Mark Butler MP. - NATIONAL PRESS CLUB ADDRESS

Date:  20 November 2015

Thank you Laurie and thank you very much to the National Press Club for allowing me to deliver this address today on a topic that I think will come to dominate federal politics for many years to come.

I remember well my first interview as the new Minister for Mental Health and Ageing in 2010 after being appointed to what I thought was a really exciting portfolio by Julia Gillard after the election. My first interview was with a journalist I knew very well, a journalist in Adelaide. His first question to me was ‘What are you going to do about the problem of ageing?’ In interview after interview after that I got every permutation of that question asked to me. I was asked about the burden of ageing, I was asked about the crisis of ageing. I was even asked by one journo what I was going to do to fix ageing. These were not rogue journalists. These were thoughtful, professional journalists who were simply reflecting a very deep hostility to ageing that I think permeates our society and many societies around the world.

This hostility has a personal dimension reflected in widespread ageism and age discrimination that older Australians experience day in and day out. These experiences happen in the workplace, they happen in health care settings and in the delivery of a wide range of services including insurance and the like.

More often though older Australians - particularly older women - would raise with me a softer form of ageism than outright legal discrimination. A complaint instead about being constantly patronised as they went about their daily business. A number of women in their 60s told me stories about young shop assistants greeting them with a fixed smile and a ‘hello dear, and how has your day been so far’ in a patronising tone. One woman even confessed to me that she just wants to punch them. I didn’t include that in my book, I didn’t think it did much for my theme of intergenerational empathy, but I think it gives you a bit of an insight into the frustrations of many baby boomer women.

The political hostility towards ageing is a hostility towards the trend of ageing rather than the individuals who are involved. It reflects the orthodox view that you hear not just in Australia, but all around the world that population ageing will cripple the economy, will cripple the labour market, it will bust the federal budget and it will usher in a gerontocracy which sees older voters use their sheer weight of numbers to entrench their privileges at the expense of everyone else.

The work of a federal minister is really an extraordinary privilege. It gets you talking to some of the smartest academics and experts, and meeting with some of the most innovative businesses and service providers in your area. But most valuably, particularly as a federal minister, you get to talk to vast numbers of Australians across the nation and listen to their views about your policy area. All of those insights over three years as Minister for Ageing convinced me of a couple of things.

Firstly, that the orthodox view about the economic and budgetary impact of ageing is heavily exaggerated here in Australia.

And secondly, that older Australians are deeply unsettled by modern society’s attitude towards age, and are deeply concerned and nervous about things that matter deeply to them. Their health, their financial security and their ongoing connection to a community that they feel they did so much to help build.

The first thing to recognise in this area is that there is indeed something quite profound happening to our population profile. The truth is that, for several decades, Australia has not been an ageing society. The deep improvements made to Australian life expectancy were primarily made decades ago.

During the nineties and the noughties, Australia’s working age cohort was two thirds of the population, the highest rate ever achieved in our history. Particularly because all of the Baby Boomer Generation and Generation X, my generation, were working at the time, helping to drive 20 years of very, very strong economic growth.

But also, for decades now, the size of the over 65 cohort of the population has hovered pretty steadily at 10-12 per cent of the population reflecting the very modest size of the birth cohorts that were born during the Depression and World War Two when birth rates were historically low.

But 2011 was a demographic tipping point. The oldest of the Baby Boomers, that generation that sang ‘I hope I die before I get old’ turned 65 and started to qualify for the age pension. Now there are almost 6 million Baby Boomers in Australia starting to move into their third age of life. Today there are 50 per cent more Australians in their early 60s than there were just 10 years ago. And by 2030, there will be 6 million over 65s in Australia, up from 3 million only a couple of years ago.

As we know, Australia is hardly unique in this respect. Many other nations also had very significant baby booms in the middle of the last century.

But Australia is better placed I think than any other nation in the world to manage this very profound shift in our population profile. In part that’s a product of very good public policy, particularly around retirement incomes that stretches back to the 1980s, as well as our relatively strong economic and fiscal position at present. But we will primarily do better than other nations because of our vastly more robust economic and demographic projections over coming decades.

Now it must be said that long term population projections have a pretty sorry record in this country. In 1888 The Daily Telegraph confidently foresaw an Australia of 60 million people by the time we would come to celebrate our bicentenary in 1988.

By contrast, the Australian Government in the 1940s at the height of World War Two predicted that, by 1980, we would only be a nation of 8 million people that would then begin to shrink.

Both very obviously wrong.

Unlike many countries in Europe and Asia, Australia experienced a strong echo boom, what the rest of us call Generation X and Generation Y.

Together with one of the developed world’s higher birth rates and pretty much the highest immigration rate anywhere in the world, Australia’s population is likely to grow strongly for decades to come.

Treasury, the ABS and the Productivity Commission all predict that Australia will be a nation of 40 million people by the middle of this century. Twice the size we were in 2000 and fully five times as big as Australia was in 1950.

Critically, from an economic perspective, these projections will see Australia’s workforce continue to grow relatively strongly by about 1per cent every year over the next four decades. By the middle of the century, even after the retirement of the entire Baby Boomer generation and many of their children, Treasury’s Intergenerational Report that was published earlier this year predicted a participation rate in 2055 of 62 per cent in the labour market, only a couple of per cent lower than the labour participation rate we see today.

Indeed average hours worked in the economy per man, woman and child - probably the best indicator of labour market strength - will in 2055 be about the same level it was in the mid 1990s.

The picture in much of the rest of the world however is very different, particularly in the three largest export markets for Australia; China, Japan and South Korea. All three of those countries share the lack of an echo boom, very low birth rates and negligible immigration.

Japan’s workforce has been shrinking for the best part of two decades and is now shrinking by about 1 million workers every single year.

In the next 25 years, 500 of Japan’s 1800 local government areas or municipalities will simply disappear because of population shrinkage. By the middle of the century, Japan’s population is likely to be about a third smaller than it is today, returning to the size Japan was in 1950.

China’s Baby Boomers who emerged after the end of China’s civil war began turning 65 this year, marking the end of a period of just extraordinary growth in that country’s workforce.

After growing by 100 million people in the decade to 2005, China’s workforce is now flat and over the next ten to fifteen years will begin to shrink, shrinking by 80 million workers during the decade starting 2025.

Now it goes without saying that Australia will over the coming decades face a range of economic challenges, as we always have. Some of them will be external as the world faces its own twists and turns in the global economy. Others are ours alone to manage and navigate, like the skills agenda, innovation and maintaining strong productivity growth. But the demographic fundamentals of our economy will remain strong in the future. Such that Treasury this year projected that the best measure of national prosperity, average household incomes, will almost double in real terms over the next 40 years.

That is to say that in the face of this very significant shift in our population profile, the average Australian’s purchasing power will rise from $66,000 today to $117,000 in 2055 after accounting for inflation.

The doomsday commentary around population ageing tends to focus more on the impact to government budgets, particularly the commonwealth budget. Obviously a much larger number of older Australians will increase spending on healthcare, aged related pensions and aged care.

But again, the likely impact for Australia is eminently manageable. Treasury has modelled these impacts in great detail since 2002 in its regular Intergenerational Reports, the most recent of which was published earlier this year, you may remember the ads by Dr Karl.

Over the four reports since 2002, projected increases in spending have moderated substantially. Mainly that’s because of vastly improved baselines for economic and demographic growth for the future; but also in part because government reforms, notably pricing changes to the Pharmaceutical Benefits Scheme, have substantially reined in commonwealth costs.

Overall the Intergenerational Reports have been I think a very valuable initiative begun by Peter Costello, with only a couple of qualifications.

Firstly, their value lies mainly in their ability to transcend the electoral cycle. That value will be lost if we continue to see the report being  politicised in the way in which we saw Tony Abbott and Joe Hockey politicise the fourth Intergenerational Report in 2015.

I also think Treasury should consider a slightly broader focus on the fiscal side. While a great deal of attention is paid for example to projected spending changes on the age pension, none at all is paid to the tens of billions that is notionally spent on superannuation tax concessions in any of the four Reports.

And finally, we must recognise that the report examines areas of spending increases in coming decades that frankly are not connected to population ageing.

The most important of these is healthcare. The headline projections on healthcare spending often suggests that the big increases that are coming our way are all due to population ageing.

In actual fact, ageing accounts for a small part of the projected increase, perhaps as little as 10 per cent according to this year’s Report from Treasury. This year’s report also provides some perspective I think on the rather hysterical debate within the media and the parliament that we saw last year over age pension entitlements.

Even if we maintain existing indexation arrangements, indexed to wages rather than inflation, and an eligibility age of 67 years, rather than 70 years, pension spending in Australia remains well below 4 per cent of GDP into the 2050s, which will be about one third of the OECD average.

Even assuming a much higher share of health increases being attributable to ageing than Treasury says, for example 25 per cent of the total increase instead of 10 per cent - old age related spending by the commonwealth government increases on my calculations by about 2.1 per cent of GDP over the next forty years.

On the other hand, the flip side of this change in our population profile of course means that there will be a smaller number of children, a reduction in commonwealth spending in child care, education and family payments which Treasury measures at about 2.2 per cent of GDP over the same period.

Now that’s not to say that there aren’t substantial challenges confronting the commonwealth budget. There are; maintaining our revenue base, dealing with spending pressures, particularly health care spending pressures. But ageing per se is simply not going to bust our federal budget.

Instead we could do well to focus a little bit more on a challenge that Australia is not as well placed to meet. And that is to ensure as far as we possibly can that the additional years that we’ve added to life expectancy are good years; years in which older Australians continue to feel healthy, active, secure and connected to their communities.

There’s a stereotype taking hold that Baby Boomers are all healthy and wealthy, and that their retirement is going to be a long festival of beer and skittles. The truth is vastly more complex than that. While their cardiovascular systems through lower smoking rates are in much better shape than their parents, only about 1 in 5 baby boomers is of correct weight. Dementia rates continue to skyrocket, preoccupying the minds of older Australians and those approaching old age more than any other health issue in our community.

And, as the OECD reminded us only earlier this week, our health system is not well set up to deal with multiple or co morbid chronic diseases which are so typical of older age in a modern society.

Also, while Kevin Rudd’s big increases to the single age pension in 2009 halved the number of older Australians living in poverty, huge numbers still hover around the poverty line.

For example, if Australia used the British/European definition of poverty - living below 60 per cent of median household income instead of 50 percent - as many as 4 in 10 aged pensioners would be officially classified as living in poverty, rising to an astounding 60 per cent of single older Australians, predominantly older women.

Now compulsory superannuation will improve this position into the future. But many Boomers have accrued only a marginal benefit from the compulsory superannuation system; again, especially women.

Indeed 50 per cent of women in their early 60s now have a superannuation account of less than $16,000. And two thirds of the oldest Baby Boomers in their late 60s who are women have absolutely no superannuation whatsoever.

In the past, high rates of outright home ownership, that is owning your own home without a mortgage, has acted as an important hedge against what is by international standards a very modest age pension. But those rates are also in freefall. Not just for younger Australians, although very much so for younger Australians, but for Baby Boomers as well.

This potent cocktail of a modest age pension, high housing costs for those people who haven’t discharged their mortgage or are in the private rental market and tiny superannuation accounts will place a huge number of Baby Boomers right on the financial edge in their retirement. Which is why of course it was so important that the Parliament block Tony Abbott’s attempts to cut indexation rates to the age pension.

In my many discussions with thousands of older Australians over my time as Minister for Ageing, a long list of other changes were raised constantly with me about the workplace, about aged care and particularly about end of life issues. They all deserve more of our attention  in the national political debate than they currently receive.

But I must say I’m broadly optimistic about ageing issues in Australia. My confidence is based in large part on the character of Baby Boomers themselves. Since they were teenagers, here in Australia and so many nations around the world, Baby Boomers have reshaped every phase of life in their own image. They’ve done so in a way that hasn’t just benefitted themselves, but has also benefitted all of us who have followed them.

Things are starting to change. Small things. Modest things. But symbolically important things.

Hollywood, for example, is starting to churn out movies that involve romance and dare I say it even sex between older characters. Just simply unheard of not too many years ago.

In real life, the 700,000 or so single Australians in their 60s are not resigning themselves to a life alone, as would have happened so much in the past.

Today they are busy logging on to dating websites built for their generation. I found one indeed that I think had the incomparable banner “A generation as special as this deserves the best”. And even some of the most stubborn industries, industries like retail and hospitality, are finally recognising the need to match their staffing profile with their emerging customer profile and employing more older workers than they did historically.

But these are modest beginnings. Living longer lives is not a problem to be fixed or a burden for society, to hark back to my early radio interviews. Living longer is something that the World Health Organisation has properly described as one of humanity’s greatest triumphs. And it’s about time that our public discourse in this nation started to celebrate that triumph a little more than we do.

ENDS