INTHEBLACK April 2022 - Magazine - Page 37
THE LATEST INTERGENERATIONAL REPORT FROM THE AUSTRALIAN
GOVERNMENT PAINTS A PICTURE OF AN ECONOMY BATTERED BY THE
PANDEMIC AND STRUGGLING WITH AN AGEING POPULATION, BUT
ECONOMISTS ARGUE THERE IS STILL MUCH WE CAN DO TO BOOST
PRODUCTIVITY OVER THE COMING DECADES.
GROWING
PAINS
STORY JOHANNA LEGGATT
T
here were very few surprises in the Australian
Government’s latest Intergenerational Report
(IGR), but nevertheless, the overall tenor was
sobering – a budget in the red until mid-2050, the
increased costs of an ageing population and the
general uncertainty posed by the post-pandemic
world.
As the report notes, referring to the pandemic,
“While Australia’s economic recovery is well
advanced, some effects from this shock will
persist for years to come”.
The most recent IGR, which was delayed by a
year owing to COVID-19, outlines expectations
of economic growth in the next 40 years across key
economic drivers of growth – including the “three Ps”
of population, participation and productivity.
The report finds that, while Australia’s population
has been increasing, it is at a slower rate, and
workplace participation, while currently high, is
expected to decline. Productivity, meanwhile, is
already slowing in line with global trends, with the
report noting that “Australian firms appear to be
slower to adopt world-leading technologies”.
How concerned should we be about this slower pace
of growth? What, if anything, can be done about it?
FEWER PEOPLE TO TAX
Australia’s population has grown at an annual average
rate of 1.4 per cent over the past 40 years, but for the
first time in an Intergenerational Report, Australia’s
population projection has been revised down to
0.8 per cent growth per year by 2060-2061.
Sarah Hunter, chief Australia economist at BIS
Oxford Economics, views this declining rate of
population growth as “almost inevitable”.
“It’s partly a product of social changes, with
women having fewer children, and an ageing
population,” she says.
“It does mean slower growth for the economy,
notwithstanding what might happen to productivity.”
Funding the healthcare needs of an ageing
population has long been a concern for government,
and Hunter sees this concern intensifying as the tax
base continues to shrink.
“There are questions we have to answer as a society,
and I use the term ‘society’ quite deliberately, because
some of these health costs will be co-funded by people
through their superannuation and private health
insurance,” Hunter says.
“The question that will only get bigger is, how much
burden should be placed on the individual?”
intheblack.cpaaustralia.com.au April 2022 37