Our coming of age

THE release of the intergenerational report serves a political purpose.

IF he's still around in 40 years, you wonder how Wayne Swan will be voting at federal elections and for whom. Because he's kept fit and active and mentored school children, the 96-year-old former Labor treasurer and traditionalist would probably shuffle off to a beachside polling booth after a morning surf, rather than using the iVote device supplied to each of the eight million Australians aged over 65, in the world's first post-post-post-modern direct democracy, version 12.0.

As a one-time tribal elder, Swan would probably opt for either Bran Nue Labor, the Young People's Party or its partisan offshoot, Two-Point-Seven, founded by his 21-year-old granddaughter Anna to further the rights of people aged 18-65 in the face of a grey-power voting bloc that controls national politics in 2050. You can be sure he won't be dallying with the current government. Old Man Swanny still harbours deep animus for El Primo Lind Z. Tanner, leader of the ruling coalition Prime (It's) Time, and his deputy, one-time evangelist, P. Howard Costello.

Looking too far into the future can be fraught, if not downright silly. Could anyone have foreseen today's political economy from the vantage of 1970, when Australia had 12.5 million people, Evonne Goolagong won the Australian Open and John, Paul, George and Ringo called it quits?

But governments are charged with managing risk. They need to make projections about the sustainability of taxing and spending, resources (such as minerals, forests, urban land and water) and the country's capacity to carry its people. By identifying problems and taking early action on these challenges, argues Treasurer Swan, we get ahead of the demographic and climate change game.

"In every area - in fiscal sustainability, in participation and productivity, in cities and infrastructure, in climate change - the lesson is that if we act today then we reap the benefits in the future," Swan told reporters at the National Press Club yesterday.

"In 40 years' time, I want it said ours was a generation marked by foresight and decisiveness."

Since 1993, nations such as Denmark and New Zealand have been preparing so-called "intergenerational reports"; John Howard's Coalition government began the process here in 2002 and yesterday his Labor successors released the third edition, or IGR3, of the Treasury's long-range figuring, Australia to 2050: Future Challenges.

In the long run, thanks to medicine, knowledge, planning and technology, we are not all dead. Lord Keynes would have to adjust the last word of his maxim to "old".

Treasury is projecting a population of almost 36 million in 40 years' time. So by 2050, nearly one-quarter of the population will be aged 65 and over, compared with 13 per cent today. This means that there will be only 2.7 people of working age for every person aged 65 and over, compared with five people today.

Down the track, spending will exceed revenues by about 2.75 per cent, leading to a "fiscal gap". How to deal with this? Cut government services or increase taxes? Labor says no, revenue will be laminated in at 23.6 per cent of GDP for the term of our natural lives. Allow budget pressures to grow and leave the problem for future generations? No again. Grow the economy? Bingo!

"As parents, we are all animated by the desire to pass on to our kids a better and more comfortable life than we had ourselves, but documents like this one remind us of our responsibility as a generation to pass on a better and stronger nation as well," Swan said in his Press Club address.

"I often think of the past decisions that have made the biggest impact on our current quality of life: comparatively simple but profound ones like removing lead from petrol. More hard-fought ones like anti-sex discrimination and anti-racial discrimination legislation that have changed the face of our workplaces. Ones like universal healthcare and the far-sighted economic reforms over many years that have made us more competitive as a nation and more prosperous as a people.

"It's true we can't entirely control how Australia will be different 40 years from now, just as we can't ultimately control how our kids turn out.

"But there is a great deal we can do to guide and shape how our country will be different 40 years from now, and extend to every Australian the opportunity to realistically choose the course of their own life, rather than having it chosen for them by birthplace or economic circumstance."

Swan derided his predecessor Peter Costello for releasing such reports, making grand gestures and exhortations, and then, he claims, taking no action. For Swan, the hallmark of a good treasurer is getting ahead of the game; this is how he, too, will be measured.

Yet Swan is nothing if not a political beast himself. He and his leader, Kevin Rudd, will shamelessly use IGR3 to meet their immediate goal of a second electoral term, deploying Treasury's projections and subtle policy nudges to underpin the political onslaught on inexperienced Liberal leader Tony Abbott during 2010.

Of course, the report is only as good as Treasury is at fiddling the knobs for a clear picture of the future: contrast, colour, brightness and the vertical and horizontal fiscal hold need to be adjusted every few years as more data comes to hand. The recent high immigration of the boom years, the "gold bars raining down on the Australian economy" (as Swan calls the terms-of-trade boost to revenues) and a higher than anticipated fertility rate are just a few factors that have changed the view of policymakers.

Nevertheless, Treasury's best estimates will determine the parameters of policy debates around health spending, pensions, retirement income, Labor's proposed Carbon Pollution Reduction Scheme, tax reform and the planning needs of Sydney, Melbourne, Brisbane and Perth.

Yesterday's IGR3 release, ahead of the start of the federal parliamentary year today, was an attempt to elevate the issues as much as it was to present the Rudd government as forward-thinking, "nation building" and somewhat above the workaday political fray. And to talk up the government's economic credentials and remind the heartland of the woes of others ahead of the Reserve Bank of Australia's expected lifting of official interest rates today.

"Many other countries around the world might be tempted to contemplate the future with a sense of foreboding," Swan told his Canberra audience yesterday. "They know they will have to wade forward knee-deep in high unemployment, massive debt, and a stuttering recovery.

"Here, in contrast, we have a spring in our step. We maintained a triple-A credit rating. Unemployment has a five in front of it. We grew while other economies contracted.

"We're not without our own substantial challenges, but we're largely unencumbered by the kind of widespread hardships that the global recession has visited on most other advanced countries."

Swan's fervent salesmanship, however, calls for a more sober assessment of how focused Labor is on the national weal and how it will face up to challenges; reform is never pain-free and blind faith can prove to be expensive.

In his recent speeches, Rudd has highlighted the need to raise productivity, elevating the economic concept to a mythical, national longing of sorts to be pondered on national days and in prayers. According to IGR3, growth in labour productivity averaged 1.2 per cent in the 1980s, 2.1 per cent in the 1990s and 1.4 per cent in the 2000s.

"This won't be good enough for an ageing population like ours," Swan decreed yesterday. We need to elevate productivity, the biggest of the so-called Ps, along with population and participation. Raising productivity growth to 2 per cent a year for the next four decades, as the Prime Minister has said so often, would raise material living standards by 15 per cent.

"The best way to grow the economy is to maintain our focus on productivity, on investing in skills and infrastructure - nation building, the education revolution and regulatory and tax reform to underpin productivity growth in the decades to come," Swan said. But there are few economic hardheads in Canberra who believe that Rudd and Swan have the iron will of their predecessors to pursue reforms during these uncertain economic times, certainly while the budget is in deficit, which is likely to be the case for several more years.

"Building productivity, of course, is not just a challenge for government," the Treasurer said. "Ultimately, it is Australian workers and businesses that will deliver the higher productivity, by skilling themselves up, tooling up, and working smarter."

Many wonder if the new Fair Work regime created by Julia Gillard, the self-styled champion of the education revolution and productivity, will actually be a hindrance to investment, employment and economic growth.

Asked by a reporter if this was a stretch, Swan replied that he had "great faith" in the nation's ability to meet the 2 per cent a year productivity challenge.

Perusing the depths of IGR3's appendices, you will find one curious development. Apparently, the education revolution is coming to an end. Does it make you want to laugh or cry?

According to Treasury, spending by the federal government on education (schools, higher education and vocational education and training) is projected to fall from 2.6 per cent of gross domestic product this financial year to 1.7 per cent in five years' time; in 2019-20, education spending will creep back up to 1.8 per cent. In today's dollars, national per capita spending on students will be at the same level in a decade's time.

One thing is crystal clear: those students who have gone back to school in the past week around Australia are the victims of catchy sloganeering and weak-kneed politicians with an eye on this year's poll. Today's Australian students will be working longer, if not smarter, and paying more tax over their lives. It's just that they haven't been told yet by politicians of all creeds.

The aged, a growing power in Australia, are unlikely to take a pay cut or lifestyle check in the coming decades. Just watch how the Rudd government courts this voting bloc and how finely attuned it is to its expectations in 2010 and beyond.

If he lives to a Bradmanesque 96, Swan may well wonder how his cohort of policymakers would have handled the challenges of 2050. He may also find himself casting a ballot for his granddaughter's Two-Point-Seven crew and wish he and his peers had "built a country that wasn't just older, but wiser", as he once said, all those years ago.

"A country that wasn't just wealthier, but fairer and more sustainable. And a country not just bigger, but better as well."