problems facing Australia caused by
an ageing baby boomer population
that is not being replaced by equivalent
younger workers. The 2010 edition of
the Intergenerational Report released
by Treasurer Wayne Swan shows
that the number of people aged 65
and over will more than double in
nominal terms as well as a share of the
population. The problems are not just
in terms of people, but also in expense
with retirees generating little income,
while also incurring huge costs from
the pension, access to aged care and
health services.
Commission up to 20 per cent of
a person's lifetime health costs
are incurred at the end of their
life. Consequently cost of health and
aged care will double and the cost of
the old age pension will increase by
up to half by 2050. Soberly, the hard
data that has come in since the 2010
report shows real costs are already
exceeding the projections. That leaves
one generation heavily dependent on
the benefits that another generation
is expected to provide through their
taxes. What is often forgotten is that
Generation Y will have to double down
on the costs.
significant assets, particularly in
property, inflating the costs that
Generation Y have to pay just to
get their foot on the property ladder.
They have also enjoyed discounted
tax rates as they funnelled their
money into superannuation with the
expectation that they will be able
to take out the dividends without
paying tax. Throughout their lifetimes,
Generation Y is or will, pay for their own
education, private health insurance,
superannuation and aged care.
the full costs of socialised health and
welfare services for a generation larger
than themselves and will concurrently
have to pay for their own costs, while
also paying off the debt legacy of the
Rudd and Gillard governments. Worse,
as debt keeps accumulating year-
on-year the level of cutbacks needed
increases with it to avoid Australia
descending into an irretrievable debt
spiral. The future is grim unless we act
to stop the entire Baby Boomer cost
burden falling onto our shoulders.
nation's finances more sustainable is
to stop any increase in debt levels,
but the only way that can be achieved
is through significant public sector
reform that reduces spending. While
the universal superannuation has been
operating for twenty years, many simply
do not have the savings necessary to
pay for their retiring years, especially
with life expectancy continuing to grow.
continue to be dependent on taxpayers
for their basic livelihood. That does
not mean they should not have to
carry the burden. As harsh as it may
sound, attitudes to retiring Australians
selling the family home to finance aged
care should be revisited to stop the
cost falling onto the taxpayer. But the
biggest concern is ballooning health
costs at a time where people are living
longer and scientific advancement is
delivering improved treatments with
complimentary costs.
reforming universal healthcare that
encourages people to save for their
own health costs, rather than the cost
always falling on the government.
The Medicare levy surcharge that
increases taxes on those who do not
take out private health insurance partly
addresses this challenge, but reform
needs to be broader to increase people
taking responsibility for their health,
ensure they better understand the
consequences of their lifestyle choices
and accept the financial consequences
as well.
not mean people need be left out
Netherlands have a form of universal
health cover where costs are not
financed by the government. By
comparison, the Netherlands has
compulsory private health insurance
with taxpayer-funded equity payments
for those who cannot afford it, whereas
Singapore has a form of compulsory
individual health savings account
that operates like our superannuation
system where people make
contributions and draw down on it when
they need it.
debate away from the government
being prepared to finance everyone's
healthcare toward only those who need
it. It has the dual benefit of reducing
costs while ensuring that those most
needy receive support while the vast
bulk of us have the choice and freedom
to take responsibility for our own health.
The system can also be reformed to
reward good behaviour, unlike the
current form of Medicare which allows
unhealthy people to financially free ride
on the diligence of the healthy.
time bomb the challenge Australia faces
the challenge is not if reforms will take
place but merely how and when. For the
sake of Generation Y, we should hope
it starts soon, otherwise our adult lives
will primarily be dedicated to working to
pay for our parent's retiring years with
little, if any, security for when we reach
their current age.
Institute of Public Affairs www.ipa.org.au