Bernard Salt asks a probing question in support of a Big Australia

While I ultimately disagree with a big Australia, the following paragraph (and indeed, whole article) asks some very important questions. I do not know the answer. Neil? Help!

We have a problem over the next 15 years. How do we fund the retirement expectations of 4.5 million boomers when to date the most we’ve ever had to cater for in any one generation is 2.5 million?

via Big Australia is a taxing problem but one we must get a grip of | The Australian.

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3 Responses to Bernard Salt asks a probing question in support of a Big Australia

  1. onesalientoversight says:

    Funding old age pensions will require an increase in government spending along with a commensurate increase in tax rates. Australia’s superannuation system has invested billions in order to pay for the retirement income of current workers.

    The Australia of the future with 4.5 million retirees can certainly afford to tax itself more. The Federal Government represents around 35-40% of the economy and this can increase.

    At the same time there are inherent savings to be made with an ageing population and zero/negative population growth.

    Housing will cost less. Less people means less demand for houses. This will filter down in the form of smaller mortgages and lower rental rates. The increased taxes paid by Australian workers to pay for retirees will be partially offset by the savings gained through cheaper mortgages and lower rents.

    The government will also be spending less on infrastructure (roads, rail, telecommunications, water & sewerage) as the population shrinks. The demand for electricity will plateau and decrease. There will be less need for new roads and new water and sewerage infrastructure. As the population shrinks the government will be faced with maintaining infrastructure that will be used less and less as the years go by and the population drops. As a result the government will be spending less on infrastructure and have room to increase spending on pensions.

    The government will also spend less on education. The number of school age children will decrease year after year after year, which will result in less money being diverted to this sector. The savings that the government can make on spending less on education will allow more money to be spent on pensions.

    In short – it is easily obtainable. Too many people who worry about the future costs of funding retirees do not factor in the savings that will occur at the same time.

    • eclipsenow says:

      Some excellent points there OSO.

      One further comment: the Dick Smith Population Puzzle asked what on earth developers would do once the demand for new housing started to reduce. Apparently 10% of the Australian economy is stimulated by ‘developers’. Now population stabilisation will have to occur one day, so it’s better to prepare than be caught off -guard. So instead of seeing our building programs as the undisputed king of our economy and litmus test as to how we’re going, surely Australia needs to look to increasing our overseas services? What else could we do to offset losses to developers? Increased employment in overseas education? New export and agricultural markets and services? Manufacturing lithium ion batteries, of which we have the raw materials, to sell km’s to overseas countries? (Australia could become one of the new ‘electric OPEC’ countries selling KM’s to overseas buyers as they buy Aussie lithium-ion batteries).

  2. onesalientoversight says:

    High tech industries that require highly skilled labor, such as Electronics and Pharmaceuticals.

    Replacing coal fired power stations with Geothermal ones as soon as possible will put Australia in the lead in that sort of technology, which will be essential (especially if you don’t want developing nations to have access to nuclear power)

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