Executive summary
The Committee's terms of reference are to inquire into 'long term strategies to address the ageing of the Australian population over the next 40 years.'
Demographic change over the next 40 years will involve substantial growth in both the proportion of the population over age 65, and associated government spending. This will be accompanied by a sharp reduction in the growth of the working-age population-previously a strong driver of Australian prosperity. Demographic change also carries risks and opportunities for family formation, fertility, care and social participation.
In broad terms, the effects of demographic change can be addressed by:
- promoting higher labour market participation and reducing premature retirement to counteract the reduction in the growth of the population of working-age and to safeguard retirement incomes
- preserving Australia's internationally moderate rate of population ageing by assisting families to realise their goals for employment and fertility
- supporting social participation, particularly amongst the elderly
- preventing long-term deterioration of the Commonwealth budget due to slower economic growth and increased age-related spending.
The Commonwealth Department of Family and Community Services (FaCS) is responsible for policies that can substantially address these goals. For FaCS, the approach to the economic, budgetary and social impacts of structural ageing can be divided into four action areas:
- Increasing participation: Despite more than a decade of robust economic growth, welfare dependence is increasing among working-age people. Without further preventative policy action, the number of older working-age people on income support is likely to grow in the coming decade. Welfare reform offers scope to forestall that growth and improve the current relatively low rates of labour market participation among mature age people, women (particularly lone parents), people with disabilities, and jobless families. Together with limiting economic growth, these low rates of participation can have deleterious effects on an individual's wellbeing and their retirement incomes and, in the case of jobless families, can increase the risks of intergenerational income support dependence. The Indigenous Australian population-being very youthful-includes a large cohort now moving into working-age, presenting a further challenge for economic participation.
- Consolidating retirement incomes: While Australia has a comprehensive retirement incomes system, based on superannuation, private savings and means tested income support payments, demographic change is expected to lead to increases in Age Pension expenditure from the current 2.9 per cent of Gross Domestic Product to 4.6 per cent by 2042. Increasing labour force participation, and preventing premature retirement, would further improve living standards in older age, particularly for women and older working-age people.
- Supporting family formation and resilience: International evidence suggests that higher labour force participation need not be incompatible with high fertility, providing the right mix of policies are in place to support parents' work and family choices. Supporting family resilience through capacity- building investments in early childhood development and youth can be the basis for greater independence in adulthood and a more productive future workforce. Promoting family stability will continue to be important as relationship breakdown can increase the incidence of income support reliance, children growing up in jobless families, and reduce retirement savings. Population ageing will also change patterns of care. Delays in family formation may lead to simultaneous care for children and older people becoming more common. The increasing prevalence of disability with age, and growth of older age cohorts, could increase the demand for care for people with disabilities and their carers.
- Responding to ageing communities: Some states and territories will have higher concentrations of older communities, suggesting greater local tailoring of policies and service delivery. Although most older Australians will continue to have busy, active lives, there is a risk that demographic change will increase the number of older Australians experiencing social isolation. A larger number of older Australians will be considering their housing options as they age. Lower transaction costs and planning flexibility could facilitate better housing transitions for older people. There is evidence that the trend toward lower rates of home ownership among younger Australians will not persist when they grow older.