Ageing demographics to crunch global growth

ScreenHunter_08 Feb. 03 14.45

By Leith van Onselen

Over the past few years, I have written a series of articles arguing that the ageing of populations across the globe would have major adverse implications for consumption spending, asset values, and government revenues and taxation.

I have also argued that the impacts from ageing would likely be most acute in Western Nations, although some developing countries, most notably China, would also be negatively affected.

The problem stems primarily from the coming end of the demographic ‘sweet spot’. That is, where there is a high proportion of working age people supporting only a small pool of dependents. Such an advantageous age structure has effected almost all of the world’s major economies and produced a population structure optimal to economic growth – that is, where the largest segments of the population were neither young nor old, but in the middle (i.e. working age).

These demographic sweet spots can be seen in the below charts, which show the dependency ratios of each major economy – i.e. the ratio of the non-working population, both children (< 20 years old) and the elderly (> 65 years old), to the working aged population.

In the Anglosphere, of which Australia is a part, the dependency ratios fell steadily in the decades to 2010. However, in the decades ahead, their dependency ratios are projected by the United Nations to rise steadily as the baby boomers retire and their populations age:

ScreenHunter_17 Jul. 09 12.38

In some major European countries, as well as Japan, their populations aged earlier and their dependency ratios bottomed in the 1990s, which might help to explain some of the economic malaise currently being experienced across those regions:

ScreenHunter_18 Jul. 09 12.38

Earlier this month, Index Universe published an interesting report estimating the impact of population ageing on a wide range of economies. And the results aren’t pretty:

…until recently 3–4% growth in real GDP was considered “normal.” So it should come as no surprise that the economic performance of the past few decades has strongly influenced expectations about economic growth. However, when optimistic expectations get detached from reality we risk creating a significant expectations gap—a disconnect between what we take for granted given our recent experiences and what we should anticipate given simple arithmetic.

…favorable trends in the size and composition of populations have helped to fuel the rapid economic growth experienced in the developed world over the past 60 years, and their reversal plays a crucial part in the current rapid deceleration in developed world growth…

We forecast growth in Real Per Capita GDP (holding everything else constant) for every five-year interval between 1950 and 2050, based on the demographic linkages observed in the 1950–2010 data spanning 22 countries. These are not “normal” GDP growth rates, they are abnormal GDP growth rates, reflecting the impact of a demographic tailwind or headwind…

ScreenHunter_16 Jul. 09 12.24

All 12 countries will confront varying speeds of demographic headwinds in the coming decades, first in the developed economies, then in the older emerging economies (China and Russia), and finally in the younger emerging economies (Brazil and India). These headwinds get stronger over time and appear to stabilize in the developed world and the older emerging economies only after about 2040. For the younger emerging economies, the demographic headwinds do not become acute for perhaps another 20–30 years.

All 12 countries enjoyed demographic tailwinds during the past 60 years, so these headwinds will feel more obstructive than they are. It is human nature to consider our personal experience to have been “normal,” so we evaluate subsequent events in comparison with this self-referential “norm.” If the people of Japan consider the former tailwind of 2–3% to be “normal,” then a future 2% headwind will feel like a ponderous 4–5% drag, relative to expectations. On average, the countries in this analysis enjoyed benign demographic profiles that boosted GDP growth by around 1% per year during much of the past six decades…

Our main goal in presenting these results is to correct the common misconception that developed countries went through a “normal” period of high growth, as if we are all entitled to fast-growing prosperity. In reality, the developed world is entering a new phase in which the low fertility rates of past decades lead to slow growth (in many countries, no growth) in the young adult population; young adults are the dominant engine for GDP growth. Mature adults, many of whom are at or near their peak productivity, are poised to retire, creating an impressive surge in the rolls of senior citizens. These newly minted senior citizens, transitioning from near-peak productivity to retirement in a single step, will be drawing on the economy while no longer producing goods and services. The unequivocal good news of a steady rise in life expectancy means that these retirees will create a very substantial drag on GDP growth, as these seniors move from peak productivity to negligible productivity in just a few years.

The danger is not in the slower growth. Slow growth is not a bad thing. It’s still growth. The danger is in an expectations gap, in which we consider slower growth unacceptable. If we expect our policy elite to deliver implausible growth, in an environment in which a demographic tailwind has become a demographic headwind, they will deliver temporary outsized “growth” with debt-financed consumption (deficit spending). If we resist the necessary policy changes that can moderate these headwinds, we risk magnifying their impact.

As argued above, the high growth rates experienced in the decades leading-up to the global financial crisis were an anomaly and growth is likely to be far more sedate going forward as the population ages and dependency ratios worsen. And although Australia won’t be hit as hard as some other nations, it too will feel the pinch.

[email protected]

www.twitter.com/Leithvo

Unconventional Economist

Comments

      • +1. Might temporarily solve things for Oz. What about Russia, China and Japan? Where are they going to get millions of immigrants from??

      • Leith I was being deliberately provocative knowing the big following here for stable population views – couldn’t help myself!

        International migration would alleviate in some cases however I do recognise that challenges do exist, migration would need be on a substantial scale, pose minimal burden on intake countries welfare systems, being relatively open migrants likely to choose destinations offering best prospects (and these will not exist in all ageing demographics), barriers to social/cultural adaptation etc.

        One day the choice may no longer be in our control.

      • Immigration also kicks the environmental can down the road as well. Overpopulation is the world’s biggest environmental problem.

      • to flyingfox:

        Russia gets approx 2MM guest workers a year from ex republics of USSR (Kyrgizstan, Tadjikistan, Uzbekistan etc.). That is #1 work force importer in Europe and #2 in the world (after the U.S.)…

        …does not really solve the problem though, as the majority of this incoming work force is not officially registered…

      • I’m surprised such a dispicable comment has been allowed to remain on the board. Mod has deleted comments far less disgusting than this.

      • BubbleyMEMBER

        A brave comment for someone who calls themselves an oxidised obsolete coin.

      • A brave comment for someone who calls themselves an oxidised obsolete coin.

        Yes, but I differ in that I still may offer utility.

      • I hope when you are old the
        euthanasia will be already allowed, so you can benefit from it.

      • I hope when you are old the
        euthanasia will be already allowed, so you can benefit from it.

        Sounds like the shifting of the retirement age to 67.

        To be implemented once most of the baby boomers have gone past that way marker.

        It is the baby boomer way, make (and wish for) every other generation carry a burden greater than them.

      • Euthanasia is a topic that I struggle with. The utilitarian in me can find arguments for it but then when I start attempting to construct a decision system it all goes to bits. A lot of people I know, most of who are involved in health, have all got their euthanasia systems in place. That is permission to flick the switch has been granted should quality of life deteriorate to an agreed upon level. Others I know have even spoken with skilled loved ones and asked them to do an under the counter job that won’t look too suspicious, just speed things up a bit. But what about those who either can’t let go of a loved one, and therefore wouldn’t be able to make the call, or don’t have any loved ones. The doctors and nurses have a duty to keep them alive for one more day.
        Whether it is right or wrong, I personally see a future where infanticide is still considered abhorrent, abortion allowed, and euthanasia introduced. If we avoid plagues and wars the burden upon society will grow too great.

      • Footstore
        You are over thinking it. If you come across an animal that is dying and in pain, you do the humane thing and put it down. Why not be humane to humans?

        What burden
        Overpopulationisamyth.com

      • Euthanasia for the most part is ridiculous, I know that, any sane minded person knows that.

        The problem here is the number of people showing up on the right hand side of the population as dependents.

        The thing is, this for all intents and purposes is a social construct. Much like China Bob comments on in regards to ou housing prices.

        We collectively let it happen, and as long as we don’t truely despise the system, as lng as we just want to join the exalted ones, then exploit everyone else like the prevailing ones do now, it won’t change.

        Baby boomers will scorch the earth to fulfil their unparalleled profligacy.

        They can not be reasoned with. You have more chance teaching a chimpanzee how to solve a rubik’s cube.

  1. One thing I have not been able to resolve is whether demographics will benefit or detract from my childrens future. Will they/we enjoy low unemployment as the wrinklies move on from their jobs + cheaper housing as people downsize? Or will the economic malaise of a lower productive population detract from youth job prospects?

      • When adult diapers start out selling baby diapers (which is happening now in Japan) then you have a problem. As Madoff will tell you there always needs to be new people entering the scheme to keep paying those that are cashing out.

    • Alex Heyworth

      Should improve them, as long as they are willing to work in aged care, health industry, pharmacy or similar industries.

      • At first blush that sounds right. But wait – is our socialised medical model going to be able to support these increasing demands as more workers (supposedly) retire?
        Am I hearing that these increased medical needs are to be paid for by a shrinking workforce?

      • Alex Heyworth

        There will be no shortage of jobs. I didn’t say they would be well paid, or that taxes would not have to rise to fund them.

      • Oh well, Gen X/Y have to reduce their expectations for another 20-25 years then. And their children – having watched their parents go through it – will never want for anything. Wait a minute – that sounds just like my 95 y.o. grandmother.
        And so, the cycle is complete.

    • It will improve their prospects as generally a ageing and decreasing population should be good for the young as it should increase the amount of resources per capita that the country has.

    • As with everything, there will be winners and losers.

      An ageing population is not the end of the world, providing you plan for it (like Australia has with compulsory superannuation).

      Also, all those ageing baby boomers will need medication, low sodium food, holiday accomodation, medical assistance, poker machines, adult diapers, plumbers, gardeners, etc, etc. There’s money to be made, you just need to apply forsight to the situation.

      • There’s money to be made

        Yeah, but money isn’t wealth, and herein lies the problem.

  2. How does the world accept Japan pretending they can avoid total bankruptcy?

    Are world economic forecasts assuming a return to pre-GFC bubble growth until everyone can pay off their debts? Do they just avoid the issue? It just seems practically criminal to pretend all is ok with Japan, not to mention Europe, US, China and Australia.

    • Alex Heyworth

      Most of Japan’s government debt is owed to its own citizens. At the same time as they repay the debt (if they ever do) they could raise taxes by a similar amount to replace the money paid out. Essentially, of course, this is the same as reneging on the debt. Technically it is not the same, but the result is the same. Give with one hand and take with the other.

      I imagine that although it would not affect international finance’s willingness to lend to the Japanese government in the future, it would lead to the population being wary about lending to the government in the future.

      • Seems to me the Japanese government should be open about this future where they will have to print or raise taxes, likely both. Instead, they just tell people not to worry. That’s criminal in my books…

  3. There are only three ways I can think of to improve the dependency ratio.

    1. Every business lobbyists (see 3D1K above) favourite is to increase immigration as this increases the pool of young (and preferably for the lobbyists cheap) workers. Unfortunately this is only a short term solution as eventually these immigrants will age as well and the number of people that need to be imported to keep the dependency ratio down for any length of time is collosial.

    2. The main reason that the dependency ratio is increasing is that people are living longer and hence it could be reduced if people didn’t. Not a very pleasent solution though.

    3. By far the best way however to reduce the dependency ratio is to increase the retirement age. A quick change to 70 and the dependency ratio would be better than it ever was again. Might encourage people to start saving again as well which would not hurt.

    • Agreed with 1). Also immigrants will need a reason to want to come here. While the increased longevity is a reason for the increased dependency ratio, the major reason is reduced population growth. Most countries are struggling to have natural growth rates even close to replacement.

      3) It will help for a little bit. Yes people are productive for longer but I suspect it does little to actually offset their medical costs etc.

    • Alex Heyworth

      Re increasing the retirement age, this is already underway. The age pension age for women has already been raised from 60 to 65 in stages. The next stage is to increase the qualifying age to 67. See http://www.superguide.com.au/how-super-works/age-pension-age-set-to-increase-to-67 for details of the current proposals.

      The preservation age for accessing superannuation payouts is also set to increase. See http://www.superguide.com.au/accessing-superannuation/accessing-super-early/preservation-age-i%E2%80%99m-58-can-i-withdraw-my-super-benefits.

      However, one fly in the ointment is covered in this article: http://www.abc.net.au/7.30/content/2009/s2593641.htm.

      • The real fly in the ointment is deflation and falling asset prices. Many current and future retirees will not have enough in super to last through retirement. Their major asset is their home and the wealth effect of this has been tremendous. If house prices start falling and the government can’t run large deficits then we will have some problems.

    • Alex Heyworth

      Increasing the birth rate also helps. In the short term it increases the dependency ratio, in the longer term it improves it.

      At the moment, births in Australia exceed deaths by quite a bit.

    • Of any nation in the world Australia should be well placed to cope as many people do want to live and/or work in Australia.

      We already use both permanent and temporary immigration, but when conflated and described as just another ponzi scheme, ignore changes Australia has made already. To cope with the baby boomer bulge and ageing oldies whether through superannuation, provisions of health services etc. while younger generations already pay for servcies that were free in the past.

      All very well to increase the retirement age etc. to avoid immigration or access to workers internationally (which it won’t), but would need to be a bit totalitarian.

      I know many baby boomers in adminstrative, education and public sector careers on very nice salaries and packcages who would happily work till they are 75 (“hold their chairs” and create a new “glass ceiling”, but those who own their own business….. are absolutely sick of working.

      If you want to see what effect declining populations have on countries one needs to go no further than Central and especially Eastern Europe, e.g. Serbia negative population growth, declining population, ‘brain drain’, has more pensioners and public servants than people working in the private sector (which pays massive taxes and social security transfers), its not sustainable.

      Germany and UK are cases in point, with UK situation being framed round the EU, immigration and population; while Germany doesn’t, both have similar solutions to ageing populations, as others in the EU do.

      You will see this exemplified by fly in fly out nurses and carers (plus every other occupation) from Central Europe, conversely low level aged care can be had in Central Europe by Germans etc.. Ironically, Turkey is also a target but their Labor minister asks Germany to encourage skilled Turk gastarbeiters to return home to Turkey….. as they have skilled shortages…..

      As Professor Ian Goldin of Oxford University states, for those countries who can see beyond xenophobia and fears of “runaway population growth”, in a generation or two will be competeing on the only continent with natural population increase for skilled workers and immigrants, Africa.

  4. Great article Leath I think you have hit the real nail on the head with this one.

    Have you read any of Harry Dents stuff on this – he pointed to 2010-2012 peak with great accuracy for slightly different reasons than you mention…

    It is not the baby boomers that are the real issue it is “peak spenders” which their research has defined as 46-50 year olds – they are what drives the consumption economy: spending, borrowing, investing…

    And in the US they have peaked as the main group in society and are now declining getting ready for retirement.

    This is the real issue IMO, a perpetual state of consumption and investment decline…and eventually a contraction in credit…money supply.

    Australia is not as bad and I think some above are correct in pointing to immigration to a degree…

    But it is USA, Europe, China, Japan, Russia…all more or less at the same time…

    Commodities are going to keep declining for a long long time IMO (a decade perhaps more), the boom as we have known it may never exist again in Australia in our lifetimes …especially with S America and Africa picking up the game with higher grade resources

    A recession is coming to Australia…I am almost sure of that…the economists that can’t see what is happening with demographics are missing the big picture…IMHO

  5. The Patrician

    I can understand the drivers for increasing dependency ratios, but why do the anglo countries level out after 2030?

    • This is the baby boomer generation moving through the system. In Anglo countries, there was a big drop in fertility post the boomer’s and this has continued. For developing nations, the drop in fertility came much later (east asia) or still hasn’t (parts of Africa).

    • Because the actual deaths are increasing rapidly as the pig passes from the snake and the DP will reduce…

  6. Purple Economy – 1960 to 1970
    Gold Economy – 1970 to 2010
    Grey Economy – 2011 – 2030
    Black Economy – 2031 to 2050
    Green Economy – 2051 to 2200

    Purple – The boomers enter teenage years and the 60’s was, what the 60’s was.
    Gold – The boomers work and start to amass wealth. The property boom get a slow start but builds to a bubble.
    Grey – The boomers retire and the unprecendented aging off the nation begins. The property bust.
    Black – Boomers start to leave the home planet. Oz death rates double. Another property decline.
    Green – Possible global population peaks and then its decline. Property grows in line with the CPI.

    • I am sick of reading about baby boomers being the guilty ones for our aging population. The greatest generational gap was created by feminist movement. The women don’t marry anymore in between their 20s and 30s years of age but much later in life and have less children if any. The delay of having a child with more than 10 years in life is accumulating and creates a grim demographic picture for the future of the West.

      China had this one child policy, which created their own problem, but the West forgot how much important family is and what is the main role of women in any society and the history of mankind. It is not the baby boomers, but the young generation which creates this huge demographic gap and as a consequence – the aging population.

      • No, it is the baby boomers.

        Righthand dependency, i.e. income support from the masses to those deemed as ‘old’ is a social construct.

        If there is no old aged income support, if there is no pension, then there are no right hand side dependents.

        It stands to reason that the longer someone lives, the longer they have to work.

        As I keep iterating, make the retirement age 35 and see what the outcome is.

        People have to retire later, it is that simple.

        The problem is in the year 2013, this message has to be sold to baby boomers, and they are too selfish to be asked ‘can you make the major change for once’.

        A generation that has never bourne their fair share, and never will.

        By the way, the major change to family that you rally against was bourne out of second wave feminism, and guess what?? They were baby boomers too.

      • Well said Lori. But it seems from comments here that your view is up against a lot of people who blame the Boomers for the problem of being born and now need them to kick the bucket quick so they can get their hands on some of that filthy lucre they have accumulated. Easier than sacrificing and working for it I suppose.

      • willy,

        I daresay there are LOT’s of Boomers contributing a whole heap already ; to their families. And quite possibly this is the best way to redistribute their wealth where it can do the most good.

        They can’t take it with them so better they self distribute rather than have some totalitarian like Rusty Penny confiscate it and spread it amongst the needy proletariat where it can be wasted on pokies and “progressive” white elephant projects like desal plants and the NBN.

      • Easier than sacrificing and working for it I suppose.

        Now let’s examine this away from the altar of baby boomers.

        The 40 hour working week in the western world tended to implemented after WWII, prior to that half or full day saturdays was common.

        Thus, ever generation prior to the returnig WWI vets and baby boomers worked harder than they did. Likewise, we are now seeing a rise in hours worked amongst those after baby boomers.

        Thus it looks like every generation after baby boomers will work harder.

        Now, lets look at the form, and reform of welfare during the boomers lifecycle.

        Prior to WWII there was generally an old aged pension at 12% of AWOTE, and life expectency was around 62. It is now 27% with peoplpe living around 20 years after qualifying for it.

        Additional welfare schemes saw:

        Menzies introduce the child endowment for the baby boomer generation, thathas generally continued along.

        We saw boomers get free university education, now to be revoked once they had to start paying for younger generations. (No longer suits them)

        There was cheap child care in the 70’s and 80’s, only for it to now be a crippling expense (No longer suites them)

        We saw policies of full employment, greater workplace security and cheap housing for boomers.

        Now, the former two have been weakened, seeing less going to those that work, and more to those that receive dividend. This is not a virtue of character, but of chronology. owning more equity because you were born earlier is a natural feature, not an exceptional one.

        The latter has seen more lump sums given to baby boomers through a housing bubble. That is not ‘working for your wealth’.

        As far as ‘sacrificing’, there has been no current accuotn surpluses for the lifetime of boomers, and other than the neglect of the disasterous Howard/Costell years, no budget surpluses either. There is no savings record for boomers, there has been excess consumption.

        They spent their parents money, all their own money and are leaving their kids and grandkids in hock.

        No generation has worked less than the baby boomers.
        No generation has spent more than the baby boomers.

        Yet, they want to give a lecture about ‘work and sacrifice’….hmmmm.

      • Rusty Penny, I am writing from the position of a person who would never aspire to live on a pension and I hope I will never be forced (by any extreme conditions) to do so. As a migrant to Australia I am also sick of the housing market, but this has nothing to do with the baby boomer, but with special vested interest, which the whole Australia accept and support with its vote. So don’t blame any generation.

        If the young Australians are not satisfied with the unfair housing policy, why don’t you protest and express your deep disappointment with housing policy and make something to change it? Every government would follow its own agenda and its own interest until there is no reaction from the voters. I don’t think all parents don’t give a s***t for the future of their kids and whether they can buy a home or not. The culture changed and this is the fast and easy money making culture, which is not the average baby boomers’ lifestyle, but the new generations’ one. I haven’t seen any boomer of the kind “I want it and I want it now!”, but most gen Y are exactly that kind.

      • They can’t take it with them so better they self distribute rather than have some totalitarian like Rusty Penny confiscate it and spread it amongst the needy proletariat where it can be wasted on pokies and “progressive” white elephant projects like desal plants and the NBN.

        No this is where you roam around in your flights of fancy.

        I’ve never espoused totalitarianism.

        I don’t want any claim to boomers wealth, I just seek to prevent or retract policies that enable me to earn mine. Planning laws are to preserve boomers wealth and make me pay an excessive amount for mine is but one example.

        More of wealth confiscated from me via income tax, is spent on the old aged pension, than any other government outlay.

        I abhor gambling, and large scale gambling outlets focus majorly on retirees.

        Wingnut.

      • Rusty Penny, I am writing from the position of a person who would never aspire to live on a pension and I hope I will never be forced (by any extreme conditions) to do so. As a migrant to Australia I am also sick of the housing market, but this has nothing to do with the baby boomer, but with special vested interest, which the whole Australia accept and support with its vote. So don’t blame any generation.

        No.

        I will blame the boomers, they are the major vested interest.

        It has been a deliberate policy to channel wealth from young to old because the ‘old’ in this case didn’t save enough for themselves.

        They have been many ancilliary beneficial parties as well, but target stands.

        If the young Australians are not satisfied with the unfair housing policy, why don’t you protest and express your deep disappointment with housing policy and make something to change it?

        Because I’ve altered my plans to emmigrate, and should see that through at some time in the future. My future isn’t Australia so I won’t waste my energy.

        Every government would follow its own agenda and its own interest until there is no reaction from the voters.

        Yep, and whilst a large chunk of voters a choosing themselves, reagrdless of the cost, regardless of legitimate voices expressing their concerns this won’t change. I agree, but as stated.

        Boomers can not be reasoned with.

        I don’t think all parents don’t give a s***t for the future of their kids and whether they can buy a home or not.

        Not their own kids, sure, boomers are observing that rational thought, but they don’t give a shit abuot anyone elses kids.

        They don’t rally against the current position, they aspire to join the beneficiaries, and despite all the knowledge that counter the viability of this, it isn’t changing their mindset.

        The culture changed and this is the fast and easy money making culture, which is not the average baby boomers’ lifestyle, but the new generations’ one.

        A majority of investment properties are owned by boomers.. an outright majority. That can’t reconcile with your claim.

        I haven’t seen any boomer of the kind “I want it and I want it now!”, but most gen Y are exactly that kind.

        😀

        The expression of gen Y is in no way unique, they are exhibiting the exuberance of self-centredness of every generation prior to them has shown at contemporary ages.

        No other group of elders however is adamant at protecting at what they see they are entitled to, the standard of living they ‘deserve’ in retirement and are so willing to cannabalise their children and grandchildren to achieve it as the baby boomers however.

      • Alex Heyworth

        @RP “People have to retire later, it is that simple.The problem is in the year 2013, this message has to be sold to baby boomers, and they are too selfish to be asked ‘can you make the major change for once’.”

        Actually, RP, as I pointed out above, changes have already been made in that direction. Astonishingly, these changes have been proposed and endorsed by baby boomers.

      • Actually, RP, as I pointed out above, changes have already been made in that direction. Astonishingly, these changes have been proposed and endorsed by baby boomers.

        Astonishingly, you are not putting forward the fine print.

        This will finalise in 2023, affecting those born 1957 or beyond (I know of the scaling from 2017), thus effectively drawing up the plank once they have got theirs.

        The crux of the demographic bubble needs to be confronted now, not a generation having already adjoined their mouth to the public teat, then telling us it’s good to raise the retirement age.

      • Alex Heyworth

        RP, I agree it should have been tackled a bit earlier. Consideration should also probably be given to delaying age pension qualification further, as well as the preservation age for super. And I strongly disagree with the reduced tax for over 60s, although I now benefit from it.

        It would have been a difficult task to sell to the electorate anything that is too immediate and not gradual in its introduction. This probably does reflect self interest on the part of boomer voters, however remember that most of them did not have access to super for a large part of their working lives. I did and I am very grateful for it.

        As far as voting for self interest goes, I doubt if boomers are different from any other generation. Voters can sometimes be convinced to vote against their own self interest, if they can be convinced the national interest demands it. But rarely.

      • To avoid the looming generational war…

        We also need to tax the asset rich/cash poor (over 65′s) more.

        1. GST to 20% and raise welfare and the tax free threshold accordingly to compensate.
        2. Land tax to replace stamps and create reverse mortgages from Centrelink for those that are asset rich/cash for to pay.
        3. CGT on all property sold under 10 years. Exemptions for real reasons to move – health, babies and work. No CGT after 10 years, ZERO!
        4. Death tax on the value over $1million at 25%
        5. Asset test the PPOR (value over $750k) for pension eligibility and also provide reverse mortgages exclusively from the govt, to those asset rich/cash poor. It is not fair that pensioners can live in a $5million dollar home, have $1m in cash and still get a part pension!

        Of course the boomers are different. 70% of them do not want to leave a cent to their kids unlike their parents who did. They even invited a term for it SKIN or SKI as a slap in the younger generations face.

      • drsmithyMEMBER

        Because I’ve altered my plans to emmigrate, and should see that through at some time in the future. My future isn’t Australia so I won’t waste my energy.
        As a matter of interest, do you have a destination in mind that is handling the situation better ?

      • DrSmithy
        Well over 91,000 chose to leave permanently over the last 12 months from a previous Leith story, so somewhere is better…

      • As a matter of interest, do you have a destination in mind that is handling the situation better ?

        No, I can not see any aging western country that does not have baby boomers that are not narcissistic, thus I can not see a better society anywhere.

        It does mean I’ve reconciled that I no longer will pursue being a good citizen, and will pursue self interest, and only self interest.

        I’ll probably pursue a zero income enviornment, then low tax for corporate interests such as Labuan, and retiring in Indonesia or Malaysia, dependent on the contemporary expression of hardline islam at the time.

      • @ willy_nilly

        +1. Some good suggestions except GST. GST will affect younger generations and asset poor more than the boomers.

    • Have to agree with the Rusted out Penny on this one. Baby boomers like to think rocks were heavier in their day, and they had it tough. It’s a load of bollocks as every social and economic policy has been reformed to fit these recalcitrant boomers, as pointed out by RP.

      Their parents shouldered real burdens. They were busy smoking weed and tripping on LSD in the 60’s and 70’s, and being distastfully decadent and hoovering up cocaine in the 80’s.

      Then they have the gall to call us lazy and entitled? There has never been a generation so self serving and entitled as they. Young professionals today have to work 15 hour days and have every bit of paper under the sun to get ahead.

      • Alex Heyworth

        “They were busy smoking weed and tripping on LSD in the 60′s and 70′s, and being distastfully decadent and hoovering up cocaine in the 80′s.”

        A ludicrous and absurd generalization. Most of the boomers did nothing of the sort. A minority dabbled in illegal recreational drugs, an even smaller minority got into them in a big way. Most boomers married young, settled down and raised a family. They never had enough money to squander it on drugs beyond beer and the gaspers.

        The habits you refer to were the preserve of the high income earners or the inheritors of wealth.

        You probably remember the 1960s differently because you weren’t there.

      • A ludicrous generalisation designed to make a point and elicit the response you just gave 🙂

      • Alex Heyworth

        So what exactly was the point?

        Any reason you couldn’t just say it straight out?

      • So what exactly was the point?

        Any reason you couldn’t just say it straight out?

        I would fathom whilst it’s alright for the Goose to say ‘Gen Y wants it now, now, now”, it’s also good for the Gander.

        Except boomer narcissism tends to not like an ugly reflection.

        Those that live in glass houses shouldn’t throw bowling balls.

      • I thought the implication from my comments were fairly transparent.

        The point was that boomers en masse make ludicrous and absurd generalisations about youth, and the real problem arises because it’s these same old ludicrous absurd generalising old geezers who make policy.

        The great emperor (i mean premier) of this great state, his excellency, the exalted one, the great Colon Barnett even made such a generalisation about youth when speaking on radio some months back regarding housing affordability.

        Also, just see what RP wrote.

      • Alex Heyworth

        So your point is that like everyone else, boomers make ridiculous generalizations?

        Profound.

      • Alex Heyworth

        PS,it was RP who started on the generalizations on this post. I don’t think you will find any I have authored.

  7. P.S. If commercial banks didn’t control the money supply we could be OK, but I think this is the real threat…

    At some point pretty soon, QE is not going to be able to goose the real economy anymore. There will be a point (pretty soon I would say) where there are not enough people in the right age ranges in the major economies to stop the decline in credit at zero interest rates…

    People over 50 tend to retire debt, they want a safe retirement, not many start risky ventures (so it is not just household debt, it is commercial credit as well) – so where are the jobs going to come from?? Look at Spain…and their birth rates…

    • “At some point pretty soon, QE is not going to be able to goose the real economy anymore”

      Some interesting discussion along those lines here;

      http://www.consumerindexes.com/index.html

      “June 26, 2013 – BEA Revises 1st Quarter 2013 GDP Growth Downward To 1.78% Annual Rate:

      “Summary

      At best this new release reports an economy with lackluster growth, created at great expense by a combination of unprecedented fiscal and monetary stimulus that have obviously progressed well past the point of diminishing returns. To be fair, many other national governments would be thrilled to be reporting a 1.78% annualized growth rate. But that observation in itself (without mentioning the plunging export numbers) also reflect global economic headwinds that do not bode well for sustaining even lackluster numbers over the balance of the year.

      And we continue to note the one truly serious domestic issue within the data:

      — Real per capita disposable incomes took yet another hit. The astonishing annualized contraction of real per capita disposable income has now reached -9.21% — dwarfing the -7.52% contraction rate recorded in the first quarter of 2009 (the worst quarterly contraction recorded during the official duration of the “Great Recession”).

      And they take a swipe at the use of deflaters to goose the stats;

      “For this set of revisions the BEA assumed annualized net aggregate inflation of 1.26%. In contrast, during the first quarter (i.e., from December to March) the seasonally adjusted CPI-U index published by the Bureau of Labor Statistics (BLS) rose by 2.10% (annualized), and the price index published by the Billion Prices Project (BPP) rose at an annualized rate of 5.35%. As a reminder: an understatement of assumed inflation increases the reported headline number — and in this case the BEA’s relatively low “deflater” boosted the published headline rate. If the CPI-U had been used to convert the “nominal” GDP numbers into “real” numbers, the reported headline growth rate would have been a much more modest 0.96%. And if the BPP index (which arguably best reflects the experiences of the American consumer) had be used as the “deflater,” the economy would have been reported to have been contracting at a -2.30% annualized rate.”

  8. What we really need is a good old fashioned plague naturally accompanied by a war or two. After the wars finished we can have another baby boom and reset this demographic clock.

    • Wars tend to kill off breeding stock, particularly male, not dependents.

      We don’t have a problem of too many breeders, we have a problem of too many RHS dependents.

      This type of a social construct and it’s costing us $51 billion per annum at last count, and rising.

      • Dr. Strangelove:

        ‘Well, that would not be necessary, Mr. President. It could easily be accomplished with a computer. And a computer could be set and programmed to accept factors from youth, health, sexual fertility, intelligence, and a cross-section of necessary skills. Of course, it would be absolutely vital that our top government and military men be included to foster and impart the required principles of leadership and tradition. Naturally, they would breed prodigiously, eh? There would be much time, and little to do. Ha, ha. But ah, with the proper breeding techniques and a ratio of say, ten females to each male, I would guess that they could then work their way back to the present Gross National Product within say, twenty years.’

        Turgidson:

        Doctor, you mentioned the ratio of ten women to each man. Now, wouldn’t that necessitate the abandonment of the so-called monogamous sexual relationship, I mean, as far as men were concerned?

        Dr. Strangelove:

        Regrettably, yes. But it is, you know, a sacrifice required for the future of the human race. I hasten to add that since each man will be required to do prodigious…service along these lines, the women will have to be selected for their sexual characteristics which will have to be of a highly stimulating nature.’

    • We are overdue for a flu pandemic. Usually happens every 80 or so years. The most vulnerable will be the elderly.

      • Alex Heyworth

        “The most vulnerable will be the elderly.”

        Maybe. According to the Wiki article on flu pandemics,

        “Another unusual feature of [the 1918] pandemic was that it mostly killed young adults, with 99% of pandemic influenza deaths occurring in people under 65, and more than half in young adults 20 to 40 years old.”

    • At least I acknowledge that some people find my views ‘loony’. The views you espouse here Rusty Penny are absolutely disgraceful, beyond contempt, indicative of someone who is not well in their mind and soul, clearly deeply embittered by their personal circumstances and failures. This is a generation that has ushered in a period of unprecedented positive social change, and you wish to advocate euthanasia so that you are absolved of any sense of reciprocity ? What an admirable intellect you have.

      • The views you espouse here Rusty Penny are absolutely disgraceful, beyond contempt, indicative of someone who is not well in their mind and soul, clearly deeply embittered by their personal circumstances and failures.

        Well, in some areas you may be deemed Loony – but on this one, you got it absolutely spot-on!

      • yeah, sure thing.

        Your shaming tactics won’t gain much traction that’s for certain.

        What you describe is widely known as a social contract, and reciprocal expectations also involve reciprocal obligations.

        That means not rorting your kids for lump sums that impair their lifelong ability for family formation, for reducing fiscal burden so they can engage in riskier enterprise, and a general better quality of life.

        Your lot have engaged in the opposite.

        Many of us remember the generation before, and how the social contract should be.

        Thus you, and those like you, have forfeited any semblence of good will, as rational outcomes would forecast.

        Enjoy eatting dog food and bathing in kerosene in retirement, because you don’t deserve to receive aid in goodwill when you are invalided.

        And for the record, can you kindly express my failures for all of us here to see?

      • What a vile, pseduo-intellectual pedant you are, Rusty Penny. No, I shan’t be bathing in kerosine, but I will leave you to bathe in your own bile. I surely won’t be the first to leave you. You express your own failures quite well on your own.

    • drsmithyMEMBER

      I await GSM’s condemnation of this sentiment, in line with his spluttering outrage above about euthanasia.

  9. There really are two seperate problems we face.
    1. The ageing of the population.
    2. The baby boomer bulge that is passing through.

    1. Will require policy changes designed for decades and beyond, whereas 2. is really all over by 2050.

  10. sydboy007MEMBER

    Wont part time work for seniors, who want to, help ameliorate this issue, at least initially?