Arch Bevis (Brisbane, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on the long-term challenges outlined in the Intergenerational report?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the honourable member for Brisbane for his question, because one of the long-term challenges pointed to in the Intergenerational report to which he refers is, in fact, the challenge of climate change, and if we do not get that long-term challenge right then it is difficult to get all the other challenges right. It is not just an environmental challenge; it is an economic challenge for industries such as tourism as well. The Treasurer yesterday released the Intergenerational report, and it contains some pretty interesting conclusions.

This is the third Intergenerational report, and the intergenerational reports of 2002 and the one following that—those of the Treasurer’s predecessor, the former member for Higgins—pointed to the core challenge of our ageing population. Most critical are the two challenges which come from that again. First, what are we going to do about the impact of a smaller proportion of Australians working in the workforce and, therefore, generating less economic growth than in the past and, therefore, less taxation revenue to fund services in the future? That is the No. 1 challenge. The No. 2 challenge is: how do you actually boost economic growth in order to fill that gap so that we can generate that extra tax revenue in order to fund the future needs of an ageing population in health, in aged care and in pensions? These are the two big challenges which are identified in the Intergenerational report.

Here is a figure which everyone in this chamber should reflect upon: as of today 14 per cent of Australians—one in seven—are over the age of 65. By 2050 23 per cent of Australians—one in four—will be over the age of 65. Take that down to the number of people in the workforce. Forty years ago we had 7.5 people of working age for every person over the age of 65. Today that figure is five people in the workforce for every person over the age of 65. Roll the clock ahead to midcentury and we are down to 2.7 people in the workforce for every person over the age of 65. This defines the core challenge because, unless we can fill that gap, what we are going to see is economic growth going down from its historical average in recent times of 3.3 down to something like 2.7, which actually has a huge impact on revenue and on individual living standards. So the big challenge for each intergenerational report is: how do you plug that economic growth gap which arises from the ageing of the population?

The response to this is that there are two big policy levers available to government and the wider economy. One is productivity growth and the second is what you do with workforce participation. We must boost productivity growth. That is No. 1. What we have in the Intergenerational report is a very clear definition that if we lift productivity growth to where it was back in the nineties—which is around two per cent—instead of 1.4 per cent, where it fell to when those opposite were in office, we boost growth back to an average annual growth figure of something closer to three. That begins to plug the growth gap and begins to plug the revenue gap for the future.

So what are the tools available for us? Boosting productivity growth by (1) investing in infrastructure; (2) investing in skills; (3) investing, also, in the microeconomic reform agenda to cut away red tape from business. These outline the core elements of government economic policy because, unless we deal with these challenges now, they will confront each government as it is elected in the future, because health and ageing will not simply disappear. This is the challenge we face. If you look at the impact of health budgets on state budgets around the country, it is huge: by 2046, absent policy change, state based revenue will be consumed by health and hospitals expenditure alone. So this outlines the core elements of the challenge and the policy agenda which all responsible policy leaders in this country would be advancing. How do we boost productivity growth through infrastructure, through skills and through microeconomic reform; how do we lift workforce participation; and how do we reform the health and hospital system of the future and fund it in order to ensure that we have the services which the seniors of today and tomorrow deserve and need for their futures?