NATIONAL AFFAIRS by Peter WestmoreNews Weekly
Intergenerational Report: a waste of time and money
, March 28, 2015
The IntergenerationalReport, a five-yearly preview of the situation in Australia in 40 years’ time, inevitably suffers from the fact that it is a government document, in fact a Treasury document, which deals with the government’s own agenda rather than the challenges facing the country in the future.
Under the Charter of Budget Honesty Act 1998, the Treasurer is required to publish an Intergenerational Report every five years that assesses the long-term sustainability of current government policies over the next 40 years, taking account of the financial implications of demographic change.
To date, four such reports have been published (May 2002, April 2007, January 2010 and March 2015).
Because the reports are based on assumptions about population growth, the continuation of current policies and future economic activity, they are probably not much more reliable than the projections of the IPCC (Intergovernmental Panel on Climate Change), which are also based on dubious assumptions.
The 2010 Intergenerational Report, released when Labor’s Kevin Rudd was Prime Minister and Wayne Swan was Treasurer, claimed that climate change was the greatest challenge of our time. This is virtually ignored in the latest report.
The report shows the strengths and weaknesses of an excessive reliance on statistics in the three areas which it identifies as drivers of economic growth: the population, workforce participation rates, and productivity.
Looking at the Australian population in 2055, the report extends current life expectancy figures to claim that, by the middle of the century, Australian men will live to an average age of 91 and women to 97.
Is this realistic?
The current average life expectancy for men and women is in the low 80s. But Trish Power, writing in Super Guide in 2012, reported that the Australian Government Actuary had reported that in the most recent figures released in 2009, the life expectancy of older women had stopped rising.
She said: “A disturbing shift in the life tables is that the life expectancy for women in their eighties and nineties has decreased. The shift is very slight — a matter of a few weeks — but is this significant deviation from the upward long-term trend a sign of things to come for older women, or is it simply a statistical blip?
“For example, five years ago a woman aged 85 years could expect to live another 7.28 years on average. Five years later, the average life expectancy of an 81-year-old woman is 7.08 years — one-fifth of a year less (2.5 months). This drop in life expectancy for women extends to all ages beyond the age of 80.”
The idea that life expectancy will rise inexorably is also contradicted by the growing problems of drug addiction, particularly among young people, poor diets and social issues including unemployment and family breakdowns, which contribute to poor health outcomes.
A further area of concern is the report’s preoccupation with workforce participation rates, by which it means, the participation rate of married women in the paid workforce.
The Intergenerational Report’s authors clearly believe that increasing the number of mothers with young children in the workforce is socially and economically desirable.
It declares: “Australia’s female participation rates remain lower than some other advanced economies such as Canada and New Zealand, and more can be done to encourage women to enter and stay in the workforce. Policies that help to continue to boost female participation will help Australia achieve an even higher level of future prosperity.”
Although the report does not say so explicitly, this is code-language which means expanding childcare facilities to induce mothers to spend more time in the paid workforce.
While childcare may contribute to the GDP, its real contribution to society is negative, because it breaks the link between a mother and her child, and, by imposing social pressures on mothers to participate in the paid workforce, it acts as a powerful disincentive for mothers to have more children.
The long-term threat to Australia’s economic and social growth is the shortage of young children in society. This is contributing to the “demographic winter”, which is already having catastrophic consequences in countries like Japan, Russia and Taiwan.
The demographic collapse will shortly encompass all of Western Europe, where population growth has stalled, and will shortly go negative.
The final area where the report’s assumptions are unreliable is in relation to productivity. While the report highlights the growth of productivity in Australia in the 1980s and 1990s, which it attributes to deregulation of the economy, it rightly points out that, since then, productivity growth has stalled.
This is not surprising, as the deregulation of the economy also caused the collapse of some of Australia’s most important and innovative industries, including high-level manufacturing, the motor vehicle industry, electronics and food-processing.
Until governments have policies which reverse the failures of the past, instead of endorsing them, the Intergenerational Report will be a waste of time and money.