‘Intensifying’: Treasurer’s 40 year warning
Australia might have just recorded a $19 billion surplus, but the Treasurer has warned that the cost of servicing debt and an ageing population will ensue a ballooning in government spending in the decades to come.
The Intergenerational Report, to be released on Thursday, will show that spending pressures – predominantly around health, aged care, NDIS, defence and interest payments on debt – are putting increasing pressure on the budget over the next 40 years.
The five main spending pressures alone are projected to increase by 5.6 per cent of GDP by 2062-63 – around $140 billion in today’s terms – and grow from one third of total Commonwealth government spending in 2022-23 to one half of total spending by 2062-63.
The NDIS and interest on government debt are set to be the fastest growing categories over the next decade, with health and aged care growing from the end of the projection period due to the ageing population.
“Demographic ageing alone is estimated to account for around 40 per cent of the increase in government spending over the next 40 years,” the report says.
“Ageing and a growing population are driving strong growth in health and aged care spending. Other factors, such as new technologies, treatments, and other improvements in care quality, are also projected to drive government spending growth.”
Treasurer Jim Chalmers said servicing the Albanese government’s inheritance of $1 trillion in debt would put added strain on the budget, with interest payments on debt projected to rise from 0.7 per cent of GDP in 2022-23 to 1.4 per cent by 2063-64.
In the light of the first budget surplus in 15 years, he said the report showed how important it was that the government was banking the majority of upward revisions to revenue to the budget; and was practising responsible budget repair.
“We’re getting the budget in much better nick, but what the Intergenerational Report reveals is after this year, the pressure on the budget intensifies,” Dr Chalmers said.
“Our responsible fiscal management is helping to repair the budget and secure essential services into the future, which is why we are taking measured actions to strengthen the structural budget position over time.
“It will take more than one budget, or one term of budgets, to undo the decade of damage done by the Coalition.”
Finance Minister Katy Gallagher said the MAlbanese government had been focused on managing the budget “in a responsible way” since day one.
She said it was a testament to the government’s fiscal strategy that a $19 billion surplus had been recorded, while also delivering “targeted cost of living”.
“The IGR shows that the hard work must continue to keep the budget on a sustainable footing, while ensuring we deliver the services that Australians rely on every day,” she said.
Originally published as New report to reveal ballooning cost of ageing Australians, servicing debt
Source: News
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