Vested interests perpetuate ageing myths

The Australian business lobby’s advocacy for higher immigration rates and higher population growth is relentless.  Anyone with an ounce of business nous or economic intuition would realise that the beneficiaries from high population growth are existing big business.  In particular those who exert a degree of monopoly power who stand to grow simply as a result of a growing captured market.  Think supermarkets and shopping centres, land owners, media monopolies in television and print, banks and private infrastructure owners.

A recent book by Oliver Hartwich, author of previous titles such as Populate or Perish: Modelling Australia’s Demographic Future, and Why a Growing Australia is Nothing to Fear, has framed the population growth debate in a very distorted way. It presents factually incorrect ‘arguments’ on both sides to reveal a distorted middle-ground discussion.  Indeed, the book, and the publicity material surrounding the it, perpetuates one crucial myth relied upon by pro-growth lobbyists – that increasing immigration can alleviate the ageing problem.

For example:

But thanks to our robust population growth, Australia is relatively well placed to adapt.

Population growth will not stop population ageing but in conjunction with increased workforce participation and improved productivity, it can help meet the costs as Australians grow older.

Some anti-growth campaigners suggest this is some kind of pyramid scheme, where an ever-increasing number of workers is needed to pay for the growing pension and health care costs of their predecessors.

If we have the right policies, such as a shift towards ‘user pays’ health care and pensions (a shift that has already begun via private health insurance and superannuation), it need not be.

As the Productivity Commission points out: “Population ageing can only be conceived as a crisis if we let it become one”. Dramatically cutting population growth is a sure fire way to make that crisis a reality.

One wonders why the author would say that population growth is useless and crucial in the same sentence.

The Productivity Commission has thoroughly debunked the claim that higher rates of population growth can reduce future burdens from higher age-dependency – the ratio of non-working age to working age people in the country.

In fact, high immigration and population growth typically makes the age dependency ratio worse in the long run.

The Productivity Commission forecasts in the table below show that high growth scenarios generate the highest age dependency ratios (see highlighted rows).

In fact, the Productivity Commission’s analysis concludes that:

Allowing for adjustments in the domestic interest rates, population ageing leads to capital deepening and higher wages.

While health costs and pensions rise as share of economic output, education costs drastically reduce.  Rarely do we hear much of the countervailing trend of declining child and youth dependency that accompanies ageing and reduces the labour supply of parents.   We can see that balancing effect in coming through when looking at Australia’s population pyramid:

The only way population growth can decrease the age-dependency ratio in the long run is if the rate of growth perpetually increases.  Hartwich does not deny this fact, even though he suggests it must be irrational to believe it.

Nor are his suggestions to cope with ageing, such as user-pays health care, actually going to make an ounce of difference to the ageing impacts on macro-economic performance.  If people are old and utilising health care it doesn’t matter who is paying from a macro point of view.  The fact that those providing care are not producing other goods is all that matters. Indeed the only way for health care costs to be brought down is to deliver fewer health services.

The simplest way to reduce the dependency ratio is to encourage people to work longer.  The qualifying age for pension in Australia is currently being ratcheted up to 67, in line with similar moves internationally.

Also, we need to consider that ageing is not a unique Australian problem, and is therefore unlikely to impact our international competitiveness as the world comes to terms with its demographic destiny.

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Comments

  1. As someone who is in their mid 20’s I expect the retirement age to be 80 when it comes time for my generation to retire. Its the only way to stop the demographic divide.

    • The ‘demographic divide’ exists because of the entrenched entitlement of abby boomers.

      The right hand side of the dependency ration is purely a function of life expectancy. The qualification for being classified as eligible for retirement needs to be recalibrated ASAP….

      now the tosh from the lobbyist here…

      Population growth will not stop population ageing but in conjunction with increased workforce participation

      Raising the retirement age can also do the same.

      and improved productivity,

      Increased skills training can do the same, but the is the favourite of ‘privatising the profits and socialising the losses’, have some other sovereign nation provide the training costs.

      Whilst most people do not enjoy a net benefit from these outcomes.

      it can help meet the costs as Australians grow older.

      Until those that are left grow old, and then what?

      And then listening to the minebot and his economic oversights….

      “We need more custoemrs for our producers.. blah, blah, blah….”

      It is the entire purpose for free trade here… open up channels in Asia, with over 3 billion people….

      Appeal to one in 330… that’s 10 million customers.

      Make a margin off them of $1 per year for 10 years… you’re a billionaire…

      find trouble appealing to the as a customer base? You’re flooded with Asia students graudating from our universities.

      This is a lay down misere, except the Australia business community is incompetent, too papmpered from protection, legislation protecting them from paying a proper wage and too busy forming duopolies that they have forgotten how to compete.

  2. Yes, the lobbying is relentless.

    http://www.theglobalist.com/storyid.aspx?StoryId=8321
    Snip:
    According to Ponzi demography, population growth — through natural increase and immigration — means more people leading to increased demands for goods and services, more material consumption, more borrowing, more on credit and of course more profits. Everything seems fantastic for a while — but like all Ponzi schemes, Ponzi demography is unsustainable.

    When the bubble eventually bursts and the economy sours, the scheme spirals downward with higher unemployment, depressed wages, falling incomes, more people sinking into debt, more homeless families — and more men, women and children on public assistance.

    That is the stage when the advocates of Ponzi demography — notably enterprises in construction, manufacturing, finance, agriculture and food processing — consolidate their excess profits and gains. That leaves the general public to pick up the tab for the mounting costs from increased population growth (e.g., education, health, housing and basic public services).

    • Don’t forget one other important thing, Violence against foreigners, and radical groups. What u have is basically a replacement of labor that knows thier rights and wage equality with cheap impoted labor, second u have gov saying this is Asia s century which means they have given up on us. mass united visa factories and skilled migrant taxi visas prop up property, quality of life is sliding, how many children who were born here a now homeless while cashed up foreign students live a great life in the city, cash feed to them by our gov and biz lobby groups exporting services and manufacturing to China where they can exploit the many so a few can come here to make life for us a struggle. and because of economy of scale those few for us r many.

      • That is the best case scenario. For a less optimistic long term scenario, just look at riots in UK or France.

  3. I’d take those projection with a grain of salt. I think were probably at the life expectancy peak right now and its all down hill. The golden age of antibiotics is over and without them the life expectancy of anyone with chronic disease like diabetes will be drastically reduced. How this affects hospital cost is anyones guess.

  4. shift towards ‘user pays’ health care and pensions

    Before subjecting his grandchildren to this “innovative” policy, Oliver Hartwich should offer himself up as a test case.

  5. Sorry I stopped reading when I saw “Improved Productivity” and Australia in the same sentence… Being a temporary skilled immigrant if there is one thing I can say its that the amount of people I have seen who take their job for granted is staggering.

    I worked on a project for one of the big 4 banks every single day there were about 10 or more people using their “sick day” allowance because they were either

    a) Hungover (mondays usually)
    b) couldnt be arsed
    c) feeling a bit under the weather (see couldnt be arsed)

    there were also groups (middle managers usually) who went out for lunch on thur/fri and either came back just in time to pack up and go home or didnt come back. Boomers who worked there for 25 years plus and now claim to start work at 5am and finish at 1:30 or work from home but somehow cant manage to pick up the phone whenever you try to call them.

    if there is one silver lining to whats about to hit Aus then it might actually result in Improved Productivity

      • +100 to both above.

        FWA (and the Union mindset that spawned it )is the single biggest obstacle to our future prosperity. It needs to be dismantled and fast. It’s negative effects, like so many many other wasteful imposts, being masked by the resources boom.

        Agree with you SMc. Australia has a huge wake up call coming. The problem is however I think our lazy response will be to further milk the cow rather than make the herd more productive.

        • That’s optimistic!

          Eating the cow and then whinging about a lack of milk is more our style.

        • I’d like to see a middle ground between Work Choices and FWA. Let’s be honest, employers of those who are least able to represent themselves will be screwed over and need to have some sort of protection. Don’t BS me about ‘valuing your employees’. Also believe in breaking the union stranglehold could see $150k truck drivers getting a wake up call when they’re earning $50k under the new regime. Let’s learn the lessons from Work Choices and the abuse of union power.

  6. Stable Population

    Nice piece Rumplestatskin. Living longer healthier lives is a triumph of modern Australia. The (unsustainable) costs of population growth far outweigh any costs of ageing. And in fact as you allude to, there should be no costs of ageing, if we get responsible policies put in place.

    You’ve got to wonder about those big business-funded ‘think tanks’. Who pays the piper…?

    The Productivity Commission stated clearly that immigration cannot make any significant or lasting impact on population ageing: “substantial increases in the level of migration would have only modest effects on population ageing and the impacts would be temporary, since immigrants themselves age”.

    A 1999 Australian parliamentary research paper, entitled “Population Futures for Australia: the Policy Alternatives”, looked at the claim that immigration could offset an ageing population. It found that in order to maintain the proportion of the population aged 65 and over at present levels, “enormous numbers of immigrants would be required, starting in 1998 at 200 000 per annum, rising to 4 million per annum by 2048 and to 30 million per annum by 2098. By the end of next century with these levels of immigration, our population would have reached almost one billion.”

    The paper concluded: “It is demographic nonsense to believe that immigration can help to keep our population young. No reasonable population policy can keep our population young.”

    Importing younger migrants to stave off ageing is an irresponsible pyramid scheme that only leads to a bigger number of ‘aged’ people down the track. Due to large-scale post-war immigration, in 2006 almost one in five (19%) of the overseas-born population were aged 65 and over compared with only 11% of the Australian-born population:
    http://www.populationparty.org.au/libraries/main/exlink.php?url=apo.org.au/research/ageing-experience-australians-migrant-backgrounds

    So as you say, immigration actually makes us older in the long run.

    Population growth is unsustainable. In the long run, the only way to successfully manage ageing is through responsible policies including: (1) Greater productivity; (2) Greater workforce participation; (3) Adjusting eligibility for entitlements such as the aged pension, aged care and subsidised health care; and (4) Increased savings (e.g. superannuation).

    Common sense will eventually prevail…

    __________________________
    http://www.PopulationParty.org.au

    • Mr SquiggleMEMBER

      Some good comments here.

      Our migrant demographic has a median age of 45.

      By comparison, the non-migrant demographic (ie the majority of us) has a median age of 34.

      Having such a high percentage of our population borne overseas is dragging our average up, not down. The more migrants we import, the higher our median age will go.

      We are rapidly becoming a middle-aged country. We are aging before our time.

      Thanks for the link SPP – keep up the good work

  7. Benefactors of population growth “Think supermarkets and shopping centres, land owners, media monopolies in television and print, banks and private infrastructure owners.”

    Pretty much the entire economy…

    • Your logic is flawed, sub prime benefited the US economy until it didn’t. You are guilty of tunnel vision and lack the capacity to see future consequences caused by decisions made today.

      Pretty much like the entire economy….

      • “the capacity to see future consequences caused by decisions made today.”

        Ay, there’s the rub. The natural predilection of the unwise is to embrace their base desires. Including the desire to not look beyond the end of their nose. Especially when everything seems fine. Hence why they do not see the brick wall coming that smashes them in the face.

        Not wishing to be pedantic, but it’s myopia, not Kalnienk Vision, that 3d1k may be evidencing there.

        • Not at all. We are a small modern economy functioning in a global marketplace where all is predicated on growth – in all forms.

          My view is multifold but quickly a couple of thoughts. Firstly, population growth is inevitable, naturally via domestic reproduction and secondly via our role as global citizen and our commitment/obligation in regards to immigration, humanitarian and economic. Our economy is structured around continued growth. This is not likely to end any time soon fanciful to pretend it will. Therefore, as the adaptive species we are we will find ways to address challenges (by some of the economic means suggested here) and embrace future growth, addressing complexities that arise along the way.

          We are going to get ‘bigger’, get used to it.

          • You’ve neatly sidestepped the original context of this discussion.

            Your original statement conflated certain stated benefactors of population growth with “the entire economy”.

            Labrynth countered with the point that certain drivers can benefit the economy up until the point where it actually causes its collapse, and cited US subprime in example. I concurred, and added that the basic problem is myopia vis-a-vis the consequences of what looks good in our near-field vision.

            Your riposte completely avoids the context of what preceded. Fail 1.

            Instead, it embarks on a platitudinous pontification on the assumed inevitability of population growth, the supposed greater good of global citizenship, and the assumed continuation of the growth-based economic model. Fail 2.

          • “We are going to get ‘bigger’, get used to it.”

            You obviously do buy in to Hartwich’s arguments – this is one of his favourites.

            Of course it is actually not an argument that supports population growth as a way of delivering some kind of social benefit.

            Let’s try it in a different context – say the 1980s in New York City. “Crime is going to rise, better get used to it”.

            That’s not an argument supporting more crime. Sounds more like an argument that the criminals themselves might use to avoid being challenged.

          • As I said Cameron, I do lean toward Hartwich.

            It is inevitable in my view and to be accepted, welcomed even, along with the concomitant benefits and challenges increased population will bring.

            As for the New York analogy, yep. Crime increased however since the 1990s violent crime in New York has been on the decline following a range of procedures implemented to address the spiralling crime rate. Notwithstanding that, crime or no, New York is one exciting stimulating world class mega-city and many would live nowhere else.

            [Hartwich has an article in CIS Policy on the subject of mega-cities and Sydney/Melbourne prospects]

            http://www.oliver-marc-hartwich.com/publications/australia-s-metropolises-at-the-crossroads

          • Smithy, I didn’t say natural reproduction was a component in isolation. It will contribute, that not at the rate it once did.

            That’s not how it’s written.

            However, the point is that population growth is completely down to immigration, thus in no way “inevitable”.

    • The owners of these businesses, not the workers – which is a relatively small subset of the general population (even accounting for an equities bias in superannuation funds). Nor do businesses in more competitive industries benefit.

      It’s a classic we benefit, you pay, strategy. Everyone apart from this small elite roup will be worse off.

      • Cameron, recently read a paper Hartwich co-authored on this subject – can’t recall where! I have found much of Hartwich’s work at CIS and elsewhere interesting and at this point lean to the view present in paper I mention. When I find it will come back to this one.

      • LOL. So owners of businesses are not workers?

        So you are seriously suggesting that population growth only benefits certain sectors of the economy.

        The Australian population has been growing for over 2 centuries. So, which sectors have collapsed over that time due to population growth?

        • The owners of these businesses, not the workers

          LOL. So owners of businesses are not workers?

          Umm… do you want to try again?

          • Then to be explained to you….

            Business owners can be workers. But not all workers are business owners.

            So when Cameron says Owners, not workers are “Benefactors of population growth”, he means that the reward under our current economic system that can be claimed from population growth is a function of capital, not a function of labour… or personal exertion.

            People who sell their personal exertion currently see very little direct fiscal reward, and are burdened with considerable decline in commonwealth.

            This it stands that if our economy is dependent on population growth for its own sake, and that sees a very small amount of winners, then it stands that we need to reform the current system.

        • LOL. So owners of businesses are not workers

          If you mean directly, no. Do the owners of Commonwealth Bank work for the bank?

          If you mean indirectly (that all people are workers no matter what their business interests), then not always. Anyone living off their superannuation, with a decent chunk in equities, is a business owner but not a worker.

          So you are seriously suggesting that population growth only benefits certain sectors of the economy.

          Yes. Very seriously in fact. This is uncontroversial. But I am happy to hear your arguments.

          The Australian population has been growing for over 2 centuries.

          True. And?

          So, which sectors have collapsed over that time due to population growth?

          Probably none. If you read closely, that’s not my argument. I argue, as does anyone with a calculator, that population growth won’t reduce the ratio of over 65s and under 15s to working age people in a country.

          • “If you read closely, that’s not my argument. I argue, as does anyone with a calculator, that population growth won’t reduce the ratio of over 65s and under 15s to working age people in a country.”

            I wasn’t responding to that, I was responding to the assertion that due to population growth “Everyone apart from this small elite group [sic] will be worse off.”

            You say this is uncontroversial, yet you seem to concede that, at least in Australia’s case, history shows that to be untrue.

            Re: ageing population, you quoted Hartwich saying “Population growth will not stop population ageing but in conjunction with increased workforce participation and improved productivity, it can help meet the costs as Australians grow older.”

            That seems right to me. We need to improve productivity in Australia and maintain a migration program skewed towards skilled migrants. Your suggestion to raise the retirement age is fully consistent with Hartwich’s quote.

          • “You say this is uncontroversial, yet you seem to concede that, at least in Australia’s case, history shows that to be untrue.”

            I don’t believe I conceded such a point.

            Per capita well-being in terms of economic output, or real per capita consumption, is the thing I argue is lower under high population growth scenarios. If we want to look retrospectively at the last 30 years the same arguments would hold true.

            If population growth was lower, per capita output and consumption would be higher, while the owners of the types of businesses I mention would be relatively less wealthy.

          • Are you implying that in a high population growth rate scenario, and therefore rapidly expanding labour force, labour costs are low relative to capital costs? Thus when planning to expand, businesses will tend to hire workers rather than invest in productivity-enhancing plant and equipment?

            Conversely, in a low population growth rate scenario, the labour market is tighter, thus pushing up labour costs relative to capital costs.

            In layman’s terms, high population growth rate = cheap labour. Is that right?

          • Are you implying that in a high population growth rate scenario, and therefore rapidly expanding labour force, labour costs are low relative to capital costs?

            That seems possible, depending on the rate of capital investment and rate of population growth (and also depends on the rates of change of these figures). But not what I argue.

            Thus when planning to expand, businesses will tend to hire workers rather than invest in productivity-enhancing plant and equipment?

            Possible. But a bigger factor is that resources are diverted to infrastructure duplication – capital that is not productivity enhancing, but simply required for the new people to be as productive as the old. Roads, electricity, sewer, water, communications etc. Profits can be very high under this scenario, but it doesn’t mean that such investment is productivity enhancing.

            In fact it leaves the country as a whole less able to invest in capital deepening (more capital per person) rather than capital duplication (more capital to catch up with more people).

            Conversely, in a low population growth rate scenario, the labour market is tighter, thus pushing up labour costs relative to capital costs.

            Some of this would happen on the margins.

            But I think you have missed the point that in the high growth scenarios the labour force becomes a SMALLER proportion of the population. While the labour force grows, the population grows at a faster rate.

            In layman’s terms, high population growth rate = cheap labour

            In a way. But it is probably more accurate to think in terms of higher costs. High population growth equals higher prices (and lower real wages), since much of our productive capacity is caught up in the duplication game, the care and education of children, care and health costs of the elderly and so forth.

  8. Looking back to history of human-kind and our natural environment, it seems like that everything has tendency to revert to its mean as statistic masters always said.

    In the past when human population are too many or increase too rapidly to be sustainable, we can always rely on natural disasters or plagues or big wars to reduce the balances. Then, when the balances are too low, the existing population can feel a bit satisfaction and happiness due to abundance and less competition to natural resources, thus starting a new population boom.

    The only exception in the history is from the science renaissance era and later on the industrial revolution which really created huge population boom due to improvement in medical skills and productivity. However, I have a feeling that everything’s good in life has a limit and we are seeing the edge of the limit probably in our lifetime.

  9. Our population will grow. At what rate will need to be determined and the variable that can be modified is of course immigration.

    If we are to maintain the God given relatively harmonious, free and high living standards we currently enjoy it will mean keeping that population growth at levels that ultimately can afford those pleasant standards. A balancing act.

    The quality of our future however will undoubtedly be predicated on how we embrace improvements in Productivity. If Australia is not prepared to work harder for it’s lifestyle blessings, then over time they will erode substantially.

  10. When today’s young will be ready for retirement the situation will be very different from indeed:

    There will be next a whole generation, which will not know what is like to have grand-parents or gran-grand-parents. As women are less ready for family and motherhood at fertile age and wait to have kids too late in life in their 30, 40s even 50s (if they can have them at this age), the society is shifting to more older people in one generation. The immigration doesn’t really change that pattern, it actually worsen it. There is a structural demographic shift, which is not natural and it will cost much more to the society, than now one can imagine, through the medical cost of the working families, but not because of the retired old people.

  11. No thought for sustainability. From what I’ve read they are winning by stealth anyway. We should know by now that it matters not what the voters want, or desire.

    • +1 – sustainability
      Everyone appears to have a very short memory with regard to Australia’s key vulnerability – water supply.
      Prior to the once in 60 – 100 odd year flood, Brisbane’s reservoirs were at dangerously low levels, despite the huge capacity that Wivenhoe dam has. The Murray Darling produces more than a third of our food and there are already bitter rows about land salination. Can you seriously see us being able to tap water in the NT and pipe it to Adelaide? Give me a break.. When our non-renewable resources run out, the last thing we’ll need is a big, thirsty Australia.

      • On top of that Rob, as we run a CAD, the population explosion they want will be borrowed into reality.

        I have zip faith in any of these plonkers. Rather than seeing some good things for my daughter all I see is lower standard of living, and lots of scary government taxes and regulations in the future.

      • Desalination plants, nuclear desalination, continued improvements in membrane technology and methods as yet unknown.

        • rob,

          Prior to the Brisbane floods, the Brisbane River had flooded many many times. It was not a 1 in 60 or 100 year event. The last was 1974, I was there. There were at least another 3 of similar magnitude during the last century and many more lessor events besides. Floods on the Brisbane River are nothing new or anywhere else. Nor are droughts in this country.

          That’s why we need more dams. Lots more. Wivenhoe has been outgrown by SE Qld during dry spells.

          We have to make our minds up. Australia is a harsh environment and if we are to survive here longterm with a decent living standard we need to husband our available sources of water. Not waste it. I know the Greens and others will be up in arms, but water = survival. You have to choose. It’s just commonsense.

  12. Jumping jack flash

    Ah, the population ponzi.

    Consider, it was never a problem back in the day because 100 years ago most people were dead before 60 – 70, hence this was set as the “retirement” age. If a few people got to age 60 after working hard their entire lives, then they deserved to rest the few years they had left.

    But these days most can easily live to 80 and over through the miracle of modern medicine and our greater knowledge of healthy living, foods, etc.

    It is a simple problem, as with most of the modern problems we face, and the solution is also simple: the retirement age just hasn’t kept up with advances in modern medicine and life expectancy over the past few decades.

    We want all the benefits of a longer life, without using it to be productive. We all would like a greater rest at the end of our lives, but sadly this is not reality.

    The real problem we face is, “who pays for the additional unproductive life expectancy of our aged”? So far the answer to that question is “everyone else”. So it is a ponzi by definition.

    Therefore I am a proponent of raising the retirement age to reflect the advances in medicine and life expectancy we have enjoyed over the past decades, rather than flooding the country with people to “take care of the aged” while most of them are living it up on younger generations’ (debt) money.

    • It could be argued that an alternate and related perspective on this dilemma is that, in economic terms, the ultimate beneficiaries of longer life expectancy hence (calls for) later retirement age is the financial “class”.

      Longer living cows can be milked for longer.

    • I don’t agree. The boomers have had much more lavish retirements than the WW2 gen. My grandad lived until he was 80, he had a Datsun 200B during his retirement for about 18 years and going on one of those pacific cruises was a massive deal. Now the boomers go on overseas holidays a lot more and have new cars every 5 years or so. They’re a self entitled lot alright.

      The retirement age will be 67 for gen x and y. You’ve got to be joking if you want to raise it past that. I’m sure their retirements will be much more in line with the WW2 gen than the boomer gen.

      Sure old people can live longer but I don’t think the quality of life is any better. Certainly in physical terms. If you’re 80 you’re usually pretty damned brittle and weak whether or not it’s 1980 or 2012.

      • The retirement age will be 67 for gen x and y. You’ve got to be joking if you want to raise it past that.

        Why?

        When retirement at age 60 was first introduced, the average life expectency for a man was 59. I would suggest they were in a hard way, physically and mentally if they were able to qualify for an aged pension.

        I know many healthy 67 year olds, the equal compariosn would be a man 1 year after life expectency.

        • Most 67 year olds I know are pretty weak. They could probably work but I think it’s inhumane. You sound like a Randist to me.

          However I would be all for your suggestion if taxes were reduced significantly so one could earn a relatively early retirement.

          • Most 67 year olds I know are pretty weak. They could probably work but I think it’s inhumane.

            People work to 65, they do not turn into withered invalid in 2 years. In fact extra vocational activity is likely the slow down regression into invalidity.

            You sound like a Randist to me.

            Then you’d be wrong.

            But you appear to fail to recognise the structure of dependency. As I mentioned above, it is a function of age expectancy. Recalibrate the retirement age to 35 and see the impact

            However I would be all for your suggestion if taxes were reduced significantly so one could earn a relatively early retirement.

            Then once again you fail to recognise the concept of dependency. We accrue financial assets for retirement, to exchange for real assets.

            If a large number, with their financial assets, pursue an increasingly small number of real assets brought to market, it is unviable.

            Dependency should be a percentage, such as the eldest x%. What do you propose if we live to 200, but don’t stop the ageing process in any meaningful way? Have the working 25% provide for themselves and the non-working 75%?

        • I know many healthy 67 year olds, the equal compariosn would be a man 1 year after life expectency.

          Typically the problem for older people finding work is not their lack of ability or enthusiasm.

      • I think it will be raised past this.

        However, qualifying for the pension is just one cost of ageing. Health care is another (both public and private).

        I don’t expect to retire at all – more likely to take period extended breaks throughout life (as I have done a few times). If I am healthy at 70 I will do something productive.

        Expect more boomers to look for part time and casual work through their 60s and even early 70s.

        I have a friend who was 63 and decided to have a ‘mid-career’ change. He thought nothing of working another ten years. He also took up cycling the 30kms to work each day the following year. While it might be a little unusual now, I expect it to become more common.

      • In defence of BB’s , many are financially and other material ways assisting their kids. Therefore the wealth transfer your harping for is in many cases underway.

        • That may be nice to hand down privilege.

          But we are an immigrant nation, 25% of us are born overseas.

          Rs 2,000,000 is a hell of a lot of money in India.

          It is less than a 10% deposit in even Brisbane for an average house.

          So ‘the defence’ you harp on about is not in the defence of many, but in the defence of very few.

          • +100 RP
            The population and property ponzi schemes in Australia is mainly unfair to most recent and younger migrant generation.

  13. “only way for health care costs to be brought down” is to reduce costs! namely bring over-charging doctors and drug companies under control and/or deliver their services more efficiently.

    You get sick, you have few options but to get repaired… it’s all too easy to be extorted by health professionals as they have you over a barrel.

  14. Colin Clark’s magisterial 1967 book, “Population Growth and Land Use”, analyses numerous positive feedback loops in economies as populations are rising, that go into reverse when the population growth levels out or falls. This is even more significant in its economic effects, than resources like oil becoming scarcer and more expensive.
    I am only saying what I do here, not necessarily to argue for “more growth”, but to try and alert people to the kind of tough political options we are going to have to confront, that will go way beyond superannuation liabilities. The end of growth, either planned or unplanned, means serious recession and falling income, not equilibrium at the “status quo”.
    The development of free markets and the creation of wealth requires, along with
    a culture that encourages trust and co-operation; “connections” via transport
    and communication, between potential participants in exchange and trade. These
    connections can be the result of proximity (through density), as well as by roads and other transport infrastructure.
    There is a limit to how much density is achievable as a substitute for transport
    infrastructure, because the production of low-density rural areas, especially
    food, has to be transported to the workers in urban industry. There is actually a correlation between the “density achieved” in urban areas throughout history, and the provision of roads in those urban areas.
    Population growth is one way in which densities are increased, and “demand
    pressures” result in rural land being used more intensively and efficiently.
    Population growth disturbs a certain “status quo” that might have existed previously, where rural production levels were regarded as “satisfactory” to both the producers and the consumers of the produce.
    As population densities increase, and rural production increases, a number of
    efficiencies are realised.
    There is increased competition, and reduced oligopoly, monopoly, and monopsony exploitation.
    Increased specialisation becomes possible, because of a viable number of
    customers for the products of the specialist. “External efficiencies” are
    realised by increasingly networked producers.
    Economies are realised in infrastructure, social institutions, and government. Roads, bridges, harbours, etc, can be utilised by increasing numbers of people without capacity increases being immediately necessary. The same goes for churches and clergy, courts and lawyers, hospitals and doctors, other professionals, government bureaucracies, public buildings, educational and other institutions. This also allows for important advances in sanitation and health.
    Labour productivity growth occurs, and less additional “capital” is required for
    each additional unit of output. The utilisation of land and resources previously underutilised, is a “substitute for capital”.
    Nevertheless, return on capital increases, AND capital formation is also
    increased. A rising population results in increasing returns to existing
    investment, encouraging more investment. Less investments “go bad”, because
    there is a rising number of customers for whatever products or services the
    investor and his competitors provide. More production capital is utilised (and
    even worn out) before it becomes obsolete.
    The products that result from new investments, inventions, and efficiencies, are easily absorbed in a rising population; as are the redundancies and relocations that might be necessary. Younger people, of which there are more, are more mobile and receptive to change. The increases in wealth creation and demand, make society more amenable to changes in employment patterns as the result of advancing technology and methods. There are more valuable “positions” to go around, so that change is less regarded as a threat by those occupying positions of advantage.
    Younger people tend to accumulate capital, while older people tend to “draw down on it”. Larger families result in pressure on the parents to save more, and on the children to provide for themselves because their inheritance will be split more ways.
    (Note: Julian Simon added a further thesis to Colin Clark’s: that a higher
    population includes both more inventive geniuses, and more people to purchase
    and enjoy the fruit of those creative geniuses).
    A high proportion of government spending is inflexible to rises and falls in
    population. This spending is more efficient if population is higher. Much
    government spending is extremely difficult to reduce even when falling
    population justifies it.
    If population is falling, there is much greater pressure on politicians to cheat
    by inflating the money supply, as the fewer numbers of young simply cannot
    sustain the taxation levels necessary to keep the government running, apart from
    the burdens of caring for larger numbers of elderly.
    Younger people are rendered less able to save, capital is “drawn down on”,
    returns on investment decline, more investments fail, investment declines.
    Population increases demonstrated beneficial effects in Holland in the 1500′s, Britain in the late 1700′s, and Japan in the late 1800′s. Holland and Japan were economic successes while importing most of their food. A LOWER percentage of the workforce in agriculture, correlates to wealth increases. These increases in population and in wealth, result in a freer, more mobile society.
    Ancient Rome in its decadent phase, illustrates the effects of falling
    birthrates, including increased taxation burdens and monetary debasement.
    Declining populations, in ancient Rome and in Europe in the 1400′s, brought
    about a simultaneous shortage of workers, and yet lack of demand. Many people clung to their source of diminishing income, becoming protective and demanding restraint of competition; others had serfdom imposed upon them by the government, their freedom to relocate and change their livelihoods being removed. These seemingly contradictory effects are the result of a reversal of the “virtuous cycle” described earlier, that occurs when population is increasing.
    France, in the period from from the revolution onwards, also illustrates economic decline consequent on falling birthrates.
    In underpopulated lands, and where population is falling, the people themselves become more “protectionist” in sentiment, and more vulnerable to illusions regarding “planning” and regulation of production and prices. This only worsens the vicious circle of decline.

    • I’m pretty skeptical about this ‘virtuous cycle’ argument.

      Many of the world best economies (lowest unemployment, highest standards of living) are in the lowest ranks of population growth and have been for decades.

      This is a good starting point

      Germany, Switzerland, Austria, Japan, Denmark and many more.

      • Yes, but did they have low population growth while they were “getting there”, and has their lowest population growth correlated with their strongest economics growth? And it remains to be seen what collapsing demographics hold in store. I am just pointing out from Colin Clark, that the effects go well beyond the sustainability of superannuation.

        By the way, “culture” matters too; all those nations you mention have a good work and thrift ethic.

    • Virtuous cycle of exploiting everything and every system to the limit of endurance.

      Must be a lot of creative geniuses in Bangladesh we never hear about while poor old Norway spirals into the vicious abyss. Sheesh.

      • “Culture” matters. Western civilisation enjoyed its greatest progress during the periods when its populations boomed. There has never been a population explosion like there was among English speakers from approx 1750 to 1920. The culture that correlated with this, was “Reformation” dissenting Protestanism, whose adherents were disproportionally represented among the great “Anglo Settler Revolution” as historian James Belich calls it in his famous book title.

        Can I dare to suggest that no Islamic nation is ever going to match this progress. Japan is the only one in which Christian culture is not a significant contributor; and they at least made a point of copying everything useful about western civilisation, which it seems other cultures are largely incapable of doing. I think it is obvious that “the China miracle” will hit glass ceilings long before Japan did in its economic development. Their property bubble is already insane, long before the stage of economic development that Japan reached before it had one.

        • I will believe that the 21st century belongs to China when I see mass immigration into China of people seeking a better life.

  15. Colin Clark: “Exploding Population Myths”
    The Annual Monash Memorial Lecture, 1977
    “The simple method of judging the trend of population by comparing current births with current deaths is open to an objection so obvious that many people fail to see it, namely, that while current births relate to the present generation of parental age, current deaths relate on the average to the much smaller generation born some seventy years ago. If current deaths are equal to current births, therefore, this must mean that population in the future is certain to decline. Now we are facing depopulation.
    World power depends, even more than it did in the past, on having a large population, not primarily in having large numbers of recruits to the armed forces; but principally in having sufficient taxpayers to pay for the enormously costly equipment which modern armed forces require.
    The cause of our infertility must be sought, it seems, in our social psychology, in a profound disillusion with the civilisation in which we live. People will undertake the undoubted hardships and difficulties of bringing up children if they have firmly fixed in the backs of their minds the belief that there is something good in the civilisation in which they live, that they live in a world worth bringing children into.
    All previous civilisations have had a faith by which they lived. We have almost entirely lost ours, and are becoming totally disillusioned with our civilisation.
    When I said at a public session of the ANZAAS 1976 Conference in Hobart that these declines in reproductivity, if not checked, would bring our civilisation to an end, a substantial part of the audience indicated by their applause that they thought that this was a desirable objective.
    Another observation to be made of civilisations in decline is that they are becoming increasingly bureaucratic and overtaxed. Governments, even more than businesses, tend to have high overhead costs, i.e., those which show little or no alteration with the size of the population which they have to serve. A stationary or declining population thus increases the comparative burden of government expenditure. It also increases the temptation on governments, faced with difficulties in raising money by taxation or borrowing, to try to get out of them by inflation.
    It is significant that France, which for a long period has had an almost stationary population, since the nineteenth century should have suffered more persistent devaluations than most Western countries.
    It can only be some irrational force of social psychology at work which led such large numbers of supposedly rational people to accept with enthusiasm the obvious nonsense about the prospect of the immediate extinction of our industrial civilisation through the exhaustion of mineral and agricultural resources; while at the same time being overwhelmed by pollution. If such people really believed what they were saying, they would have bought agricultural land and mining shares, both of which would obviously be rising rapidly in value if the world really were on the point of exhausting its resources……”
    http://www.cooperativeindividualism.org/clark_colin_population.html

  16. Curious to see that many of the arguments against perceived population growth and immigration have been used for years by “nativist” groups in the USA.

    Does anyone actually understand the definitions of immigration, net overseas migration and population?

    Population (since 2006 the 12/16 rule) includes 2nd year tourists, temporary workers, international students and dependents, neither permanent residents nor immigrants.

    The supposed “runaway population growth” was a statistical blip caused by mooted or rumoured negative immigration and student visa changes 2007/8 and alarmist headlines, this caused a rush of applications, and accordingly spike in NOM affecting population growth statistics.

    Ironically student visa system is being streamlined to make it easier for applicants after govt. was forced to play tough and student numbers plummeted…..

    I have a vested interest assisting candidates from Europe, Turkey etc. to study in Australia, but the concerns about population growth etc. would be more plausible if there was also concerted effort in Australia to adjust urban/house design, transport, lifestyles, attitudes etc.

    With or without population growth Australia has to change…..

    • Good comment.

      Does anyone actually understand the definitions of immigration, net overseas migration and population?

      Hopefully. You seem to. Should those captured by the 12/16 rule (more info here) not be included in the Estimated Resident Population? Why/why not?

      The supposed “runaway population growth” was a statistical blip caused by mooted or rumoured negative immigration and student visa changes 2007/8 and alarmist headlines, this caused a rush of applications, and accordingly spike in NOM affecting population growth statistics.

      Are you saying that the ABS uses Visa application numbers, rather than actual arrivals? Seems odd.

      According to the ABS the main impact of the introduction of the 12/16 rule is to delay NOM estimates. Given that it is applied for travellers in both directions, I’m not sure about the bias (although I suspect what you imply about biasing the growth up upwards is correct).

      If the net change was to increase the measure population (since the rule is applied symmetrically), that might explain some of the blip in the forth chart in this post.

      Something to look into a little more.

      With or without population growth Australia has to change…..

      In what way? Why?

      • Whether it is actual arrivals and departures or visas (the issue with raw visa numbers is that one individual can take multiple visas and/or enrollments in same year), the NOM will be dominated at times of the year by international students and dependents (and fluctuate), off top of my head can be round 40%.

        “Australia has to change” comment reflects the focus in media etc. given to incoming foreigners, immigrants, refugees etc. and their impact upon environment, society etc. but there seems to be little said about Australia’s and Australians’ own carbon footprints exemplified by a preference for large houses, cars, low density living etc.

        Saw photographs taken by a Brit recently of Melbourne’s suburbs….. a sea of newish suburban homes lacking tree cover, and one assumes decent public transport, services etc. If home and car energy prices continue to increase, living in the burbs may not be that attractive…. (comparison, e.g. Turkey’s petrol prices are already nearly double Australia’s)

        Further, few Australians choose to work in skilled or semi skilled shortage occupations e.g. hospitality, aged care, selected trades while in other occupations baby boomer bubble is coming through for retirement without replacements in some cases…

  17. Another issue is that quantitative of headline population figures or stats can have great impact, but my other concern is the lack of focus upon the qualitative side of our population, related ageing…..

    Eastern Europe already has towns and regions dieing due to ageing populations….. not unlike parts of regional Australia being unable to compete with colonial capital cities, lacking investment, communications e.g. high speed internet.

    Yes, we live longer but that also can mean living longer with aged care requirements. I was in situation of having both parents needing care in NE Victoria, at minimum a part time job.

    God help baby boomers who have dependent children requiring support to pay university/TAFE fees etc. and also having dependent parents in care……

  18. Rumplestatskin said:

    “One wonders why the author would say that population growth is useless and crucial in the same sentence.”

    But he didn’t say that. He said population growth can’t stop population ageing, but it can help with the costs of an ageing population.

  19. “The only way population growth can decrease the age-dependency ratio in the long run is if the rate of growth perpetually increases.”

    Yes, but benefits can be gained not only by decreasing the age-dependency ratio ie. benefits can be achieved by slowing the increase in the ratio.

    • Matthias,

      I think you misunderstand. A higher rate of population growth INCREASES the age dependency ratio, therefore ADDING to the costs associated with ageing and ensuring we realise these costs SOONER.

      Therefore what Hartwich says is nonsense.

      “Population growth will not stop population ageing…”

      Correct.

      “… but in conjunction with increased workforce participation and improved productivity…”

      If it doesn’t help at all, why should it be ‘in conjunction’?

      Try my version – “Accelerating your car in first gear won’t stop you going in forward, but in conjunction with using the brakes it can help the car remain stationary”

      It’s a nonsense statement.

  20. If you look at the 10 years increase in life expectancy we’ve had since 1960, but the retirement age has not changed and is still 65! And all this sitting on top of a working age population that gets smaller and smaller as a percentage of the total population.

    We need an immediate jump to 70 years and then a quick move to 75 years.

    But trying telling that to your baby boomer parents and they’ll squeal how they’ve worked hard all their lives and they deserve 30 years of retirement.

    So no government will actually increase the retirement age at anything like the speed needed.

    Instead they’ll do it by stealth by reducing retiree incomes so retirees will have to working even past the retirement age.

    Low interest rates are doing this already by removing the income of retirees.

    Retirement at 65 will be for the rich few, oh and policeman, armed services personel and politicians which their gold plated inflation linked pensions.