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.