Speech - The Population Challenge And Australia's Future




"The Population Challenge And Australia's Future"




Thanks Fred [Hilmer] for that introduction. It is a real privilege to be invited to formally launch the Australian Institute for Population Ageing Research.

Let me kick off with three facts that some of you may be aware of, but which wouldn't yet be appreciated by the broader community. Over the next 40 years it is projected that the number of young people and the number of people of traditional working age will both increase by about 45 per cent. But here's the thing: over the same 40 year period, the number of older people aged 65‑84 years will more than double and the number of very old people aged 85 and over will increase by more than 4½ times.

These are some of the facts that illustrate just how big a challenge population is, when it comes to the Australian economy. It is arguably one of two of our greatest economic challenges - along with climate change. And it is a particularly daunting challenge when it comes to Government finances, which is why I'm so focused on it and why the Commonwealth Treasury has always taken the lead on intergenerational issues.

As you know, population ageing will lead to slower economic growth, in the form of declining growth in real GDP per person. And it will lead to increasing levels of Australian Government spending per person. Together, these factors will contribute to significant ongoing fiscal pressures.

But this is only one example of the challenges posed by an ageing population. We will need to understand the many facets of this challenge, if we are to respond appropriately.

But one thing I want to emphasise today is that we also need to look for the opportunities that are provided by an ageing population. Policy makers face a number of difficult questions. For example: How do we harness the life experiences and intellectual capital of older Australians? How do we facilitate their contribution to the community - in the workplace, as volunteers and as carers? And how do we encourage Australians to recognise the benefits of an older population?

As Australians live longer and healthier lives, we are going to see significant change in the Australian community. Issues such as cultural diversity, disability, health and well-being will all come to the fore. We need a holistic and comprehensive examination of all these issues. And that is where this Institute comes in.

There's never been a more pressing need to bring together academia, government and industry to consider the impacts of population ageing. A single research entity spanning the economic, cultural, environmental and social implications of ageing. Unifying an outstanding field of investigators, all leaders in their field.

Let's acknowledge the efforts of those who have made this possible:

  • Professor Fred Hilmer, President and Vice Chancellor of UNSW;
  • Professor John Piggott - the Director of the Institute, who has played such an active role in policy and research in this area;
  • Marc de Cure - Chair of the Institute; and
  • The Founding Sponsors - PricewaterhouseCoopers and the Australian Prudential Regulation Authority.


We also see the first fruits of their labour today with the release of the inaugural Longevity Index.

The Longevity Index allows us to track the changing affordability of retirement. As we live for longer, as interest rates vary, as inflation changes then the cost of retirement changes. It shows the changing costs facing people who are seeking to fund their retirement - many of you will appreciate how important this is. The Index will be published quarterly.

At the moment it covers the recent period of turbulence on financial markets, and it will be developed to cover the period of long-term improvement in mortality for the last 50 years. It will also be decomposed to capture the influence of socioeconomic factors and geographical location.

These are the types of things we need to know and consider, as policy makers like me try to understand the costs that the ageing population is confronted with when considering a retirement decision. This is where this policy research really matters - where it is informing and improving policy decisions and business practices. And that's why it's so important to have input from the business community and senior policy-makers in the workings of the Institute.


So I'm very pleased to announce that the Leadership Forum selected by the Institute will ensure a continued dialogue between research, policy and practice. It will provide a powerful vehicle for driving rigorous and relevant research, applying that research for social and commercial benefit, and community engagement and awareness.

The Institute has asked prominent industry leaders and representatives from key government agencies to join the Forum. People like:

  • Dr Jennifer Alexander, CEO, Royal Australasian College of Physicians
  • Cameron Clyne, Group CEO, National Australia Bank
  • Professor Peter Shergold, Director, Centre for Social Impact
  • Dr Ken Henry, Secretary to the Treasury
  • Mark Johnson, CEO, PricewaterhouseCoopers
  • Craig Dunn, CEO, AMP
  • Professor Les Field, Deputy Vice-Chancellor Research, UNSW
  • George Savvides, CEO, Medibank Private
  • Glenn Stevens, Governor, Reserve Bank of Australia
  • Jeff Harmer, Secretary, FAHCSIA
  • Heather Ridout, CEO, Australian Industry Group
  • Matthew Quinn, Managing Director, Stockland


To start things in the right direction, let me share some insights from the Government's thinking in this area.

We will soon release our revised projections of demographic change when we release the next Intergenerational Report - the third one. We have committed to releasing this report before the 2010-11 Budget, but my expectation is that it will be released sooner than that. Certainly, officials in Treasury are beavering away on this report right now, as we speak.

The IGR will highlight that the economic and fiscal pressures of an ageing population persist. That is no surprise. What's of more interest to us is the fact the population ageing story in Australia is changing. This work is really fascinating - it is like getting a glimpse of the future community that our children will enjoy. A future that has changed significantly since the first IGR, and which will continue to change in light of the policy decisions we will make in coming years.

Our projections suggest that Australia's population could be larger and younger than presented in previous IGR projections. In addition to those stats I mentioned off earlier, I can also tell you today that Australia's population is projected to grow by 65 per cent to reach over 35 million people in 2049, up from around 21½ million people now. This projection of 35 million people is significantly higher than the IGR2 projection of 28.5 million in 2047 and is largely driven by a greater number of women of childbearing age, higher fertility rates, and increased net overseas migration.

The total fertility rate of Australian women has increased to over 1.9 births per woman in recent years. This is a level of fertility not seen in Australia since the early 1980s, although it is still a long way off the peak of 3.5 births per woman at the end of the post World War II baby boom.

Net overseas migration is also an important contributor to population growth in Australia. Migrants to Australia tend to be younger on average than the resident population, and in combination with a higher net migrant intake, contribute to the projected larger and younger Australian population.

The larger projected population poses a whole raft of policy challenges and opportunities quite apart from the age structure. Careful environmental and infrastructure planning will be required to support this population. But when we get it right, population growth can be an important contributor to the overall economic wellbeing of Australians.

As I mentioned at the beginning of my speech, the age structure of the population will change dramatically. The proportion of people aged 65 and over is projected to rise to 22 per cent in 2049, compared with around 13 per cent today, and 8 per cent in 1969. That figure is slightly less than what was projected in IGR2, but this is still a huge change from the current proportion of older people in Australia's population. The proportion of the population aged 85 and over is projected to increase most rapidly, rising from 1.7 per cent of the population in 2009 to 5.0 per cent in 2049.

The next IGR will, like previous IGRs, point to the spending pressures in the areas of health, pensions and aged care that arise with an ageing population. Equally the Government needs to facilitate the significant contribution that older people can make to the economy and the community - the dividends of an ageing population, if you like. Our future Australia needs to draw on the full benefit of this ageing army of carers, volunteers and ongoing participants in the workforce. And this requires policy that's cognisant of the needs and value of older people.


Dealing with an ageing population also means getting your fiscal settings right. When you look at the long-run prosperity of the economy, as we will be doing in the IGR, the starting point is crucial. This is one of the many reasons why it has been so important for the Government to act to mitigate the impacts of the global recession. By acting the way we did, we helped to insulate the Australian economy from some of the long-term impacts that would result from a sustained downturn.

Just as importantly, we have committed to a fiscal strategy that means putting the Budget on a more sustainable footing. Some of the hard choices we have made are inevitably about addressing the short-term challenges that the economy faces. But we have made those choices with a view to long-term economic and fiscal responsibility.

For example, the Government delivered on its commitment in the Budget to increase the Age Pension. But in order to make the pension system sustainable in the long-run, we also made the hard decision to raise the qualifying age for the Age Pension. There is a lesson in that decision and the lesson is this: when we make policy we need to have the courage to adapt to changing demographic trends. It simply was not feasible to continue with a pension age drawn up a century ago.

Partly because of decisions like these, the Government's medium-term fiscal strategy is projected to result in a return to surplus in 2015-16. We have committed to achieve that objective largely by implementing spending restraint. Spending discipline does not mean that the Government will be giving up on its active reform agenda. It will mean that new policies will have to be funded by reprioritising within existing resources rather than expanding the total quantum of government spending - doing more with less.

I understand that not everyone will agree with every decision we make, especially when these decisions, by their very nature, involve difficult judgments on competing priorities. But what I do want is for people to be engaged in the process and aware of why we are making these decisions.

That is why we have endeavoured to look beyond the immediate impact of our policies by publishing medium-term projections, including in the 2009-10 Budget. These medium-projections provide a regular update to the Australian community about how we are building a sound foundation to face the fiscal challenges of the future.


With a plan in place to get the Budget back to surplus, the second big challenge is to grow the economy through improved labour productivity and participation. Let me make one thing clear - this Government is 100 per cent committed to maintaining its focus on delivering our ambitious reform agenda. A reform agenda that will sustain prosperity beyond the downturn. Let me quickly outline a couple of the major initiatives.

We are working with the States and Territories through the Council of Australian Governments to reshape the way key services are funded and delivered, and to boost productivity and workforce participation.

Tax and welfare reform is also a priority for this government as we explore ways to make Australia's tax system fairer and more sustainable, including removing the barriers to participation. The Henry tax review is expected to be completed later this year and, along with the IGR, will help inform our decision-making moving forward.

Finally, the Government is committed to supporting jobs and promoting future prosperity through investment in nation building infrastructure - this is absolutely critical to our push for productivity. That's why we're investing $22 billion to improve Australia's transport, energy, communications, education and health infrastructure in order to expand the Australian economy's productive capacity.

These initiatives have a double benefit: delivering stimulus in the short-term and increasing productivity in the long-term.


In laying down the foundations for our recovery from the global recession, we haven't ever lost sight of the long-term challenges on the horizon. It is a fact that the Australian population will continue to age.

As this ageing occurs, we will face new and different challenges, not just in terms of financing government services, but also how we deliver those services to people. These challenges will be matched by new opportunities. An older cohort that has made a significant contribution to our nation already, and which will want to keep contributing.

I said before - we want a holistic and comprehensive examination of the many dimensions of this issue. That is why the Australian Institute for Population Ageing Research is so important.

I am honoured to officially launch the Institute and I look forward to a productive working relationship with you on an issue that is permanently on the Government's mind: the future of our population.

Thank you.