Aging population scenarios: an Australian experience

Abstract

During the past decade, there has been wide public discussion about the effects of population and immigration policies. There is some consensus that an older population imposes economic costs but uncontrolled population growth imposes congestion and environmental burdens. While many realize that policies which restrict population tend to exacerbate aging, the inevitable trade-off is not widely acknowledged. Fewer still appreciate that there is a sustainable age distribution that is largely imposed on us by nature that cannot be defeated in the long term. In this paper, we look at the ‘aging issue’ for Australia by looking at the total population and age distribution as a joint outcome. For ease of interpretation, the age distribution is converted into a required retirement age (RRA) to maintain dependency ratios at 2010 levels. We examine the effects of alternative policy scenarios on total population and RRAs, benchmarked against a hypothetical population in zero population growth equilibrium. We account for differing demographic groups of immigrants and emigrants as well as trends in mortality. Policy scenarios can be well summarized by plotting the trajectory of the two outcomes, total population and RRA, with the equilibrium values as axes.