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Report highlights
CEDA's Ageing report argues that the initial impacts of demographic change are only a few years away, and a comprehensive policy package is required now to alleviate future fiscal pressures and ensure that all Australians enjoy an adequate standard of living in retirement.
The CEDA report contains in-depth analysis of the effects of demographic change by some of Australia's most senior government advisors, private sector economists, policy commentators and academics. The impact of population ageing on government budgets (both Commonwealth and state), the labour market, workplace practices, futures consumption patterns, and savings and retirement incomes are assessed. A range of policy measures aimed at minimizing the costs of an ageing population are presented.
The report acknowledges the importance of maintaining strong economic growth driven by high rates of productivity growth. This will ensure that an increased dependency ratio associated with population ageing does not lead to a decline in Australia's living standards.
However, the report argues that reliance on economic growth alone is dangerously complacent. Three key areas require urgent policy action:
- Enhancing labour force participation, particularly by older workers.
- Ensuring the adequacy of retirement incomes.
- Ensuring that income support and retirement policies do not discourage workforce participation.
Workforce participation
Dr Michael Keating, former head of the Prime Minister's Department and a contributor to the CEDA report, stresses the need to reverse recent declines in workforce participation by older males (often due to involuntary retirement). He argues that population ageing would not present a problem for another 50 years if the next cohort of men entering their late 50's postponed their retirement for as long as the previous generation did. According to Keating: 'a reversal of the trend to early retirement would go a long way towards financing the fiscal demands from an ageing society.
National savings guru Dr Vince FitzGerald argues that current levels of superannuation provision will not provide the standard of living in retirement aspired to by most Australians. "Only in the most favourable of circumstances will people relying solely on the 9 per cent Superannuation Guarantee enjoy in retirement a standard of living close to what they enjoyed while working, and most of the many Australians who came into superannuation only in the past 15 years or so, will not achieve an adequate retirement income".
Dr FitzGerald calls for urgent measures to address the inadequacy of superannuation provision including increased compulsory superannuation contributions; co-contributions and other matched saving schemes targeted at lower income groups, and shifting superannuation taxation from the contributions stage to the benefits stage. Measures aimed at unlocking housing wealth, such as reverse mortgage products, can also help address savings adequacy.