By Jessica Brown
We need a mature debate on growth.
AS DEBATE on population growth loomed over the federal election and public consciousness, it is surprising that another big demographic challenge, population ageing, has hardly been mentioned.
This year's Intergenerational Report projection of 35.9 million Australians by 2050 captured the public's imagination and ire. But, in fact, population projections are not what the report was set up to do.
The original purpose of the 2010 report, like its two predecessors, was to examine and highlight the fiscal challenges that will be brought on by population ageing.
Birth rates have dropped dramatically over the past half-century. At the same time, medical breakthroughs mean we are living longer. The result is that the age distribution of our population has changed - and continues to change - dramatically.
The report predicts that the proportion of Australians over 65 will grow to more than 20 per cent of the population by 2050, up from just over 10 per cent now. This means the proportion of Australians in the labour force will fall and economic growth will slow.
The result will be a growing fiscal gap: under such projections, by 2050 government expenditure will exceed revenue by 3 per cent. Healthcare and pensions will cost us an extra $60 billion a year (in today's money).
Under every realistic scenario, Australia's population will grow. But whether we are able to meet the challenges of population ageing will not be determined largely by the size of our population. Instead, it will depend on the age composition of our population and the proportion in the workforce.
The opposition has copped flak for suggesting that if it wins government it will cut immigration - while pursuing policies it claims will boost the birth rate, such as paid parental leave. Detractors imply there is something sinister in this. But in terms of population ageing, this apparently contradictory set of policies does have some logic.
Migrants to Australia are mostly of prime working age. Skilled migrants, who last year made up about 70 per cent of the immigration intake, tend to be better educated and have better labour market outcomes than the average Australian.
In this sense, our immigration program provides a boost to our productivity and our workforce participation rate - two vital components, along with population growth, of the efforts to meet the cost of population ageing. Many of us would agree that immigration brings other benefits too. But immigration doesn't substantially change the age composition of the population. Migrants get old as well.
It is changes in the fertility rate - not in migration levels - that will substantially alter the age composition of our population.
Australia's birth rate stands at 1.97 babies per woman. This is shy of the ''replacement rate'' of 2.1, although it is relatively high when compared with other developed countries. And while other countries' birth rates seem to be in terminal decline, ours has rebounded in the past few years.
Reaching the replacement rate is not out of the realms of possibility; the US and New Zealand are already there. But even if this does happen, it is likely that we will still have to deal with population ageing - albeit to a lesser extent. This is because we can expect scientists to make big advances in fighting disease in the coming decades, meaning we will all live longer.
In other words, we can't ignore the reality of population ageing and the fiscal challenges it will bring.
Moreover, we can't become complacent about the possibility our baby boom could end. Canada and much of Europe are already on unsustainable demographic trajectories with low birth rates.
So what are the lessons for the debate?
First, there are good reasons to keep migration levels relatively high. We simply don't have a big enough workforce to meet projected demand from employers. And a combination of low immigration and low fertility would be a demographic disaster. But we can't expect immigration to solve our future fiscal problems. Only high fertility can slow the inevitable ageing of our population.
Populist debate about a big versus small Australia is far too simplistic a response to the complex challenges that will be brought about by population ageing - as are caps on population or immigration. Like it or not, population ageing is happening. If we are to have a more mature debate, politicians and policymakers must recognise this.
Jessica Brown is policy analyst at the Centre for Independent Studies and co-author of upcoming report Populate and Perish?