A roadmap for the future but will the community listen

A roadmap for the future but will the community listen
March 6, 2015 Peta Lange

Peta-Rectangle2015 Intergenerational Report

Treasurer, Joe Hockey, today released the Government’s 2015 Intergenerational Report (IGR) – the third of its kind since first handed down in 2002.

As the ink dries on the report, journalists and analysts alike will be pouring over the figures to assess what they really mean; are they accurate; and to locate the elephants in the room. One may query whether the IGR has outlived its usefulness and simply represents a means for the Government to find some much-needed evidence to support its politics.

The Treasurer has defined the IGR as the fuel to ignite community discussion, something that will make all Australians want to stand around the barbeque, tongs in hand, and discuss the changes coming. In doing so, Hockey will certainly be hoping that Australians conclude that the Government has been future-focussed and established policies that will frame the nation to prosper amidst those changes.

In some ways it all seems quite reminiscent of last years’ Commission of Audit which was used by the Government to provide evidence that strong measures were needed to save the country from financial ruin. This led to a 2014 Budget which Abbott and Hockey now agree “went too far”. One may feel that the IGR is giving us a sneak-peak at the main themes of the 2015 Budget. Certainly it’s confirmed that the Government will not back down on two of its major future-proofing plans – the establishment of a Medical Research Future Fund, and the reforms to higher education.

Despite the opportunities presented in today’s report to start discussions on participation, productivity, social services and our desired future for Australia – one wonders whether, as a result of recent politics, it may just be too much for the community to swallow? Will we take Joe’s advice and discuss the report around the barbeque, or will we just stick to talking about the football?

One suspects the only person who’ll really take notice of the projections within this IGR report will be Prince William. It seems that in 2055, as King William, he will be required to send some 40,000 letters to those Australians celebrating their 100th birthday!
The IRD in numbers:
By 2044-45, the IGR is projecting:*

  • Australia’s population to climb to 39.7 million from 23.9 million.
  • Participation rate will fall from 64.6% to 62.4%.
  • Seniors’ participation (Australians aged over 65 years) will increase from 12.9% to 17.3%.
  • Female participation will increase from 66% to 70%.
  • Male life expectancy will increase from 91.5 years to 95.1 years.
  • Female life expectancy will increase from 93.6 years to 96.6 years.
  • For every person aged 65, there will be 2.7 people aged 15-64 years; down from 4.5 today.
  • Economic growth to average 2.8 per cent annually.
  • Spending to reach 31.2 per cent of GDP.
  • Net debt to reach almost 60 per cent of GDP.

What does the IGR mean for the health portfolio?
We now have another report to add to the library of research projecting that health costs will continue to rise. While non-demographic factors (rising income, wage costs, change in disease rates and technological change) were responsible for much of the growth in health costs over the last 20 years, this report along with recent research, finds that the growth of spending is slower than previously projected and will keep pace with Australia’s growing and ageing population.

As a nation, we are getting bigger and older, and our health system will cost more as a result. Health expenditure is projected to increase to 5.7 per cent of GDP in 2054-55 from 4.2 per cent today – that’s $260 billion in today’s dollars or $6,600 spending for every single Australian.

Over the next 13 years:

  • Medicare will grow from $855 to $1,071 per person (in today’s dollars) and be the fastest growing component of health expenditure.
  • Pharmaceuticals will grow from $420 to $474 per person (in today’s dollars).
  • Public hospitals will grow from $647 to $680 per person (in today’s dollars).
  • Private health insurance rebate will grow slightly from $280 to $283 per person (in today’s dollars).

While the report contained no alarmist statements for health, it will be used to underpin the Government’s motivation to structurally change the health portfolio and drive efficiencies, which will benefit the budget in the short and longer term.

It has taken a hit on the GP co-payment and read the community’s apathy towards further changes, however the Minister for Health, only three months into the job, is pushing for fiscal responsibility and ‘outcomes’ driven policy.

The projected growth of an ageing population (with some 40,000 centenarians in 2055, rising from 4,500 today), entwined with the rising rates of participation and longer working life, will also doubtlessly be used by the Government as continued justification for the establishment of a Medical Research Future Fund.

* Statistics based on “current situation” forecast

Peta Lange, Director Parker & Partners