NO.030

PRODUCTIVITY COMMISSION REPORT ON ECONOMIC IMPLICATIONS OF

AN AGEING AUSTRALIA

The Government is today releasing the research report of the Productivity

Commission inquiry into the economic implications of an ageing Australia.

The Government welcomes this report, which provides an independent and comprehensive

analysis of the economic impacts of ageing for all levels of government for

the first time.

The report was prepared for the Council of Australian Governments, and provides

useful background information for future planning and policy development by

all Australian governments, in the context of the projected ageing of the Australian

population.

The report endorses the findings of the 2002 Intergenerational Report and

updates its results. The Productivity Commission report projects an overall

increase in fiscal pressure for all Australian Governments of 6.4 per cent by

2044-45. This increase is fundamentally due to expenditure pressures, rather

than the revenue implications of population ageing.

For the Australian Government the projected fiscal gap is 5.7 per cent of

GDP over the next 40 years. States and territories are not projected to face

fiscal pressures as large as those facing the Australian Government. In its

base case, the Productivity Commission projects state and territory fiscal pressures

to rise in aggregate by 0.8 per cent of GDP over 40 years.

“It is particularly pleasing that the Report endorses the Australian

Government’s emphasis on increasing participation and productivity to

address the economic implications of an ageing Australia”, the Treasurer

said today.

The Government will continue to encourage participation in paid work with

income tax reforms.

We intend to modernise the income support system through a better balance

between mutual obligations, incentives and assistance. We will reform the arrangements

associated with the Disability Support Pension.

We will continue to enhance employment services through the active participation

model. To enhance opportunities and provide greater choice for mature age workers,

we are introducing a new Mature Age Worker Tax Offset, extending the age to

which individuals satisfying a work test may make personal superannuation contributions,

and encouraging phased transition to retirement by allowing mature age workers

to access to income streams.

Productivity growth will be important for Australia’s future economic

growth. The Australian Government will continue vigorously to pursue its productivity

enhancing reform agenda with the aim of raising Australia’s long run productivity

performance.

We will pursue further workplace reforms such as reforms to unfair dismissal

laws. This will assist business, especially small business, to employ more staff

under more flexible work arrangements.

The 2004-05 Budget put in place a package of major initiatives including by

providing more help for families, cutting taxes further, boosting retirement

savings and investing in Australia’s future. The Government will continue

to build on these policies by putting in place further measures to address the

challenges faced due to population ageing.

To encourage self funded retirement, we have made superannuation more attractive

as a retirement savings vehicle by increasing the fully deductible amount for

personal contributions by the self employed, providing a co-contribution to

eligible people, and reducing maximum superannuation surcharge rates.

The Government is also responding to the increased need for aged care, including

by providing assistance to carers, and more help for older people to stay at

home longer, reducing pressure on demand for aged care facilities.

We are also providing equipment grants for volunteers who generously provide

their time and resources to assist other Australians.

The Productivity Commission has also suggested that governments should seek

to increase the cost-effectiveness of services particularly in the health and

aged care sectors.

In this context, the Australian Government has introduced modest increases

to Pharmaceutical Benefits Scheme (PBS) co payments, and negotiated a 12.5 per

cent reduction in the price of new brands of existing drugs, to enhance the

longer term sustainability of the PBS.

We will continue to look for positive reforms to address the challenges facing

Australia due to ageing.

Copies of the report may be downloaded from the Productivity Commission’s

website at www.pc.gov.au.

CANBERRA

12 April 2005

Contact:

David Alexander

02 6277 7340