Australia keeps getting the sort of problems that other countries would pay good money to enjoy. Today’s it’s the discovery that, oops, we’ll actually have 6.5 million more people in the country in 2049 than the last time Treasury had an educated guess.
What would the Japanese, the Italians and the Russians give to have an expanding population! They’ve started shrinking, or soon will, and lack the sort of well-developed retirement savings policy that Australia acquired from Paul Keating.
Extra population, if we get our infrastructure and environmental settings right, is always good news. Those are big ifs, admittedly. We don’t charge properly for infrastructure usage; investment decisions are too politicised, and our politicians are incapable of agreeing on an effective greenhouse emissions trading scheme.
Wayne Swan’s (carefully-leaked) speech at the new and very specifically-titled “Australian Institute for Population Ageing Research” flagged the arrival ahead of schedule of the third Intergenerational Report, one of Peter Costello’s better initiatives. There’s some more good news in it. The population in mid-century will be bigger, but younger, courtesy of both immigration and a slightly higher domestic fertility rate. That’s not to say the demographic time bomb of an ageing population has been statistically defused. Rather, to labour the metaphor, the explosion will be slightly less powerful because there’ll be a higher proportion of the population under 65.
Further, with a modicum of policy gumption or, perhaps, the Prime Ministership of Tony Abbott, we’ll have increased the pension age to well over 70 by that time and ploughed billions more into superannuation by getting rid of commissions and other dodgy fees by financial planners.
I referred to the “ifs” of getting our infrastructure and environmental settings. Swan’s address emphasises getting fiscal settings right. Swan has flagged that there’ll be no new spending without offsets from existing spending. Sounds tough, but the Howard Government notionally had exactly the same policy as spending haemorrhaged to obscene levels in its final terms. It’s also the policy that was in place for the last Budget, when we were promised a bloodbath and ended up with a couple of paper cuts.
Nevertheless, the Government continues to shift its rhetoric toward that of fiscal responsibility, an approach that I appear to be alone in thinking will be the key to the Government’s election year strategy. The Henry Review and the looming superannuation inquiry will complicate matters, most likely serving up a number of reforms guaranteed to yield long-term benefits but short-term losers. Combined with a tough budget and without deft handling, the lead-up to the next election could be dominated by angry interest groups offended that they’ve been singled out to take a hit in the cause of a more efficient economy. “We’re taking the tough decisions” could quickly become “sh-t, we’re under fire from all directions”.