INTHEBLACK November 2021 - Magazine - Page 8
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// C PA A U S T R A L I A P O L I C Y
AT A G L A N C E
NOVEMBER
UPDATE
Richard Webb,
CPA Australia’s policy
adviser, financial
planning and
superannuation
Every five years, the
Australian Treasury
releases its
Intergenerational Report,
which is based on current
economic and social
indicators.
The latest report makes
projections of slower GDP
and population growth,
as well as a maturing
superannuation system
that could drive higher
retirement savings over
the next 40 years.
While the report
highlights challenges,
it also notes the
resilience displayed
by the economy
during the pandemic.
HOW THE 2021
INTERGENERATIONAL
REPORT WILL SHAPE
POLICY FOR OUR FUTURE
THE AUSTRALIAN GOVERNMENT HAS RELEASED THE LATEST
INTERGENERATIONAL REPORT, GIVING US A SNAPSHOT OF WHAT
AUSTRALIA COULD LOOK LIKE IN THE NEXT 40 YEARS.
T
he 2021 Intergenerational Report is a detailed,
five-yearly snapshot of Australia that also
forecasts where the current trends are going
to take us based on economic and sociological
indicators, such as taxation revenue, unemployment,
inflation and fertility rates. The most recent report
presents a generally upbeat view of Australia’s future,
but there are challenges as well.
HOW WILL THE TAX SYSTEM SUPPORT US?
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8 ITB November 2021
According to the report, the economy is expected to
grow at a slower rate over the next 40 years than it has
in the past. Real GDP per person is expected to grow at
an average annual rate of 1.5 per cent, down from the
past 40-year average rate of 1.6 per cent. Population
growth is also slowing down, with Australia expected
to reach a population of 38.8 million in 2060-2061. This
is likely to be due to a reduced migration intake, as well
as a declining fertility rate.
These factors, as well as a general increase in life
expectancy, mean that Australians aged 65 or over will
likely make up 23 per cent of the population by 20602061. One key metric, which reflects the ratio of working
age Australians to those aged 65 or over, will fall
substantially from 4.0 to 2.7 by 2061. This fall in the number
of working Australians – the bulk of Australia’s taxpayers –
highlights a potential problem, namely will Australia’s
retirees be adequately supported by the taxpayers?
According to the report, the national budget will
remain in deficit well into the future, meaning that
government debt is likely to provide part of the answer.
However, with interest rates trending downwards for the
foreseeable future, this may be less of a problem than it
was in the past.
HOW WILL WE SUPPORT OURSELVES?
Despite housing affordability being considered part
of the third pillar of retirement savings, there is little
commentary on it in the report. This does not assist
with understanding how much accumulated
superannuation will be used to retire household debt.
However, the report does make a number of other
interesting points regarding retirement.
By 2060-2061, it is expected that Australians will
retire with a median superannuation balance of
A$460,000, as compared to A$125,000 today. This
higher balance is likely due to the maturing
superannuation system, which will see the
superannuation guarantee increased to 12 per cent
from 1 July 2025, meaning that Australians retiring
in 2060-2061 will have had 35 years of the higher
mandatory contribution rate.
This may mean a more comfortable life for retired
Australians. However, the lower dependency rate should
immediately worry Australians planning on retiring in
2060-2061, unless more is done to ensure they have