Australia's ageing population: Economic implications for local government
The Productivity Commission's research report, Economic implications of an ageing Australia, was released on 12 April 2005. The study examined the productivity, labour supply and fiscal implications of likely demographic trends over the next 40 years, to further improve understanding of the challenges and opportunities resulting from an ageing Australia. A distinguishing feature of this study is that it includes an assessment of:
- demographic change at the regional level
- the economic implications for local government
Demographic change at the regional level
As Australia's population ages, regional populations will also age, some more than others. The proportion of the population aged 65 and over (seniors) has increased substantially in all regions over the last 20 years. In 2001, the highest concentrations of seniors were in non-urban (15.4%) and urban costal (14.5%) regions and metropolitan inner suburbs (14.1%). This was closely followed by both inland rural (13.9%) and urban (13.3%) regions. Population ageing was less evident in metropolitan outer suburbs (9.9%) and both remote other (6.7%) and remote urban (6.2%) regions.
Population projections show that older populations will continue to be concentrated in local government areas along the Australian coastline. As Table 1 indicates, coastal regions will experience growth of 210% in the number of seniors between now and 2045. Australia's inland regions will also experience significant growth in the number of seniors with 179.7%.
| Region | 65+ in 2001 (%) | 65+ in 2045 (%) | Change 2001 - 2045 (%) | Growth in 65+ over 2001 - 2045 (%) |
|---|---|---|---|---|
| Metropolitan | 12.0 | 30.1 | 18.5 | 129.3 |
| Coastal | 15.1 | 26.8 | 11.7 | 210.8 |
| Inland | 12.5 | 30.2 | 18.1 | 179.7 |
Source: Productivity Commsssion (2005), page 288
Economic implications of ageing for local government
The report concluded that with the delivery of human services now representing 49% of total local government expenditure, local councils are more likely to face budgetary pressures from population ageing than from traditional activities such as road and infrastructure provision and maintenance. The main demands are expected to be: health and aged care, home support services, subsidy of medical services, community transport and a range of cultural and recreation services.
At the same time, local government faces potentially significant demands on revenue. The Productivity Commission report found that:
- there is likely to be an emerging fiscal deficit at the local government level under current policy settings
- local government rate revenue will come under pressure from the increasing proportion of pensioner households
- local government revenue is unlikely to increase at a greater rate than the growth in GDP, and some components such as FAGS will grow at slower rates.
The Productivity Commission also found that much of local government will face increasing pressure relating to the suitability of infrastructure, much of which was constructed without particular consideration for ageing populations.
Key resources
- Local government needs fair federal funding to cope with ageing population - 12 April 2005
- Local government will struggle to cope with ageing population - 25 November 2004
- Economic implications of an ageing Australia for local government - 24 September 2004
