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The money’s already here

Projections that aged-care costs will overwhelm the country by 2050 fail to recognise the wealth accumulated through Australia’s ageing population.
By Michael Fine

Despite all the hand wringing and finger pointing associated with the Intergenerational Report (IGR), there is no need to believe that aged care in Australia will become financially unsustainable by the year 2050. And after that the entire demographic equation changes, as Australia will cease to age – at least at the population level.

How can I be so confident with this prediction? Because it is based on the same population projections as used in the IGR, but with much more complete analysis of the impact of savings and household assets on our future wellbeing. In a recent review published in the Australasian Journal of Ageing, I explored the theories and methodologies that lie behind what is called intergenerational accounting, and found them wanting.

A much better and more comprehensive approach, called intergenerational economics, shows that transfers within families just about always flow down the generations, from older parents to their children and grandchildren. The same is true with unpaid domestic labour – grandparents give far more hours of childcare than they receive in aged care from their family members. But you won’t read that in the IGR.

Look around the world today. The wealthy countries are the aged and most ageing countries. That is not a coincidence, because the establishment of good health programs, strong educational systems, and the accumulation of wealth and savings are a necessary condition for population ageing. The trouble is that much of the savings occurs within families and in privately held assets such as housing and family trusts, whilst most of the costs appear only on the government side of the ledger.

The trick is that by concentrating on projections of public spending and existing tax mixes, the IGR, in effect, ignores the most interesting and important contributions of an ageing population. As a result, what we have is not an informed analysis of the full financial costs or of the assets and savings available to pay for them, but a one-dimensional view that focuses on just part of the equation.

The IGR completely omits the unpaid help (volunteer contributions as well as unpaid family caregiving) that is such an essential part of family and community life. By also leaving out the savings and accumulated assets that have made population ageing possible, a distorted and possibly dangerous analysis is advanced.

To focus on the costs to the public purse does not provide the whole truth about ageing, but a one-sided portrayal of the costs without the income and savings. The cynical-minded might even suggest the IGR is more concerned with promoting the market and justifying cutbacks in publicly financed programs than with uncovering the truth about the increasingly unequal way that wealth is managed and passed through the generations in Australia.

This is not to say we shouldn’t be concerned with planning and with making future adjustments to the way services are delivered and funded. We need to plan and make sure we can pay for the services we’ll need in the future. But if we ignore private wealth and family investments, forget to levy tax on financial transactions and retirement incomes and continue to be the only advanced country that does not collect death duties, what we’ll end up with is a society in which rich families pass on vast inheritances, whilst the middle class and poor will be forced to beg for assistance. Does that sound Dickensian? If so, the IGR could well prove to be a blueprint that takes us backwards.

Michael Fine is an adjunct professor, department of sociology, Macquarie University.

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