Population Ageing and Social Expenditure in New Zealand

As the population ages there will be potentially significant implications for a wide range of economic variables, including in particular the fiscal costs of social expenditures. Long‐term fiscal planning requires estimates of the possible future path of public spending. This article presents projections for 14 categories of social spending. These projections are based on detailed demographic estimates covering fertility, migration and mortality. Distributional parameters are incorporated for all of the major variables, and are used to build up probabilistic projections for social expenditure as a share of gross domestic product using simulation. Attention is focused on health expenditures which are disaggregated into seven broad classes. In addition, we explore the impacts of alternative hypotheses about future health costs. While it can be predicted with some confidence that overall social expenditures will rise, the results suggest that long‐term planning would be enriched by recognising the distributions around point estimates of projected social costs.