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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

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January 27, 2010

There hasn't been much commentary about Rudd's series of recent speeches about Treasury's forthcoming Intergenerational Report entitled Australia to 2050: Future Challenges. Is it just the holiday season, or another sign of the decllne of the mainstream press?

Ross Gittins is an exception. He critically tackles Rudd's rhetoric. Gittins says that one of the effects of ageing is slower growth in our material standard of living due to to slower growth in the size of the workforce:

But, by my calculation... rather than rising by about 110 per cent over the next 40 years, our real incomes are projected to grow by a paltry 80 per cent..Rudd apparently views this gap with great concern and automatically assumes all of us do, too. He vows to take the steps necessary to prevent this slowdown in the rate of growth in the economy's production of goods and services..How? Mainly by increasing the rate of improvement in the productivity of our labour - the average amount of goods and services produced by an hour of work...If we could increase this rate of improvement to average 2 per cent a year, Rudd tells us, we wouldn't miss out on each being that last $16,000 a year better off by 2050.

Gittins comment is just think of all the extra stuff you could buy with an extra $16,000 per family member. It's hardly worth the effort. My response is how about extra free time from work? That is my choice--to forgo the $16,000 and give more time and energy to my photography.

Gittn's says that Rudd's second point is that the ageing of the population threatens the sustainability of government budgets, as it will result in higher costs for health, aged care and the age pension, with the key spending pressure being healthcare.

Rudd says the looming pressure on government budgets leaves us with three options: first, ''cut health spending, reduce aged care and reduce payments for people entering retirement''. No dice. Second, permit ''long-term unsustainable budget deficits''. No dice.But third: boost government tax revenue by increasing participation in the workforce and ''most critically, by boosting the productivity of the workforce''.

Gittins comment is that he is not buying this analysis. There is the fourth option for covering the expected higher spending on healthcare is higher taxation, only Rudd doesn't have the courage to mention it.
Rudd, as Peter Costello did, is trying to ''pathologise'' the expected growth in health spending: make something good (our greater ability to prolong our lives and make them healthier) sound like it's bad (the elderly will be putting an intolerable burden on taxpayers).According to the Government's projections, our real incomes are likely to grow about 80 per cent over the period. There's no good reason we shouldn't choose - as we assuredly will - to spend a higher proportion of that on improving our health and longevity.

That increased spending is not just higher taxation for hospital care by the welfare state that libertarians call the nanny state.

What Gittins misses is that we are devoting a greater proportion of our income on preventative healthcare so that we don't end up obese or in hospital after a heart attack. We also eat better (clean and fresh food) and we exercise more to get fit. We go to the gym --ride our bikes-- so that we are able to live longer, healthier lives.

| Posted by Gary Sauer-Thompson at 7:54 AM | | Comments (10)


Rudd is using the Intergenerational Report to sell the idea that Labor is real strong on economic growth and prosperity. Better than the Liberals. Trust us. We know what we are doing.

who wants to do paid work under ever increasing stress until they die?

Another possible reason there hasn't been much commentary on Rudd's speeches is that he's losing cred. Losing cred on healthcare and everything else he's claimed requires urgent attention.

Besides, the cost of supporting an ageing population is old news and doesn't even pretend to cover the absence of climate change in the government's concerns.

Yes I think Rudd's been around long enough now for people to judge him on what he does, not his speeches. And he doesn't do much, which is not a problem at the moment because the great GFC proved to be a bit of a damp squib. Therefore most folks are getting on with their lives without worrying too much what the government is up to or what Kevvie's rambling on about.

One thing that is missing in economists' (and politicians') discussions of productivity is the increasing amount of productive activity that doesn't get measured. We've long known this is the case with household work, so that a wife who cooked and cleaned for 8 hours a day was deemed not to be making any contribution to GDP, but as soon as she hired Jim's Cleaning or whatever, GDP goes up. That was just accepted as an anomaly.

Now however we see the reverse happening. Instead of people buying things they used to do for free, they are doing things for free that people used to pay for. For example, bloggers like Gary are producing media which is replacing stuff people used to pay for. YouTube and Facebook are increasingly taking the place of commercial TV. The absurd economic result is that this causes GDP to go down, while the quality and quantity of goods available to the public is going up.

Traditional national accounts, in other words, may become an even more unreliable guide to actual productive activity in future years.

The intergenerational report talked about the 3 Ps
- population numbers
- workforce participation
- productivity

Rudd's concern about the ageing population is noting his concern with workforce participation rates.

I am not worried about the baby boomers leaving the workforce, hell, most of them find it impossible to keep a permanent position past the age of 45. Many mature workers as well as inexperienced workers find they can only get casual employment. Now some people might have enough work to live comfortably, especially those on lucrative contracts after years of skilled permanent work. Most casual employees in my experience do not earn enough to take out a home mortgage or plan life decisions.

As a third of the workforce is in casual employment, I do not believe that we have a shortage of workers to do the work. I think we still have an oversupply of workers and the increasing immigration levels is designed to keep that imbalance in the labour market

A few years ago I calculated that I would be better off if I paid Swedish level taxes, instead of Australian Income tax + private Health insurances + additional contributions into super + additional investments to save for rainy day prior to being able to access super.

If I was working and had an additional $16000 in todays terms I would buy more shares because I wouldn't have time to take a holiday and how many TVs or suits do I need?

"Yes I think Rudd's been around long enough now for people to judge him on what he does, not his speeches."

I see more and more comments describing Rudd as a do-nothing prime minister. The stimulus has been forgotten, and there's not much else to show. This year we'll have school league tables and internet filtering, and probably budget cuts. In an election year, he really needs something like bank regulation to bump things along.

Nan, perhaps Rudd wants to keep everyone working so they don't get old enough to be a burden on the economy. I think the surge in 85 year olds will be a blip that isn't repeated by baby boomers or Gen X or Y

A letter to the Sydney Morning Herald today from a 75 year old said that if we are concerned about supporting an ageing population why not offer the choice of euthanasia as well as incarceration in the nursing home

cannot have euthanasia can we? That offends Rudd's Christian values which are those of the nation.

well, they want be doing anything on the greatest moral challenge facing Australia--climate change. Rudd avoided talking about it in all of his speeches around the country. Nothing much will happen on health. The education revolution has petered out. What else is left?

An ageing population is seen as a "problem". There won't be enough money or resources to sustain all the elderly, with older people looked on as burdens on the health and social security system.

This remains caught up in old way of thinking--- people work and then die.That used to be the case in the in the late 60s and early 70s when two-thirds of Australian men were dead at 65.Now, half live to 79.

We do need to acknowledging that many people are living longer, fuller, healthier and happier lives.