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Home > Demographic Disaster or Hype and Hysteria?

Demographic Disaster or Hype and Hysteria?

April 2nd, 2007 at 12:19 pm

The Australian Treasurer today released an updated "Intergenerational Report", five years after the first report made official the looming demographic disaster facing government finances as the aging Baby Boomer generation reached retirement age, stopped paying taxes and starting drawing on the aged pension. The most interesting aspect from my point of view was the radical change in the projected situation in 40 years time (which is based on expected trends in life expectancy, fertility rates, retirement ages and workforce participation) compared to the previous report. Instead of a projected 50 Billion dollars a year (5% of GDP) budget deficit in 40 years time, the latest projection is for a more modest $35 Billion dollar a year shortfall - a reduction of 40%. This decrease was largely due to a slight increase in the fertility rate (whereas the original report expected the downward trend in fertility to persevere) and a slight increase in the participation rate, especially of older male full-time employees. It makes me wonder what situation will arise if, as is likely, the participation rate increases further. As there is apparently a large proportion of the Baby Boomer generation that has insufficient funds socked away for their retirement, it seems inevitable that more of them will have to continue working beyond their planned retirement age. Perhaps this will end up being a non-event. I'll see what comes out in the next update 5 years from now.

Enough Wealth

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