Five key takeouts from the recently released intergenerational report

Life expectancy

The life expectancy of Australians is already one of the highest in the world, and it is projected to continue rising. According to the intergenerational report, a boy born in 2062-63 can expect to live an average of 87 years, which is a new record. Meanwhile, a baby girl born in the same year can expect to live for 89.5 years.

Old-age dependency

With the passage of time, a diminishing number of individuals in Australia of working age will provide financial support for their older counterparts. The old-age dependency ratio, which is a comparison of the number of individuals over the age of 65 against those between the ages of 15 and 65, provides insight into the number of taxpayers as opposed to those who will avail themselves of publicly funded services, such as health and aged care. The report points out that Australia, like many Western countries, benefited from a sizeable cohort of Baby Boomers born between 1946 and the mid-1960s.

With the onset of the retirement of the Baby Boomer generation in the 2010s, the demand for expensive government-provided services for elderly individuals has increased. The old-age dependency ratio experienced a rise in the previous decade, reaching 26.6 per 100 working-age individuals. It is projected to decrease slightly before rising again in the 2040s, when Gen Xers begin to retire. By the year 2062-63, the old-age dependency rate is expected to reach 38.8 per 100 working-age people, which will pose a challenge for Gen Z to determine how to support the needs of retiring Millennials.

Home ownership

The report has raised concerns regarding the issue of home ownership, particularly for individuals under the age of 40. The escalating property prices and larger mortgage requirements have made it increasingly difficult for people to become homeowners, resulting in a longer acquisition period. The graph clearly illustrates that the percentage of individuals in their late twenties who own homes has decreased by 17 points since 1981. Delaying the home purchasing process also enhances the likelihood of carrying a mortgage into retirement, while those who are unable to purchase homes will have to rent for an extended period. The report has emphasized that if this trend continues, it could pose a fiscal risk to the financial support systems of older Australians, including age pension spending and superannuation withdrawals.

Climate change and productivity

The report indicates that climate change is likely to result in a considerable loss of labor productivity, with estimates ranging from $135 billion to $423 billion over the next four decades. This estimate accounts for the value of work performed and does not factor in additional costs linked to reduced crop yields or natural disasters. The graph presented illustrates that as temperatures rise, Australians’ work output is expected to decline. The failure of governments worldwide to take appropriate action on climate change will lead to more severe negative effects on productivity. Outdoor workers, such as machine operators and laborers, are likely to be the most affected. The southern United States has already experienced the consequences of this impact this year.

Government spending per person

The federal budget for the current year includes a significant allocation of funds amounting to $680 billion. To facilitate a comprehensive understanding of this staggering figure, the intergenerational report has calculated the spending per capita. In the preceding fiscal year, the government disbursed $23,808 for each person in the country. However, this amount is projected to increase to $40,162 by the year 2062-63, taking inflation into account.

Although the current spending rate is slightly higher than what was estimated in the previous two intergenerational reports, it is not as high as what former Treasurer Peter Costello had anticipated in his own two reports, which constituted the initial ones in the series. The largest expenditure is in the healthcare sector, which is expected to exceed double the current amount and reach $8677 per individual in four decades. As a percentage of the overall spending, it is projected to escalate from 16.8% to over 21%.

Aged care is expected to be the second-largest expense, rising from 4.5% to 8.7% of all disbursements. The defence sector will be close behind, accounting for 8.1%, followed by the National Disability Insurance Scheme at 7.2%.

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.