Population Ageing and Projections of Government Social Outlays in Australia

This paper makes new projections of government social outlays for Australia. The calculations suggest that government social outlays will increase considerably as a percentage of GDP over the next 50 years, by 7.3 per cent of GDP in the base case. This is a greater increase than that found by previous investigators. Over 60 per cent of this increase will occur between 2011 and 2031, the years when the baby boom generation retires. The major contribution to this increase will have come from increased government outlays on social security. Lower rates of net immigration are shown to yield an even larger increase in the percentage of government social outlays in GDP. The paper also considers the disincentive effect of taxation and the effect of in-creasing the age of retirement. However, notwithstanding the trends suggested by the projections, the paper argues that there are a number of reasons to be sanguine about the implications of ageing on the share of government outlays in GDP.