16 September 2011

The 2010 intergenerational report

Population ageing reduces the proportion of working age people supporting people aged over 65 years. The rate of improvement in average living standards is projected to fall, placing pressure on Australia’s capacity to fund the spending pressures associated with an ageing population, particularly in terms of health spending.

Australia’s population will continue to grow over time, though at slightly lower rates than experienced over the past 40 years. This will put pressure on infrastructure, services and the environment, but the growth also assists in managing the pressures of an ageing population by providing the skills and innovation needed to underpin continued economic growth.

Decisions taken in the near term will impact on the wellbeing of future generations. Productivity-enhancing reforms, particularly through nation building infrastructure and improving the skills base, will grow the economy, improve living standards, and partly offset the fiscal pressures of ageing. With an ageing population, productivity growth is the key driver of future growth prospects. Reforms that reduce barriers to participation will also lift growth and reduce future pressures.

Steps to grow the economy and ensure permanent spending growth is sustainable, including through the implementation of the Government’s fiscal strategy, will reduce future adjustment costs and the economic and fiscal consequences of ageing.

Climate change is the other big intergenerational challenge facing Australia. It is the largest threat to the environment and represents one of the most significant challenges to economic sustainability. There are currently 32 countries that are operating emissions trading schemes, and others are in the process of introducing them. The global consensus is that this use of market-based mechanisms is the least cost mechanism to reduce carbon emissions while protecting jobs and growth. Tackling climate change early will avoid larger costs for future generations, and a more severe adjustment to the economy in future years.

To download the full report go to www.treasury.gov.au/igr/igr2010/#

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