WEEKLY E-MAIL

11 September 2023

THE INTERGENERATIONAL REPORT – POPULATION GROWTH AND AGED CARE

By Amelia Paullo

The Australian Treasury recently released the 2023 Intergenerational Report which provides a glimpse of what changes we can expect to see across our society and economy over the next 40 years. Key themes of the report are an ageing population and rising demand for aged care services.

Population growth

Australia’s population is projected to grow from 26.5 million in 2023 to 40.5 million by 2063 and the number of people aged 65 and over is expected to increase substantially and represent 23 percent of the population. By 2063 the number of Australians aged 65 and over is expected to double and the number aged 85 and over, triple.

Life expectancies will also continue to rise, but the rate of increase is projected to slow. Life expectancies at birth are 81.3 years for men and 85.2 years for women in 2022–23 and are expected to be 87.0 years for men and 89.5 years for women by 2062–63.

It is expected that longer life expectancies will result in Australians spending more years in full health but also an increased number of years in ill health. This will accelerate the need for government spending on health and aged care as well as the demand for aged care services and advice.

The ageing of the population is expected to reduce Australia’s population growth and participation rate as well as slow long-run productivity growth. This should result in our economy growing at an average of 2.2% in real terms over the next 40 years compared to 3.1% over the previous 40 years. Nonetheless, the economy is projected to be around two and a half times larger and incomes 50 percent higher in real terms by 2063.

Despite significant ageing over the next 40 years, Australia’s population is expected to remain younger than most advanced economies, aided by a higher birth rate than many as well as strong net migration.

Funding for aged care

Most Australians who reach old age will need aged care services. The Australian Government provides funding for residential aged care and a range of community care, including home care services.

The major aged care services subsidised by the Australian Government include:

• Home support services through the Commonwealth Home Support Programme and Home Care Packages, and
• Residential aged care services that provide 24-hour care and accommodation for older people who are unable to continue living in their own homes.

Currently, people aged 65 or older account for around 40 percent of total Australian health expenditure, despite being about 16 percent of the population.

Government spending on aged care is projected to grow from 1.1% of GDP to 2.5% in 2063 with the older population accounting for around 70% of the projected increase in real spending on aged care per person.

Spending on residential aged care will increase the most although spending on community care should also rise significantly. Aged care spending per person will also increase.

Australians need to consider the available choices and plans for aged care, both for themselves and their family members, especially when they bear the responsibility of caring for older relatives. Individuals who possess enduring powers of attorney for elderly family members and are tasked with making financial and healthcare decisions must ensure they have the necessary resources and assistance to make well-informed choices.

As Australians are living longer and care needs are both complex and costly, it’s important that future care needs are accounted for when considering a financial plan throughout the latter stages of retirement.

Amelia Paullo
Financial Planner
SMSF Specialist Advisor™
Authorised Representative No. 1243426

If you have any questions or comments, please email me at amelia@gfmwealth.com.au

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