Confronting ageing: the talk Australia has to have

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Australian society will be reshaped as its population ages, it needs to have some confronting conversations about ageing and how it pays the inevitable cost. [Source: Shutterstock]

Australian society is facing monumental change as it ages  — and that change will reshape workplaces, national and household finances and the structure of communities.

It means Australians face potentially uncomfortable conversations about who will pay to support older Australians. It could also mean redefining how they think about ageing and retirement.

Australia is getting older, faster. By 2026, more than 22% of Australians will be aged over 65  — up from 16% in 2020, which was already double the 8.3% at the start of the 1970s. 

This demographic change is partly due to the baby boom of the 1950s and 1960s and a falling birth rate, but it’s underpinned by something positive: Australians are living on average 30 years longer than they were a century ago.

For children born between 2019-2021, boys have a life expectancy of 81 and girls 85. As they grow into adulthood, this will change how Australia looks at and thinks about ageing.

The makeup of our society will trigger a drastic change in the services needed and how many need them. The way communities are built will shift as the population does: more health centres might be needed rather than schools or more seniors’ gyms instead of playgrounds. 

The old-age dependency ratio is the number of people aged 65 and over for every 100 people of traditional working age — 15 to 64. It is projected to climb to a point where, by 2063, for every five working-age Australians there will be almost two older people.

Older Australians understandably use the most healthcare and keeping people alive longer requires greater resourcing of our health systems.

The rising number of older Australians is projected to increase the country’s health spending on them to more than double to AUD$270 billion (USD$174 billion) by 2035, even if the cost of providing care to each older person is static.

Australia, already short of care workers, is projected to need another 285,800 workers for aged care, disability and mental health support by 2050.

A Royal Commission into Australia’s aged care system reported in 2021 that the sector had been chronically underfunded, despite it already being the fifth-largest area of Government expenditure at AUD$29.6 billion (USD$19 billion) in 2023. 

Australia spends 1.2% of its GDP on aged care, which is low compared with other high-income countries. Denmark, for example, spends 4.3 percent of GDP. Across multiple intergenerational reports, the cost of aged care to Government has been raised as a concern and is a priority in discussions about reforming the sector.

The most direct way to better fund the sector is to increase taxes, specifically adding to Australia’s Medicare levy to fund aged care. 

A 1% levy was recommended by an Aged Care Royal Commissioner and 0.65% was suggested by Australia’s Health Services Union with backing from aged care peak bodies. Australia’s Aged Care Minister flagged in June 2023 that changes to the levy were possible. Another solution could be drawing from a United States-based approach and soliciting greater contributions from the person receiving care, depending on their means. 

This might involve changes to means-testing, such as including the value of the family home in assets and charging more to those deemed able to pay. Countries like the Netherlands and Korea have aged care insurance, a private or public option to cover the long-term cost of care. 

Australia doesn’t have private long-term care insurance, with debate over whether there is a market for it. Public aged care insurance might function like superannuation, where workers contribute a proportion of their pay and this accumulates for use in older age.

Otherwise, the shifts could be cultural rather than policy-based — children of older people, and their wider families, could bear a greater responsibility to contribute to costs of care, as is the case in countries like Singapore and France.

Discussions into funding models are not just economic: they tap into conversations Australians will have about what is fair and valuable to the wider public.

Questions will be asked about the responsibility Australians have for their own families and how they should contribute to their own aged care. 

The role of taxation underpins all of these discussions. The issue of intergenerational fairness will arise if today’s workers are taxed more to pay for the care of older people who paid less tax when they worked.

Any changes are likely to be politically unpalatable because the public pays one way or another. Sustained public support is needed to achieve proper reform.

Funding changes need to be developed in detail, legislated and implemented. Reforms like this require collaboration across departments within the Federal Government and with the States and Territories.

All of it could be derailed by changes during election cycles. 

As Government services and taxes change, so must the way Australian society perceives ageing.

The Age Pension was introduced to Australians 125 years ago with a retirement age of 65, when men had a life expectancy of 55 and women 59.

In 2023, the Australian pension age is 67, but people now are expected to live for 16 years after retirement. 

Society is starting to shift its thinking around what retirement means. 

Working part-time, working on a passion project and volunteering are all common. While evidence suggests that keeping active is beneficial for health, delaying retirement and active retirement might also have health benefits. 

Businesses could start to view older people as a workforce asset — older workers have valuable soft skills and expertise. Ageist stereotypes about older people in the workforce hurt would-be workers and their potential employers, who miss their talents.

To entice older people to keep working, incentives like flexible working conditions can be brought in, allowing longer periods of unpaid leave for travel or allowances to care for grandchildren. 

Businesses already recognise older people are powerful consumers and are tailoring entertainment, leisure and healthcare to them. We all have a story in our head about how our lives may play out, stories from our families and our communities. 

These are usually grounded in ageist thinking, tending to show a simple arc where you grow up, get a job, get a partner, have children, grow old and die.

There are far fewer stories about growing old and finding new loves, starting new jobs and having more adventures. 

This shift in demographics will change society, meaning we will need to develop new stories of the third age about contribution and fulfillment instead of stories of decline, care and death.

Communities can embrace the opportunities that can come with getting older and shift the conversation from financial burden to societal benefit.

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