Transcript of Question & Answer Session Ageing and Australia's Economic Outlook

Thanks Dr Kent, Glen Murray from Sundale. Just wondering, with our current consumers are those who’ve saved all their lives, so they’re very much savings oriented, our upcoming consumers are the baby boomers who’ve been known forever to be consumption oriented. How’s that been factored into the forecasts considered by the RBA in terms of the intergenerational wealth transfer and also affordability for health and social care in the longer term?

That’s a good question but I don’t know that I’m going to be able to give you a very good answer to that. I mean yeah I mean I think – I think I’ve heard it said the baby boomers have done reasonably well out of life but I think what they are facing ahead of them, particularly if they haven’t got sufficient savings, is the prospect of, as I’ve suggested, living in a world when they’re in retirement where workers are more scarce, wages are moving higher and the cost of services, in part because they’re going to be wanting to consume more themselves, is going up. So it will potentially be a challenge for those not well placed. And I guess that’s – that’s the point I’m trying to make, that what we need to do is look forward into our futures as best we can and be thinking these things are coming and making adjustments. One of the important ones I think, you want to do it with your eyes open, is to work longer into life if that’s what you need and are able to do. I think that’s happening and possibly more of it will happen.

Good morning, thank you for your speech Dr Kent. Just wondering about the issue of efficiency in human services which as an industry we have over the last 14 years produced well over 30 to 40 per cent efficiency, because we have our funding cut by 1 ½ to 2 per cent every year but yet we’ve managed to maintain our EBITDAs through that period. I’m more interested in I guess the next stage, what are the levers in terms of producing efficiency in human services as unlike goods production where you have machines? Are machines our future in human services?

Well history would suggest that no because services tend to be delivered much more so with people more than machines. You obviously need buildings, we still need machines to be linked into many of the services we provide, but typically it’s just the nature of the service that they have long relied on humans. That doesn’t mean as you’ve suggested that you can’t enjoy significant productivity gains in those sectors.

One of the challenges and we heard about data before from the Chair, is that it’s very hard to measure productivity growth in something that’s much harder to count the outputs of, and what we tend to do, what the Bureau of Statistics and other statistical agencies do, is measure those simply by the number of sort of the output of a service industry, by the number of workers that are in them. So that’s not entirely satisfactory and as you say services do enjoy significant productivity increases, but it won’t I don’t think come from machines. That doesn’t mean that we can’t raise the capital stock in the form of machines and use them to free up some labour in other industries so that those people who might otherwise be working in goods production can work in services instead, and that was the point I was trying to make.

Good morning, Paul Calbury from LASA in South Australia. Chris you’ve made the point that one of the solutions to the ageing population is for people to work longer. There’s a fair bit of debate in the media and in the financial circles that the concessions allowed to superannuation are too generous and should be reviewed. Is there a risk if they’re reviewed too harshly that that might cause a disincentive for people to continue working and trying to save for their future?

Well I’m certainly no expert on superannuation policy. Obviously it has a very important bearing on the decision people take as to when to retire and it’s something that we have to think very carefully about, among many other policies, to try and encourage people I think to work later into life. I was having a conversation about this issue with my sister just the other day, who’s sort of looking quite far in the future in my mind, to her retirement, she’s really still some way away from that, and she was sort of thinking well you don’t want to change the goal posts and that’s certainly true. But I think we have to step back and think about this in a world where if we’re all living in a small community and we’re relying on ourselves we would see that all – if we can be healthy into our older age then all of us working a bit longer is one of the solutions to deal with an ageing population and I think it’s pretty straight forward when you think of it like that.

Dr Kent, Neil from All Care Aged Care. Could you shed some light on what positive outcomes you may have seen or the Board may have seen in other countries that have faced similar ageing issues as us within their communities?

I’m trying to think, not specific to the Board, I myself – well I’ll answer perhaps in the opposite to that. I’ve seen my sense of ageing affecting economies such as Japan and in parts of Europe where I think what they’ve tried to do particularly in some parts of Europe is really just hold on to the status quo, what they’re used to, and that makes these sort of funding pressures, particularly these fiscal pressures just rather extreme. And every time somebody comes out to try and suggest we need to make adjustments to account for a change in the structure of our economy, more older people in our population, people if they want to hold on to the status quo they’re going to make it very, very difficult to adjust, which I think is the point of my talk. We need to adapt, we need to change, we need to be forward looking and I think you can see the dangers when countries try to really resist that.

Chris, Valerie Lions, Villa Maria. Chris I’d be interested in your reflections in the context of the intergenerational report and the aspects around the productivity and participation and population in the context of increased immigration into Australia. It seems to me that that’s an obvious solution to some of the challenges that we have and particularly if we look in the broader global environment where there’s certainly some challenges in some countries that are well over-populated.

No I think that’s true, but I think the point of my talk was that populations are tending – not in all parts of the globe, they’re tending to age in many parts of the globe including in places like China. So it can’t be a solution for everyone, we’ve had a lot of immigration of late so it’s already operating and helping to reduce ageing to some extent. But immigrants come in of all ages and the medium age is 25, so my point is it just has much less effect than a new born baby who comes in at nothing in terms of the age structure of the population. Let me stop there.