks have made paying tax optional for many wealthy older people.
"The IGR, like the Budget, ignores the revenue side of the Budget. Where is the modelling of the future cost of tax breaks for superannuation, which now cost as much as the age pension ($40 Billion a year)?”
Lin Hatfield Dodds, National Director of UnitingCare Australia, said that the IGR asked important questions of how Australia would pay for its future.
“A strong safety net should not be seen as a barrier to a good future, but as a central plank for a good society now and in the years ahead,” Hatfield Dodds said.
“With government currently spending more than it collects in revenue it is clear that some changes are needed. We should be giving less government assistance to people who don’t need it and more assistance to those who do.”
“We must remember that society in the years ahead will not be shaped solely by forces we have no control over, but largely by the things we value and the decisions we prioritise today. The IGR is an opportunity for us to look at the context we are in and the challenges we face, and then to decide what sort of future we want to gift to our children and grandchildren.”