1301.0 - Year Book Australia, 2003  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/01/2003   
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An ageing Australia

Like many other developed countries, Australia is experiencing fundamental changes in its demographic structure. This is characterised by three significant trends:

Growing longevity - Life expectancy at birth has increased from 66.1 years in 1947 to 76.2 years in 1999 for men, and from 70.6 years to 81.8 years over the same period for women. These trends have been driven by lower mortality rates at all ages.

Declining fertility - In 1976, the total fertility rate (TFR) fell below replacement level (2.1 births per woman) and has fallen even lower since. A record low of 1.7 births per woman occurred in 1999, and the TFR is predicted to fall further still.

‘Baby boomer’ progression - The peak of this large generation (born between 1946 and 1966) will be entering the over 65 age group between 2011 and 2031.

These factors have contributed to an ageing population, which in turn may be categorised in two ways. The term 'numerical ageing' refers to the absolute increase in the number of people aged over 65 years. In the Australian context, the number of people aged over 65 is expected to grow from 2.3 million in 1999 to between 6.2 million and 7.9 million by 2051. Alternatively, 'structural ageing' refers to the relative increase, or growing proportion, of older people within the total population (see graph 7.5). This reflects the impact of falling fertility on population age structures; as the proportion of people aged under 15 falls, the proportion of Australians aged over 65 years increases. The proportion of people aged over 65 years is expected to grow from 12% of the population in 1999 to around a quarter of the population by 2051. The over 85 age group is expected to almost quadruple as a proportion of the population, from 1.3% today to around 5% by 2051. On the other hand, the proportion of the population currently considered to be of labour force age (those aged between 15 and 64) is expected to fall from 67% in 1999 to around 59% by 2051.

Graph - 7.5 Population in Age groups

While any forecast in relation to future population size and structure requires assumptions about future levels of mortality, fertility and immigration, it appears that Australia’s population outlook over the next few decades is likely to be dominated by structural ageing.

Ageing presents challenges and opportunities for individuals, families, communities, businesses and governments. The social dimensions may include changes to caring and disability support needs, housing demands and recreation patterns. The economic dimensions are likely to be equally complex. Budget Paper No. 5, The Intergenerational Report, released as a part of the 2002-03 Commonwealth Budget, provides a detailed overview of the long-term sustainability of government finances in the context of structural ageing. The report shows that fiscal pressure on the Commonwealth Budget is expected to build, with the most significant impact first emerging in around 15 years from now. By 2041-42, the gap between spending and revenue is expected to reach 5% of gross domestic product in the absence of any major policy shifts (graph 7.6).

Graph - 7.6 Projection of commonweath government fiscal pressure, Proportion of gross domestic productu

A key to addressing this challenge lies in managing government costs in the areas of health and welfare, as well as maintaining strong economic growth. Critical to this will be future rates of workforce participation, particularly among older workers. Greater workforce participation among older Australians may contain government welfare outlays by improving self-provision for retirement and reducing the risk of older Australians entering long-term income support. In addition, boosting workforce participation rates among older Australians is also expected to help sustain economic growth by offsetting the expected decline in labour force supply.

In many ways the economic and social opportunities and challenges of projected population ageing are inseparable. Public attitudes towards older Australians, either within the workplace or in broader aspects of community life, will be critical to how our society responds to structural ageing. Since most other developed countries are much further down the ageing track than Australia, we are fortunately well placed to learn about how other communities deal with the pressures and benefits of adapting to an ageing population.