Immigration needs to be ramped up by more than 20 per cent to 280,000 new arrivals each year to reduce the burden of ageing Australians on public services, a new economic report says.
At Monday’s Committee for Economic Development of Australia (CEDA) forum, authors of the report – Connecting people with progress: securing future economic development – warned that critical services would be hampered if governments did not overhaul their approach to policymaking.
One of the report’s authors, (who was not present at the forum) Australian National University demographer Liz Allen, wrote that the nation’s biggest challenge stemmed from the ageing population.
“These include intergenerational inequalities, further confounded by pre-existing socioeconomic inequalities, relating to housing and population distribution,” Dr Allen reported.
Another of the report’s authors, PricewaterhouseCoopers (PwC) partner James van Smeerdijk, estimated that an additional $24 billion in capital costs and $12.8 billion a year in operating costs would be needed by 2025 to meet the projected gaps in aged-care services and hospital beds, due to the ageing population.
“By 2040, this could reach $57.3 billion in additional capital costs and $28.9 billion per annum in operating costs for the same categories,” he said.
Dr Allen wrote that while population ageing was not a new phenomenon, Australia had not experienced the current magnitude and its likely consequences before.
“The scale and future prospects of structural population ageing are the likes of which Australia has never seen, and to that end, Australia is faced with a demographic crossroad,” she said.
Dr Allen also argued that the pressures posed by a proportionately shrinking workforce could worsen intergenerational inequality. In order to avoid such a scenario, she said it was necessary to boost immigration from current levels of around 220,000 a year to 280,000.
Latest figures, however, show that immigration numbers have fallen below 190,000 a year.
“Balancing immigration intake to meet the needs of the Australian economy is an essential element for advancing population wellbeing.
“Of three (Australian Bureau of Statistics) immigration scenarios examined, net overseas immigration (NOM) of 280,000 people per year provides the most benefit in moderating old-age dependency.
“NOM has averaged under 220,000 annually over the period 2004–05 to 2016–17.
“Population ageing places fiscal pressures on the economy as the proportion of older people typically not in the labour force and not contributing personal income tax (aged 65 years and over) increases proportionally to the working-age population (15 years and over).
“Immigration has the potential to reduce intergenerational inequality by easing pressures on the workforce.
“Figure B (above) presents a crude but indicative demonstration of the impact of different net overseas migration intake levels on the old-age dependency ratio.
“Immigration is shown to minimise potential adverse consequences of an ageing population by moderating the proportion of older people relative to the working-age population.”
Meanwhile, Mr van Smeerdijk said the PwC report showed that the scale of community needs in future would be considerable and “some of the projected gaps in social infrastructure seemed unattainable from a fiscal and feasibility perspective”.
“There will be critical workforce shortages with potential gaps of approximately 85,000 nurses by 2025 and 180,000 aged-care workers in 2025, increasing to 400,000 more aged care workers needed by 2040.
“Even if logistically possible, simply scaling up and doing more of the same in the future will mean a very costly health system, and one increasingly seen as no longer fit for purpose.
“It does not fully meet the needs and preferences of people, their families and communities today, let alone in the future,” he said.
Do you believe there are solutions other than increasing migration in order for the demands of older Australians on the economy to be met?