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Intergenerational Report: Australia to 2050: Future Challenges « Previous | |Next »
January 19, 2010

So there is to be a third Intergenerational Report, entitled Australia to 2050: Future Challenges, which analyses the key long-term challenges facing Australia for the first half of this new century. This is to be released in the next few weeks, but we have heard this account before from Peter Costello, when he was Treasurer in the Howard Government. Kevin Rudd adds little that is new. More problematically he says nothing about addressing the effects of climate change on the economy.

According to Rudd's Australia Day speech the ageing of our population is the key challenge. Rudd says that to understand its implications, we need to ask three basic questions:

First, how much are we ageing by?
Second, how will this impact on family living standards and the economy?
Third, what can we do about it?

No mention of ageing and wellness at all. For Rudd its all about the negative impact of ageing economic growth and prosperity. Rudd says that:

On the first question, the Intergenerational Report projects that our population will grow from 22 million today to 36 million by 2050... On the second question public finances will be burdened with the increased costs of looking after the needs of older Australians - in health, aged care and age pensions - but with a smaller proportion of Australians in the workforce, tax revenues won't keep pace with those rising costs.

Consequently, we will either generate large, unsustainable budget deficits into the second quarter of the century, or else we'll need to reduce government services - including health services - as the needs of an ageing population become greater. This is the same message as Costello. For the old political order an ageing population is not an active population.

The third question is what can be done to strengthen economic growth in the face of the fundamental challenge from the ageing of the population.Rudd says:

In the long-term, there are three sources of economic growth - the three Ps of population, workforce participation and productivity growth.With lower fertility rates and stable migration ratios, population policy will on current trends at best make a marginal contribution to the challenge of an ageing population.The truth is that the strong policy levers lie with policy measures to lift participation and productivity growth...the most important of the three Ps [is] productivity growth. It is productivity growth that must play the central role in building Australia's future economic growth.

Again this is same message as Costello. It's Treasury's message. Rudd's twist is that productivity growth had fallen under the Howard Government:
During the 1990s, productivity growth hit the two per cent mark following the reforms of the Hawke-Keating Governments, but it fell to just 1.4 per cent in the first decade of this century. If we let this trend of lower productivity growth continue, Australia will struggle to meet the major challenges facing our economy in the decades ahead....The Australia to 2050 report shows that without a concerted effort to increase productivity, average annual productivity growth will be just 1.6 per cent over the next 40 years, leading to average annual economic growth rate falling to 2.7 per cent, compared to the historical average of 3.3 per cent over the last 40 years.

And Labor's plans to grow Australia's productive capacity over the long-term? Well, there is nothing new there either.

It is increased investment in long-term nation-building economic infrastructure including in roads, rail and ports; an education revolution, in the form of doubling the investment in Australian schools over the next five years; helping businesses use technology to work smarter and faster through the high-speed National Broadband Network, and implementing microeconomic reforms to cut red tape for business and build a seamless national economy.

Nothing about greening Australia to make it more sustainable or making the shift to a low carbon economy. Not a mention, even though this is actually a key long-term challenge for Australia.The inference is that Rudd Labor is not serious about making the shift to a low carbon economy.

| Posted by Gary Sauer-Thompson at 3:41 PM | | Comments (14)


Rudd's Australia Day speech? Did they change the date when I wasn't looking?

it was a speech to an Australia Day reception at the National Gallery of Victoria Melbourne.

Yep... Rudd ignoring the major challenges, and making matters worse by pandering to the inter-generational "problems" while ignoring productivity improvements in managing the elderly and/or frail.

Consider the productivity improvements in 50 years for a frail person just doing housework: microwaves, vacuum cleaners, automatic washing machines and clothes dryers. Much less assistance, if any, required, compared to washing in a copper and hanging it out on a clothesline.

Now add IT (medical telemetry, nurse-on-call, or even fancy beds to eliminate bedsores, internet-expedited home-delivery)... and a lot of the "burden" goes away.

The key problem is how to adapt to an economy that provides appropriate resources to people as people become fewer and more resource-efficient, less acquisitive, in order to manage impact on climate, but I haven't seen any "mainstream" economists/policymakers actually working on this seriously. Has anybody else seen any equations or anything to look at improving quality-of-life factors in a shrinking more efficient population?

there was narry a mention of the widespread depression in the population either, which costs the economy billions of dollars. Being required to work harder (unpaid overtime)---for that is what is happening--- will only increase the work-based depression. Health was never mentioned by Rudd, even though sick workers have low productivity.

the political response to the first two Intergenerational Reports was to address the health issue of rapidly rising health costs to ensure that the commonwealth's budget did not blow out. That response involved the shift to preventative care to reduce the admissions to public hospitals

Rudd made no mention of this in his speech.

The 3 Ps are
workforce Participation
and Productivity.

Before his comments on increasing Productivity Rudd mentioned that workforce participation will decline from 65% to 60%.

Workforce Participation rates refer to the workforce not in studying aged between 15 and 65.

So before we start fretting over the increased costs of caring for the elderly shouldn't we be improving the workforce participation rates and addressing our severe underemployment rates and preposterous unemployment statistics.

A self funded retiree or superannuant in good health costs the economy less than a school child. Society provides infant health nurses, kindergardens, schools and teachers to educate our young and this costs money. I have no problem with spending money educating our youth to become useful members of our society. By and large the older members of our society run self funded social groups like Probus, may undertake Volunteer work like meals on wheels or preparing lunches for those less fortunate so I think the talk about the aging population is hysterical

Gary said "there was narry a mention of the widespread depression in the population either"

Yep, agreed on the impact of this. I wrote something (pointers to original post and On-Line-Opinion repost here about mental health metrics, including the easy-for-the-ABS-to-run MDI as a high-level indicator of overall government performance, and a lead indicator for general economic performance as well as the health budget. I think it's one of the most original things I've ever written.

But, as you say, narry a mention, despite the Victorian Auditor-General (see this) pointing out that 20% are affected by mental illness (including depression), and showing that there is virtually no measurement and thus no management of even the worst cases. I suspect that because it's an elephant in the room, and has such an effect, politicians try to ensure we don't look at it.

The old political order says that we're not rich enough, because, as we aren't "productive" enough, so we need to become more productive to become richer. Nothing about well being or happiness or the good life there.The link between health (eg., obesity from fast junk food and lack of exercise) and productivity is simply missing. Yet work pressures mean we have less time to prepare healthy alternatives.

they would look at it if they accepted that the end of politics is the wellbeing of the population, or the good or flourishing life, instead of being convinced that thy only way for Australia to flourish is for more of us to work, and work harder, to produce more stuff more efficiently.

We canwork harder to produce more stuff more efficiently and be very unhappy and depressed.

Joseph Stiglitz argues that GDP is a poor measure of wellbeing. Rudd, it would seem, equates GDP with well being.

My experience is that what companies mean by productivity is working harder and longer hours. It is not about being smarter so that we have time for oursevles.

Rudd is beholden to the neoliberal dream:

For more than a quarter century now the countries of the world have been dreaming the neoliberals' dream. They have been trying to shrink their states back to their core competencies to promote economic efficiency, global economic integration, and growth, and to slash through red tape, rent-seeking, and simple corruption. They have been actively privatizing state holdings. They have hugely reduced their ownership and their active involvement in "national champion" companies. They have cut back on interventions to affect market outcomes and on regulation to scrutinize and control market players.

He is revising bits of it--interventions into the market and put a stop to prrivatisation---but he still talks the language of promoting economic efficiency, global economic integration, and growth

a question: "Is Australia's productivity slowdown cyclical rather than structural"?

Kevin Rudd is saying that there is slowdown in the rate of growth not that we are going backwards. He is also saying that we can have the benefits of greater affluence with increased productivity without paying any costs in environmental destruction.

It's spin