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Transcript
The Hon J. B. Hockey MP
Treasurer
The IGR is a social compact
between the generations
Children, grandchildren, parents,
grandparents and each other
The IGR is required to be produced by the Government
every 5 years under the Charter of Budget Honesty Act.
It presents 40 year projections of the changing shape of
Australia’s population and economy, and the Budget impacts
of Commonwealth government policy settings.
3
How Australia is changing
1 – Population
Life expectancy is increasing
100
Year
95
90
85
Year
Life expectancy will reach 88 yrs for men and
90.5 yrs for females. (80.7 and 84.8 now).
100
95
90
It’s even higher if you take into account expected
improvement in health and new technologies
(95 yrs men and 97 yrs for women).
85
80
80
75
75
4.3
4.3
70
65
65
4.1
Female life expectancy
60
60
4.1
4.1
Male life expectancy
55
50
1905
70
1920
1935
1950
1965
3.8
1980
55
50
1995
2010
2025
2040
2055
5
The Age Pension eligibility age should
better reflect increases in life expectancy
100
95
90
85
Years
Years
100
95
Male life expectancy
Age Pension eligibility age
for males
90
85
80
80
75
75
70
70
65
65
60
4.1
55
55
50
60
4.1
4.1
50
Note: chart shows life expectancy and Age pension eligibility age for males only.
Figures for females would show a comparable story.
6
The number of centenarians (100+) will grow rapidly
Number
Number
40,000
40,000
35,000
35,000
30,000
30,000
25,000
25,000
20,000
20,000
15,000
15,000
4.1
10,000
10,000
4.1
4.1
5,000
5,000
3.8
0
1971-72 1984-85 1997-98 2010-11
0
2023-24 2036-37 2049-50
7
There will be fewer people aged 15-64
relative to each person aged over 65
0
1
2
3
4
5
6
7
1970
8
7.5
1990
6.1
2015
4.5
2025
3.7
2035
3.2
2045
3.0
2055
2.7
0
1
2
3
4
5
6
7
8
8
Migration as a share of population will fall
2.5
2.0
1.5
1.0
Per cent
Per cent
Average:
post war
period ~ 1.0
per cent per
annum
(1949-1972)
Average: ~
0.5 per cent
per annum
(1973-2006)
Average: recent
period to end of
forward estimates
~ 1.1 per cent
per annum
(2007-2018)
Projections –
net overseas
migration of
215,000 per year
2.5
2.0
1.5
1.0
0.5
0.5
0.0
0.0
-0.5
-0.5
Previous NOM assumptions in IGRs: 2002 was 90,000; 2007 was 110,000; 2010 was 180,000
9
Population growth will be slightly slower
over the next 40 years
1.5
Per cent
Per cent
1.5
1.4
1.3
1.2
1.2
0.9
0.9
0.6
0.6
0.3
0.3
0.0
past 40 years
next 40 years
0.0
Note: growth rates are average annual growth rates.
Reference years: past 40 years 1973-74 to 2013-14 next 40 years 2014-15 to 2054-55.
10
Three contributors to per person growth
– population makes a small contribution
4
3
Percentage
contribution
Percentage
contribution
Population
3
2
Past 40 years
2
Next 40 years
1
1
0.3
0.1
0
-1
4
0
Share of
population 15+
Participation
rate
Unemployment
rate
Average hours
worked
Labour
productivity
Real GDP
per person
-1
Reference years: past 40 years 1973-74 to 2013-14 next 40 years 2014-15 to 2054-55.
11
How Australia is changing
2 – Participation
Participation rates will decline
as a result of population ageing
Per cent
Per cent
68
68
67
67
66
66
65
65
64
64
63
63
62
62
61
61
60
60
13
Aged 65 and over
20
Per cent
18
16
14
12
Per cent
Increase from 2003 due to strong
economy and full employment.
Continued rising through GFC partly as
asset values of people close to
retirement were hit. Also ongoing
change in work options.
10
20
18
16
14
12
Opportunity to
achieve higher
outcomes here.
10
8
8
6
6
4
4
2
2
0
1974-75
0
1994-95
2014-15
2034-35
2054-55
There is potential to lift participation
80
Per cent
Per cent
74.1
75
75
Australia
71.4 71.1
80
Canada
70
68.4
New Zealand
70
66.5
64.9
65
62.1
60
65
63.0
60
58.6
55
55
50
50
Male
Female
Total
Note: refers to total labour force participation (15+) in 2013 (ILO).
15
Three contributors to per person growth
– participation will detract from growth
4
Percentage
contribution
Percentage
contribution
Population
4
Participation
3
3
2
2
Past 40 years
Next 40 years
1
1
0.3
0.1
0.2
0.0
0
-0.1
-1
Share of
population 15+
Participation
rate
-0.1
Unemployment
rate
0.0
0
-0.2
Average hours
worked
Labour
productivity
Real GDP
per person
-1
Reference years: past 40 years 1973-74 to 2013-14 next 40 years 2014-15 to 2054-55.
16
How Australia is changing
3 – Productivity
Our productivity assumption is the big ‘if’
(30 year average)
5
Per cent
Per cent
Average 1990s
(2.2 per cent)
5
4
4
3
3
IGR assumption
(1.5 per cent)
2
2
1
1
0
0
-1
Average 1980s
-2 (1.3 per cent)
-3
Average 2000s
(1.5 per cent)
-1
-2
-3
18
Three contributors to per person growth
– productivity is the key
4
Percentage
contribution
Percentage
contribution
Population
Participation
Productivity
3
3
2
Past 40 years
Next 40 years
1.5 1.5
1.7
2
1.5
1
1
0.3
0.1
0.2
0.0
0
-0.1
-1
4
Share of
population 15+
Participation
rate
-0.1
Unemployment
rate
0.0
0
-0.2
Average hours
worked
Labour
productivity
Real GDP
per person
-1
Reference years: past 40 years 1973-74 to 2013-14 next 40 years 2014-15 to 2054-55.
19
Projected economic growth will be lower than the
growth we have had over the past 40 years
4
Per cent
Per cent
3.1
3
2.8
Past 40 years
4
3
Next 40 years
2
2
1.7
1.5
1
1
0
0
Real GDP
Real GDP per person
Reference years: past 40 years 1973-74 to 2013-14 next 40 years 2014-15 to 2054-55.
20
Key drivers of productivity
1. Investment in new capital and
infrastructure
2. Innovation and technology
3. Entrepreneurship and competition
4. Skills and education
21
Building a stronger Australia
We need to be able to afford our future.
The IGR shows we have made considerable
progress in putting the budget back on
track.
But more needs to be done.
22
We inherited an unsustainable budget…
Per cent of GDP
Per cent of GDP
Underlying cash balance
3
3
0
0
-3
-3
Previous policies
-6
-6
-9
-12
2014-15
Deficit would have reached 11.7% of
GDP or $533 billion in today’s dollars.
2024-25
2034-35
2044-45
-9
-12
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
23
…but we have made considerable progress
in reducing the deficit…
3
Per cent of GDP
Per cent of GDP
Underlying cash balance
0
3
0
Currently legislated
-3
-3
plus
implemented
measures
Previous policies
-6
-9
-12
2014-15
The deficit has halved to around 5.8%
of GDP in 2055 or $267 billion in today’s
dollars.
2024-25
2034-35
2044-45
-6
-9
-12
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
24
…all our policies would get the budget on track, but
the remaining task is challenging.
Underlying cash balance
3
3
Proposed policies
0
plus
measures yet
to be
implemented
-3
Previous policies
-6
plus
implemented
measures
-9
-12
2014-15
0
-3
-6
-9
2024-25
2034-35
2044-45
-12
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
25
Growth in payments was exploding…
40
Per cent of GDP
Payments rising from 25.9% of GDP in 2014-15 to
37% in 2055 or $1.7 trillion in today’s dollars.
Previous high was 27.6% in 1984.
35
30
Per cent of GDP
40
35
Previous policies
30
25
25
Receipts/GDP historical high = 26.2%
(1986)
20
2014-15
2024-25
2034-35
2044-45
20
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
26
…we have made progress in reining in the growth
in payments…
40
Per cent of GDP
Payments to GDP down to 31.2% in 2055
or $1.4 trillion in today’s dollars
35
30
Per cent of GDP
35
plus implemented
measures
Previous policies
40
30
Currently legislated
25
25
Receipts/GDP historical high = 26.2%
(1986)
20
2014-15
2024-25
2034-35
2044-45
20
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
27
…our proposed policies would keep
payments relatively constant
40
Per cent of GDP
Per cent of GDP
35
30
40
35
plus implemented
measures
Previous policies
30
plus remaining
measures yet to be
implemented
25
25
Proposed policies
20
2014-15
2024-25
Receipts/GDP historical high = 26.2%
(1986)
2034-35
2044-45
20
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
28
International net debt comparison
-50
0
50
100
Greece
Japan
Australia 2054-55 - Previous policy (a)
Italy
France
United Kingdom
United States
Spain
Australia 2054-55 - Currently legislated (a)
Germany
Canada
Korea
Netherlands
New Zealand
Australia 2014-15 (a)
Australia 2054-55 - Proposed policy (a)
Per cent of GDP
150
200
Per cent of GDP
-50
0
50
100
150
Note: (a) Commonwealth general government net debt only; does not include net debt of states and territories.
Source: Treasury projections for Australia, IMF World Economic Outlook (October 2014) estimates for 2013 for all other countries.
200
150
Net debt was heading towards
unsustainable levels… Per cent of GDP
Per cent of GDP
150
122% of GDP or $5.6 trillion in today’s dollars
100
50
100
50
Previous policies
0
-50
2014-15
0
2024-25
2034-35
2044-45
-50
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
30
…our considerable progress to date will
almost halve net debt…
150
Per cent of GDP
Per cent of GDP
Net debt would reduce to 57.2% of GDP in
2055 or $2.6 trillion in today’s dollars
100
50
100
plus
implemented
measures
Previous policies
150
50
Currently legislated
0
-50
2014-15
0
2024-25
2034-35
2044-45
-50
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
31
150
…our proposed policies would see net debt
eliminated by 2031-32 Per cent of GDP
Per cent of GDP
100
50
150
100
Plus
implemented
measures
Previous policies
50
Plus measures yet to
be implemented
0
0
Proposed policies
-50
2014-15
2024-25
2034-35
2044-45
-50
2054-55
Note: Fiscal projections assume a further 40 years of uninterrupted economic growth.
32
Our Budget measures will help to rein in the
explosion in health costs
8
Per cent of GDP
Per cent of GDP
8
7
7
6
6
5
Previous policy
5
4
3
Currently legislated
Government policy
4
3
2
2
1
1
0
0
33
Rising spending and lending on education per person
Real dollars per person
Real dollars per person
2,000
2,000
Total Education
1,600
1,600
1,200
1,200
800
800
400
400
0
2014-15
2024-25
2034-35
2044-45
0
2054-55
How can we pay for our future?
1. Participation
• Grey Army
• Female workforce participation
2. Productivity (increasing output per hour)
• Investment in new capital and infrastructure
• Innovation and technology
• Entrepreneurship and competition
• Skills and education
35
How can Government help?
Enable consumers.
Facilitating change rather than controlling
change.
Living within our means.
36
Next - the conversation
We must continue to make the changes that
unlock the vast potential of Australia’s future.
This is a conversation the nation wants to have.
37
The Hon J. B. Hockey MP
Treasurer