AUSTRALIA - Ageing-related pressures on government finances will open up a national fiscal gap equal to 7% of gross domestic product by 2045, according to a report by the Productivity Commission.
The report sparked a call to action from the Association of Superannuation Funds Australia (ASFA) to encourage people to up their savings.
The commission’s draft research on the Economic Implications of an Ageing Australia projects that economic growth will flag as the Australian workforce grows more slowly than the population. The commission estimates that GDP growth per capita could fall to around 1.25% per year in the 2020s, about half its present rate.
ASFA says the report echoes many of the points made in its Economics 2004 Intergenerational Report issued in April this year but declined to mention the impact on family budgets.
CEO of ASFA Philippa Smith said the potential response by state and federal governments of passing on their increased costs to private pockets or future generations would merely privatise what were previously public responsibilities.
“Added to this is the growing gap between age pensions, and the current level of savings together with expectations of living standards in retirement,” she said.
“There needs to be action today to increase household savings for tomorrow. Superannuation is the most appropriate vehicle for individuals and the nation if we want to sustain our anticipated standard of living in retirement, and provide ourselves with a buffer against the increased costs that are likely to hit the family purse.”
Commission chairman Gary Banks commented: “Ageing will have pervasive effects, but we need to keep things in perspective.
“Average households will have nearly doubled in 40 years time and rising government outlays bring benefits as well as costs. That said, the looming fiscal gap is large and will require action by all governments.”
The commission will submit its final report to the Treasurer and the Council of Australian Governments in March 2005.
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