Intergenerational Report 2007
By Phillip McGann, 05/04/2007

The media has been commenting heavily on the recent IGR that was released by the Federal Treasurer a few days go. So what is it, and why is it important?

In 1998 under new legislation to provide for a more open and honest approach to the governments budget process, it was made law that an Intergenerational Report be prepared every 5 years to track the dynamics of the budget going forward. 

Essentially this process allows a long-term outlook to be adopted to see how the future budgetary position of Australia will look in 10 years, 20 years and even 40 years time.

The main thrust of the first two reports (in 2002 and now 2007) has been how the ageing population will cause a burden on the federal budget.  Effectively there will be more older non-workers looking for services from the government and less younger working Australians actually paying tax to meet those expenses.

The current IGR has provided a better outlook than the 2003 report but still it is forecasting that there will be an annual $35 Billion Budget deficit in today’s dollars in 40 years time!! 

Not real good, but how do we fix it?  Well, it all comes down to demographics and improving productivity.

In simple terms we need:

1. More babies to increase the amount of workers in the future in relation to the amount of retirees; and

2. We need those workers to be more productive than we are now to get more income (and tax dollars) for the country from less overall workers.

3. Workers will need to stay in the workforce longer - the time of early retirment at age 55 is over.