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Australia’s Intergenerational Report

Australia’s Intergenerational Report. Considering future liabilities of Government in a fiscal context 22 April 2013. History. 1992 - Senate Select Committee on Superannuation report. 1992 - Retirement Income Modelling (RIM) Task Force commenced operations.

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Australia’s Intergenerational Report

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  1. Australia’s Intergenerational Report Considering future liabilities of Government in a fiscal context 22 April 2013

  2. History • 1992 - Senate Select Committee on Superannuation report. • 1992 - Retirement Income Modelling (RIM) Task Force commenced operations. • 1996 - Commission of Audit report draws attention to the demographic issue using RIM projections and proposed the Charter of Budget Honesty. • 1998 - Charter of Budget Honesty Act 1998 passed.

  3. The Charter • The Charter of Budget Honesty Act 1998 requires the Treasurer to produce an intergenerational report (IGR) every 5 years. • The report is intended to assess the sustainability of current Government policies over the next 40 years. • The Government has released 3 IGRs: 2002, 2007, 2010.

  4. 2010 IGR: Themes/Conclusions • Ageing population, health and climate change challenges for living standards and budget • Early action minimises adjustment costs and economic and fiscal consequences in long run • Responding to these challenges • Responsible economic management: productivity, participation • Fiscal strategy: restraining expenditure growth • Health reform

  5. How the IGR is put together • IGR is a snapshot based on current policy • IGR model • GDP projections based on 3Ps methodology • Constant tax-to-GDP ratio assumption (23.5%) • Model major demographic spending areas • Non-modelled held as constant share of GDP

  6. The 3Ps framework for real GDP Source: Australian Government, 2010, Intergenerational Report 2010, Canberra.

  7. Population growth and combined dependency ratio Source: ABS cat. no. 3105.0.65.001 (2008) and Treasury projections from 2010 Intergenerational Report.

  8. Participation rates Source: 2010 Intergenerational Report and ABS cat. no. 6291.0.55.001. Note: ◊ denotes recent participation figures published by the ABS for 2010-11.

  9. Growth in real GDP per person based on the 3Ps Source: 2010 Intergenerational Report.

  10. Fiscal Gap Source: 2010 Intergenerational Report and 2012-13 Budget . Note: Primary balance measure. For the 2012-13 Budget numbers, 2009-10 and 2010-11 are actuals, 2011-12 to 2013-14 are estimates and 2014-15 and 2015-16 are projections.

  11. Projected path of net debt

  12. Pension and superannuation expenditure

  13. Influence and the IGR • Provides an authoritative long term perspective on major pressures affecting Australia’s future • Useful tool for influencing community opinion • Recognition of long-run fiscal pressures and steps taken to manage spending pressures and liabilities • Productivity and Participation are now key considerations when assessing policy • Significant policy change since IGR1 • Health • Pension age • Modelling capability a key policy tool

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