Today I am proud to launch the 2010 Intergenerational Report Australia to 2050: Future Challenges.
The report provides a comprehensive study of the challenges that Australia will face over the next 40 years, including an ageing population, escalating pressures on the health system, and the environmental and economic challenges of climate change.
These challenges will place substantial pressure on economic growth, living standards and the federal budget over the next 40 years.
The report demonstrates just how critical it is to plan for the future, invest in productivity and participation, maintain fiscal discipline, and deal with dangerous climate change. Taking modest steps now means we can avoid the need for much more dramatic and painful adjustments in the future.
The report shows clearly that the ageing of Australia's workforce will present a particular set of economic and social challenges. The proportion of Australia's population aged 65 and over is projected to almost double over the next 40 years. Today there are 5 working-aged people to every person aged 65 and over. By 2050, this ratio will fall to only 2.7 people.
With proportionately fewer working-age Australians supporting a much larger population of older Australians, ageing and rising heath costs are expected to result in spending exceeding revenue by around 2¾ per cent of GDP in 2049-50. Today, around a quarter of total Australian government spending is directed to health, age-related pensions and aged care. The report shows this is expected to rise to around half by 2049-50.
The report highlights that productivity growth – producing more output with proportionately fewer workers – will be the major contributor to increases in living standards over the next 40 years.
That's why the Rudd Government is delivering a far-reaching productivity agenda, including historic investments in vital infrastructure like the National Broadband Network, skills and training, cutting business red tape and the Education Revolution.
The Government is also taking steps to remove impediments to workforce participation and provide incentives and reward for those Australians who choose to remain in the workforce in their later years.
Steps by the Government to grow the economy and ensure strong fiscal discipline, including through the implementation of the Government's fiscal strategy, will lower future adjustment costs and the economic impacts of the ageing population.
Australia to 2050: Future Challenges also highlights that climate change presents a major threat to Australia's environment and economic prospects.
The Government is committed to introducing the Carbon Pollution Reduction Scheme (CPRS), which will achieve large-scale reductions in greenhouse gas emissions at least economic cost by steadily transforming the economy.
The Government has already expanded the Renewable Energy Target to ensure that by 2020, 20 per cent of our electricity supply comes from renewable sources. This is complemented by the $4.5 billion Clean Energy Initiative, which will support solar, clean coal and renewable technologies, and the $3 billion Energy Efficient Homes Package, which is helping households improve the energy efficiency of their homes.
Australia to 2050: Future Challenges makes it clear that the decisions that are taken in the near term will be crucial to the economic prospects and living standards of future generations. That's why the Rudd Government is determined to tackle the big future challenges, so we can leave a stronger, fairer and healthier Australia to future generations.
The Australia to 2050: Future Challenges report can be found on the Treasury website www.treasury.gov.au.
1 February 2010