Defusing fiscal time-bomb will be an age-old question

Josh Frydenberg argues for better training for older Aus­tralians to stay in the workforce.

Treasurer Josh Frydenberg at The Australian’s Strategic Forum in Sydney on Monday. Picture: Nikki Short

Josh Frydenberg will flag Aus­tralia’s ageing population as an economic time-bomb that must be addressed while arguing that the fruits of the government’s fiscal discipline will be enjoyed by future generations.

The Treasurer will use a speech at CEDA’s annual dinner on Tuesday night to again defend the government’s determination to achieve a budget surplus at the cost of further short-term fiscal stimulus.

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He will link spending restraint with reducing the national debt burden, with Treasury’s budget papers showing net government debt in 2019-20 is expected to be $361bn, or 18 per cent of GDP.

“With the budget back in balance for the first time in 11 years and on track to return to surplus, it’s important that we focus not just on the ‘what’ but the ‘why’,” Mr Frydenberg will say.

“At $19bn per annum, our interest bill is more than double what we invest in childcare and nearly as much as we spend on schools.

“Our debt burden represents not just a cost to the budget, and therefore every taxpayer, but also an opportunity cost as it constrains the government’s ability to invest in other areas.

“If we don’t remain fiscally disciplined today, the next generation will have to pick up the bill tomorrow.”

As discussed with @LeonByner5AA, the importance of responsible budget management is that it allows us to pay down debt & reduce our $19 billion-a-year interest bill.

Money that could otherwise be spent on essential services like education, healthcare & aged care. pic.twitter.com/GAKYqmNFM3

— Josh Frydenberg (@JoshFrydenberg) November 15, 2019

Mr Frydenberg will also point to the challenges presented by an ageing population, noting that the number of working-age Australians for every person aged older than 65 was steadily diminishing.

“In 1974-75, it was 7.4 to 1 and 40 years later in 2014-15, it was 4.5 to 1. It’s estimated over the next four decades to fall to just 2.7 to 1,” he will say.

“Since the first Intergenerational Report was released in 2002, we have gone from 13 per cent, or 2.5 million people, being aged 65 and over to 16 per cent, or four million people, today.

“Our median age, now 37, has increased by two years since then, and life expectancy has gone to 81 for males and 85 for females.”

Mr Frydenberg will make the case for a range of policy ­responses to meet the challenge, including greater workforce ­participation and productivity growth.

Workforce participation has trended upwards among those aged over 65, increasing to 14.6 per cent from 12.3 per cent over the past five years.

Twenty years ago, only 6 per cent of over-65s were in the workforce.

Honoured to deliver a keynote address at The @australian Strategic Forum today.

I spoke about the importance of a strong economic relationship between Australia & China that advances our national interest, reflects our values & creates opportunities & jobs. #auschina2019 pic.twitter.com/3zEWWBTPVx

— Josh Frydenberg (@JoshFrydenberg) November 18, 2019

However, Mr Frydenberg will argue for greater efforts to be made to ensure that older Aus­tralians have the opportunity to receive training to keep them in the workforce for longer.

“With Australians in work currently undertaking 80 per cent of their training before the age of 21, this will have to change if we want to continue to see more Aus­tralians stay engaged in work for longer,” Mr Frydenberg will say.

“As we implement our economic plan to repair the budget, grow the economy and guarantee spending on essential services, we do face some significant ­domestic and global economic headwinds.

“This will require calm and considered decision-making and (for us) not to engage in knee-jerk reactions to every economic event or request for more government spending,” he will say.