Australia's Ageing Population
The Implications of an Ageing Population in Australia
I am specifically looking at the problems surrounding an ageing population, the effects on supply and demand, issues with the government and impacts on the economy.
Introduction
Australia’s population is steadily ageing and implications that the country faces as a result of this, is something that economists and governments alike fear. Leading factors such as significant increases in demand for health care, medical services, financial aid from the government and a decrease in the supply that will be available to cater these needs and financial pressures on the government are just some of the many, threatening to jeopardise the economy in the next forty years. The ageing population …show more content…
is not only effecting the economy but there are also opinions from a social perspective. In my opinion, one of the main implications and focus’s regarding an ageing population is on health care and other medical related services.
Body of Report
Relevance of the implications of an ageing population to Economics, the effects on supply and demand and the financial pressures this problem will create.
The issue of an ageing population in Australia is intertwined with the issue of a sustainable economy in Australia. It is a situation of Macroeconomics, impacting the economy as a whole. The Australian Local Government Association, in their article: Economic implications of an ageing population, pg 2(2004) confirm that the number of people aged over 65 years old will increase from the current 2.5 million to around 7.2 million by 2051. Such an increase in the aged will decrease the number of working citizens, decrease the number of tax payers and decrease supply in a variety of areas in Australia thus decreasing the economy as a whole. As stated in Principles of Economics, pg 64, demand is the quantity of a good that consumers are willing and able to purchase. Since the population of people around retirement ages (65) is increasing, consequently as result of their low income they are not able to purchase as many goods, thus demand for many consumer goods will fall dramatically whilst demand for things such as medical related services will rise dramatically. This also leads to an increasing financial pressure on the government to provide cheaper services to the aged and to help aid them in areas such as health care. David Parker, the executive Director, Macroeconomic group, stated in his address to CEDA pg 4(2007),’ the pattern of supply and demand in the economy is going to be significantly effected.’ He explores the reasoning behind this is due to the different demands of the aged and the supply that is required to meet their demands especially in the health care department. Medical services and health care are two examples of the areas that will have a significant shift in demand with the population ageing. These examples are all items that are more inelastic, being more necessities and needs than wants. This proposes a problem for the government as the aged do not have much money of their own, thus again adding to the financial pressure that an ageing population is creating. With this will also come a need for an increase in supply of these services, but with the population ageing will there be an ability to supply enough for the amount that is demanded? In my opinion unless measures are put into place at an early stage, Australia and other countries around the world are going to find themselves in economic turmoil in years to come when the supply for the needs of the elderly cannot keep up with the demand.
Impacts on the government and what governments are doing and are planning to do to control the situation
Governments intervene and place policies to help shape the economy in a positive way. Lesson 7, in economics actually states that government intervention can sometimes improve market outcomes. As seen in Principles of Economics, pages 28-29, policy is normally based on normative economics, as it is formulated on how the world or rather the economy should be. As discussed by Alan S Blinder, in his article: Keynesian Economics, it is sometimes imperative for governments to step in and intervene to regulate markets and ensure the economy stays strong- a theory represented by John Maynard Keynes. This may be in the form of governments spending or in the form of policy development.
Kevin Rudd, in his speech to Australia Day reception (found on PM online) states the biggest impact financially on the government: ‘It will simply cost more to look after the needs of older Australians in health, aged care and age pensions, at the same time, a smaller proportion of Australians will be working, so tax revenues won't keep pace with those rising costs.’
The government does not have their own money; they rely on tax revenue in order to provide society with basic needs of health, medical services and research, and other welfare items.
With a decrease in the amount of people able to contribute to this tax revenue, the government must start thinking about the years to come, now. If government revenue decreases significantly due to ratio of workers to non workers also decreasing, this leads to an economic catastrophe as the aged are one age group that provide the biggest cost to the government in terms of health care and medical services. In my opinion one of the scariest realities is going to be the huge demand and need for health care and medical services, at the same time this is going to be and already is one of the biggest costs for the government. This is also illustrated by article, ‘ Rudd warns of massive hikes in health costs’, stating that NSW treasury figures show health costs for the aged will rise to seven times higher than they currently are, in 40-50 years time. The article further states that Kevin Rudd is worrying about health costs as well, ‘with fewer people in the workforce to generate tax revenue, governments around the nation are facing rapidly rising health costs.’
As stated on the Australian Local Government Association website, local governments are trying to enforce new measures to ensure the sustainability of our economy. The Australian Local Government Population ageing plan 2004-2008 has been developed, …show more content…
as an alliance between local governments and the national government to help decide on approaches that need to be taken and working on things such as building awareness, improving information available about the economy and the aged and encouraging action from all governments, helping to address the problem head on.
The impacts that an ageing society has on the Labour Force
An increasingly worrying effect of an ageing population is the ratio of workers to non workers. The issue surrounding this ratio is apparent to all: If ratio of workers to non workers decreases significantly, consequently this means a significant shift in economic growth- a downfall. With this comes the issue of Participation, Population and productivity. According to the Productivity Commission Research Report pages 21-22, in approximately 50 years participation rates in relation to ageing will drop severely thus having a detrimental effect on growth prospects for Australia’s economy. Further seen in the graph (sourced from the Productivity Commission Research Report pg 21) below is the extent of how much an ageing population effects the participation in the labour force. This is caused by the population moving slowly towards becoming more populated with elderly people, who consequently fall under the category of a group that has significantly low participation rates. Not only will it affect the demand of labour force but the supply of the labour force aswell (as stated in the productivity Commission Research Report pg 23-25). The productivity commissions research report states that the number for workers will increase by one million in the next seven years. This is the same amount that growth in labour supply is expected to grow in the next 21 years. Evidently this shows that the number of workers is growing at a much faster rate than the labour supply. This is detrimental to the economy, as there is not enough supply in labour to meet demand.
Social perspective
A video documentation titled , ‘Australian population to hit 35 Million in year 2049’, where a Wayne Swan, the Treasure of Australian stated ‘(the ageing population)is not just an economic issue but comes down to the very core of social life and what social policies are used to backup the economic approach we are putting in place.’ In my opinion this is true, an ageing population is not only going to cause economic problems but social problems as well. As there will be an increase in the amount of elderly people, it will put pressures on families and children to help support their parents and relatives of an older age. This may cause resentment and hostility in society between the different age groups and between families. Things such as Australia’s infrastructure and other facilities are also not ready for an ageing population.
Conclusion
Population ageing comes with many implications and drawbacks. Outlined in this essay are just some of the ways in which the economy and society as a whole will be effected in Australia in the upcoming years. Issues such as problems in supply and demand, government financial issues and impacts on the labour force are those that need to be dealt with, with adequate knowledge and preparation. Society can only hope that this issue is going to be dealt with using the proper precautions by governments, to help secure our future as an ageing population.
REFRENCE LIST
Government Reports
Productivity Commission Research Report. 2005. ‘Economic Implications of an ageing Australia’. Research team from the Commission’s Canberraoffice headed by Ralph Lattimore. Productivity commission. Canberra. Accessed 9th May 2010. http://www.pc.gov.au/__data/assets/pdf_file/0020/69401/ageing.pdf Prime Minister, Kevin Rudd. Speech to Australia Day reception. ‘Building Australia's future: A sustainable budget for an ageing population.’ 2010. Hobart. Accessed the 28th April 2010http://www.pm.gov.au/node/6419
The Intergenerational Report. 2010. ‘ Australia to 2050: future challenges’, Circulated by Hon. Wayne Swan MP, Treasurer of the Commonwealth of Australia. Accessed the 27th April 2010. http://www.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf Address to CEDA state of the Nation Conference, 14th June 2007, David Parker- Executive Director, Macroeconomic group, the treasury, The Economic Impact of Australia’s Ageing Population, Accessed 22nd April 1010. http://www.treasury.gov.au/documents/1273/PDF/IGR_CEDA_Presentation.pdf Australian Local Government Association Report, 2004.
Economic implications of an ageing Australia, No Author found. Accessed the 21st April 2010 http://www.alga.asn.au/submissions/2004/20040924Ageing.php Books
Mullan.P, 2001.The imaginary Time Bomb: Why ageing population is not a social problem, I.B.Tauris, 2001, U.S.
Gans, King, Stonecash, Mankin,2009. ‘Principles of Economics’, 4th Edition, Hardcourt Australia Pty Limited, Australia.
World Wide Web Document
Blinder.A.S, 2002.‘Keynesian Economics.’ Viewed 28th April 2010. http://www.econlib.org/library/Enc1/KeynesianEconomics.html Media
Australian population to hit 35 Million in year 2049, Youtube, viewed 9th May 2010http://www.youtube.com/watch?v=johZ5EdbqC8
Online Newspaper Articles
Promnitz.P, 2010. The next GFC: our ageing population, viewed 28th April 2010, http://www.smh.com.au/opinion/politics/the-next-gfc-our-ageing-population-20100119-miot.html
Harrison. D, 2010. PM warns ageing population time bomb, viewed 28th April 2010, http://www.smh.com.au/national/pm-warns-of-ageing-population-time-bomb-20100118-mgst.html
No Author found, 2010. ‘Rudd warns of massive hikes in health costs’, Viewed 29th April 2010
http://www.abc.net.au/news/stories/2010/01/24/2799944.htm
I am specifically looking at the problems surrounding an ageing population, the effects on supply and demand, issues with the government and impacts on the economy.
Introduction
Australia’s population is steadily ageing and implications that the country faces as a result of this, is something that economists and governments alike fear. Leading factors such as significant increases in demand for health care, medical services, financial aid from the government and a decrease in the supply that will be available to cater these needs and financial pressures on the government are just some of the many, threatening to jeopardise the economy in the next forty years. The ageing population …show more content…
is not only effecting the economy but there are also opinions from a social perspective. In my opinion, one of the main implications and focus’s regarding an ageing population is on health care and other medical related services.
Body of Report
Relevance of the implications of an ageing population to Economics, the effects on supply and demand and the financial pressures this problem will create.
The issue of an ageing population in Australia is intertwined with the issue of a sustainable economy in Australia. It is a situation of Macroeconomics, impacting the economy as a whole. The Australian Local Government Association, in their article: Economic implications of an ageing population, pg 2(2004) confirm that the number of people aged over 65 years old will increase from the current 2.5 million to around 7.2 million by 2051. Such an increase in the aged will decrease the number of working citizens, decrease the number of tax payers and decrease supply in a variety of areas in Australia thus decreasing the economy as a whole. As stated in Principles of Economics, pg 64, demand is the quantity of a good that consumers are willing and able to purchase. Since the population of people around retirement ages (65) is increasing, consequently as result of their low income they are not able to purchase as many goods, thus demand for many consumer goods will fall dramatically whilst demand for things such as medical related services will rise dramatically. This also leads to an increasing financial pressure on the government to provide cheaper services to the aged and to help aid them in areas such as health care. David Parker, the executive Director, Macroeconomic group, stated in his address to CEDA pg 4(2007),’ the pattern of supply and demand in the economy is going to be significantly effected.’ He explores the reasoning behind this is due to the different demands of the aged and the supply that is required to meet their demands especially in the health care department. Medical services and health care are two examples of the areas that will have a significant shift in demand with the population ageing. These examples are all items that are more inelastic, being more necessities and needs than wants. This proposes a problem for the government as the aged do not have much money of their own, thus again adding to the financial pressure that an ageing population is creating. With this will also come a need for an increase in supply of these services, but with the population ageing will there be an ability to supply enough for the amount that is demanded? In my opinion unless measures are put into place at an early stage, Australia and other countries around the world are going to find themselves in economic turmoil in years to come when the supply for the needs of the elderly cannot keep up with the demand.
Impacts on the government and what governments are doing and are planning to do to control the situation
Governments intervene and place policies to help shape the economy in a positive way. Lesson 7, in economics actually states that government intervention can sometimes improve market outcomes. As seen in Principles of Economics, pages 28-29, policy is normally based on normative economics, as it is formulated on how the world or rather the economy should be. As discussed by Alan S Blinder, in his article: Keynesian Economics, it is sometimes imperative for governments to step in and intervene to regulate markets and ensure the economy stays strong- a theory represented by John Maynard Keynes. This may be in the form of governments spending or in the form of policy development.
Kevin Rudd, in his speech to Australia Day reception (found on PM online) states the biggest impact financially on the government: ‘It will simply cost more to look after the needs of older Australians in health, aged care and age pensions, at the same time, a smaller proportion of Australians will be working, so tax revenues won't keep pace with those rising costs.’
The government does not have their own money; they rely on tax revenue in order to provide society with basic needs of health, medical services and research, and other welfare items.
With a decrease in the amount of people able to contribute to this tax revenue, the government must start thinking about the years to come, now. If government revenue decreases significantly due to ratio of workers to non workers also decreasing, this leads to an economic catastrophe as the aged are one age group that provide the biggest cost to the government in terms of health care and medical services. In my opinion one of the scariest realities is going to be the huge demand and need for health care and medical services, at the same time this is going to be and already is one of the biggest costs for the government. This is also illustrated by article, ‘ Rudd warns of massive hikes in health costs’, stating that NSW treasury figures show health costs for the aged will rise to seven times higher than they currently are, in 40-50 years time. The article further states that Kevin Rudd is worrying about health costs as well, ‘with fewer people in the workforce to generate tax revenue, governments around the nation are facing rapidly rising health costs.’
As stated on the Australian Local Government Association website, local governments are trying to enforce new measures to ensure the sustainability of our economy. The Australian Local Government Population ageing plan 2004-2008 has been developed, …show more content…
as an alliance between local governments and the national government to help decide on approaches that need to be taken and working on things such as building awareness, improving information available about the economy and the aged and encouraging action from all governments, helping to address the problem head on.
The impacts that an ageing society has on the Labour Force
An increasingly worrying effect of an ageing population is the ratio of workers to non workers. The issue surrounding this ratio is apparent to all: If ratio of workers to non workers decreases significantly, consequently this means a significant shift in economic growth- a downfall. With this comes the issue of Participation, Population and productivity. According to the Productivity Commission Research Report pages 21-22, in approximately 50 years participation rates in relation to ageing will drop severely thus having a detrimental effect on growth prospects for Australia’s economy. Further seen in the graph (sourced from the Productivity Commission Research Report pg 21) below is the extent of how much an ageing population effects the participation in the labour force. This is caused by the population moving slowly towards becoming more populated with elderly people, who consequently fall under the category of a group that has significantly low participation rates. Not only will it affect the demand of labour force but the supply of the labour force aswell (as stated in the productivity Commission Research Report pg 23-25). The productivity commissions research report states that the number for workers will increase by one million in the next seven years. This is the same amount that growth in labour supply is expected to grow in the next 21 years. Evidently this shows that the number of workers is growing at a much faster rate than the labour supply. This is detrimental to the economy, as there is not enough supply in labour to meet demand.
Social perspective
A video documentation titled , ‘Australian population to hit 35 Million in year 2049’, where a Wayne Swan, the Treasure of Australian stated ‘(the ageing population)is not just an economic issue but comes down to the very core of social life and what social policies are used to backup the economic approach we are putting in place.’ In my opinion this is true, an ageing population is not only going to cause economic problems but social problems as well. As there will be an increase in the amount of elderly people, it will put pressures on families and children to help support their parents and relatives of an older age. This may cause resentment and hostility in society between the different age groups and between families. Things such as Australia’s infrastructure and other facilities are also not ready for an ageing population.
Conclusion
Population ageing comes with many implications and drawbacks. Outlined in this essay are just some of the ways in which the economy and society as a whole will be effected in Australia in the upcoming years. Issues such as problems in supply and demand, government financial issues and impacts on the labour force are those that need to be dealt with, with adequate knowledge and preparation. Society can only hope that this issue is going to be dealt with using the proper precautions by governments, to help secure our future as an ageing population.
REFRENCE LIST
Government Reports
Productivity Commission Research Report. 2005. ‘Economic Implications of an ageing Australia’. Research team from the Commission’s Canberraoffice headed by Ralph Lattimore. Productivity commission. Canberra. Accessed 9th May 2010. http://www.pc.gov.au/__data/assets/pdf_file/0020/69401/ageing.pdf Prime Minister, Kevin Rudd. Speech to Australia Day reception. ‘Building Australia's future: A sustainable budget for an ageing population.’ 2010. Hobart. Accessed the 28th April 2010http://www.pm.gov.au/node/6419
The Intergenerational Report. 2010. ‘ Australia to 2050: future challenges’, Circulated by Hon. Wayne Swan MP, Treasurer of the Commonwealth of Australia. Accessed the 27th April 2010. http://www.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf Address to CEDA state of the Nation Conference, 14th June 2007, David Parker- Executive Director, Macroeconomic group, the treasury, The Economic Impact of Australia’s Ageing Population, Accessed 22nd April 1010. http://www.treasury.gov.au/documents/1273/PDF/IGR_CEDA_Presentation.pdf Australian Local Government Association Report, 2004.
Economic implications of an ageing Australia, No Author found. Accessed the 21st April 2010 http://www.alga.asn.au/submissions/2004/20040924Ageing.php Books
Mullan.P, 2001.The imaginary Time Bomb: Why ageing population is not a social problem, I.B.Tauris, 2001, U.S.
Gans, King, Stonecash, Mankin,2009. ‘Principles of Economics’, 4th Edition, Hardcourt Australia Pty Limited, Australia.
World Wide Web Document
Blinder.A.S, 2002.‘Keynesian Economics.’ Viewed 28th April 2010. http://www.econlib.org/library/Enc1/KeynesianEconomics.html Media
Australian population to hit 35 Million in year 2049, Youtube, viewed 9th May 2010http://www.youtube.com/watch?v=johZ5EdbqC8
Online Newspaper Articles
Promnitz.P, 2010. The next GFC: our ageing population, viewed 28th April 2010, http://www.smh.com.au/opinion/politics/the-next-gfc-our-ageing-population-20100119-miot.html
Harrison. D, 2010. PM warns ageing population time bomb, viewed 28th April 2010, http://www.smh.com.au/national/pm-warns-of-ageing-population-time-bomb-20100118-mgst.html
No Author found, 2010. ‘Rudd warns of massive hikes in health costs’, Viewed 29th April 2010
http://www.abc.net.au/news/stories/2010/01/24/2799944.htm