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Addressing Fiscal Pressures in the Context of an Aging Population

In this comprehensive analysis, Richard Murray, Executive Director at the Commonwealth Treasury, explores the fiscal challenges posed by an aging population. He highlights the significant increase in budget costs as a percentage of GDP driven by health care, aged care, and payments to individuals. The presentation also examines the implications for future generations, such as rising debt levels and the necessity for policy adjustments. Furthermore, it addresses labor market dynamics, the need for skill development, and the retirement decision-making process, stressing the importance of sustainable fiscal strategies.

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Addressing Fiscal Pressures in the Context of an Aging Population

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Presentation Transcript

  1. Ageing Research- some questions Richard Murray, Executive Director, Fiscal and Corporate, Commonwealth Treasury

  2. Fiscal Pressure on Budget Balance Per cent of GDP Per cent of GDP 2 2 0 0 -2 -2 -4 -4 -6 -6 2002-03 2005-06 2008-09 2011-12 2014-15 2017-18 2020-21 2023-24 2026-27 2029-30 2032-33 2035-36 2038-39 2041-42

  3. Major components of budget cost Drivers Impacts in 40 years Health +4¼% GDP Demography Aged care +1 GDP Payments to individuals + ½% GDP Average cost of programmes Education etc -½% GDP Total +5¼% GDP Fiscal adjustment

  4. Budget balance falls and debt increases 1 Pass the problem to future generations Tax:GDP ratio increases 2 Lower cost budget programmes Policy response 3 Faster GDP growth Policy choices

  5. Population Employment (hours) GDP Participation Multifactor productivity Components of GDP growth Total population Share of population 15+ Participation rate Unemployment rate Average hours worked Capital deepening Productivity

  6. Skills

  7. Skills

  8. Skills

  9. Skills

  10. Skills & education • School retention rates? • Foundation skills and lifelong learning? • Remedial action for increasing skill levels of adults of working age? • Female labour supply and demand for part time work? • Future for unskilled males/females in a changing economy?

  11. Health • What type of policy interventions generate the greatest improvement in health outcomes? • What is the nature of the link between good health and specific aspects of social and economic participation, such as labour force participation? • How can we maximise the benefits delivered by the subsidised PBS?

  12. Retirement Decision • What is the impact of dependent children? • Will less physically demanding work lead to longer working lives? • What influence does the level of home ownership have on the retirement decision? • Workplace flexibility and the retirement decision? • Relationship between current income, expected income in retirement and age of retirement?

  13. End

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