The matter of getting old is an ongoing concern on both a collective and individual basis.
On a collective basis we have policy debates and prescriptions driven by what is often characterised as an ageing population crisis. There are several drivers for Australia’s ageing population – more of the large baby boomer cohort is reaching 65 and there has been an increase in life expectancy. This has occurred alongside low fertility rates.
Everyone understands that ageing brings challenges. So such a characterisation helps with the pursuit of policy reforms aimed at containing the costs of pharmaceuticals, hospital costs, aged care or the like.
In terms of the ageing of the Australian population being a demographic time bomb, it is a time bomb with a very long fuse and not much explosive power. Australia has had a relatively young population structure, assisted by continuing net immigration. Also, current immigration policies do not allow much scope for older migrants on the basis of family reunion.
The latest demographic statistics issued by the ABS indicate that there has not been any dramatic increase in dependency ratios in Australia. Over the 20 year period to 2018, the proportion of Australia’s working age population remained fairly stable at around two-thirds of the total population, while the proportion of people aged 65 years and over increased from 12.2 per cent to 15.7 per cent. Conversely, the proportion of people aged under 15 years decreased from 21.0 per cent to 18.8 per cent during this same period.
Older Australians can be expensive to run, especially in regard to health care costs. But as parents of children going back to school know, those aged under 15 are not cheap to run either. The cost of schools is also a major public sector expense.
Policies really need to be justified in terms of whether they make sense in their own right; rather than as an urgent response to what is in effect a glacial rate of ageing of the population structure.
At the individual level, ageing involves a range of issues and attitudes. After about age 18 nobody really gets excited about being a year older, and enthusiasm for another birthday falls even more sharply for those in their sixties and seventies. For instance, I have discovered that one of the few good things about being aged over 60 is that you can get cheap cinema tickets. Tax free super benefits are not bad either.
Somewhat oddly, once a person gets into their 90s they not infrequently round up their age. Claiming to be 100 (and still spritely) sounds much better than saying you are aged 97.
Measurement issues aside, the number of centenarians has increased sharply in Australia, albeit from a low base. In June 2010 there were around 2,900 Australians aged 100 and over with this increasing to 4,500 in June 2018. In comparison, by single year of age there were around 243,000 persons in June 2018 aged 67.
The Australian Government Actuary in recent work has sought to measure the effectiveness of retirement income products in dealing with the risk of negative income variations in retirement by projecting out to age 100 – which is a very long period and most people will be dead by that age. The role of the means tested Age Pension is also ignored.
Actuaries are always interested in the full range of cases. Defined benefit pensioners and their reversionary beneficiaries tend to live for a very long time. The last widow of a US civil war veteran, Gertrude Janeway nee Grubb, died some 140 years after the conflict ended, but she did marry when she was 18 and the groom was 81. However, most individuals (and hopefully policy makers) focus on what is most likely rather than giving equal weight to outlying cases.
The Treasury is currently seeking comments on possible simplified, standardised disclosure making use of metrics like that developed by the Government Actuary. It is hard to be in principle against simplicity and standardisation. However, meaningful and relevant are other important principles.
ASFA will be providing a submission to Treasury and the input of ASFA members is welcomed.
