Governments need rethink on ageing services: report

By Staff Writer

A global research report: Serving the Ageing Citizen has found Australia is well ahead of most OECD countries in responding to an ageing population, but suggests a rethink is required to fund public services in the future.

According to Deloitte’s global managing director for the public sector, Greg Pellegrino, Australia identified the issue as significant more than five years ago, at a time when other countries still had not realised the potential economic impact.

Mr Pellegrino says the ageing global population will force governments to revisit the services they provide to their constituents and rethink how they will continue to fund public services.

“By 2011, the first wave of the baby boom generation will reach retirement age, which will mark a new era for governments across the globe,
“Government leaders are going to have to step up to a new set of challenges, and a new way of delivering government services, to keep up with the changing demands and expectations of their citizens.”

He says the ageing of the baby boomer generation – and with it, the significant transfer of wealth from the boomers – would be a one-off occurrence.

“Never again in history are we likely to have a demographic challenge like this one where the number of people over 50 years of age is likely to outnumber people under 50 years of age at a ratio of two to one.”

The report looked at how shifting demographics will also force governments to rethink how they will finance government services and points to four likely trends in the next few decades:

• Tax system modernisation. Governments will have to modernise their tax systems to reduce their dependence on personal income tax revenues. This means fewer exemptions that poke holes in the tax base and a shift away from narrow-based, idiosyncratic tax structures

• Rise in the average retirement age. The erosion of the tax revenues from income and payroll taxes can be somewhat offset by extending the average retirement age. The retirement age in the OECD countries has started to tick up since the end of the 1990s, but a meaningful impact is unlikely without significant changes in the demand for older workers

• Increased reliance on user fees. Citizens may be required to pay user fees for access to government services

• Growth of public-private partnerships. The emergence of a much bigger and more sophisticated non-profit sector will create new opportunities for partnering and leveraging private dollars for public causes.

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