The age pension burden on taxpayers will shrink even as the number living beyond 65 years more than doubles because of a massive increase in the pool of superannuation savings, according to Treasury forecasts.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
The intergenerational report due out on Thursday is expected to show that spending on the age pension will decline from 2.3 per cent of gross domestic product to 2 per cent by 2062-63 despite swelling ranks of elderly Australians in the next 40 years, including an estimated 9 million people aged 65 or more and a trebling of those 85 years or older.
Instead of relying on the pension, older Australians are expected to increasingly draw upon their superannuation to fund their retirement.
The total pool of superannuation assets reached $3.54 trillion in June, up 7.6 per cent from a year earlier. This included a 13 per cent jump in MySuper product assets to reach $996 billion.
Treasury forecasts that the pool of superannuation savings as a proportion of GDP will almost double over the next four decades, from 116 per cent to 218 per cent.
Treasurer Jim Chalmers said the fact that spending on the age pension as a proportion of GDP will decline even as the number of older Australians surges highlighted the "genius of super".
"Super is delivering on its promise, providing a better retirement for more Australians and a better outcome for the budget over the next 40 years," Dr Chalmers said.
Australia is projected to have the lowest proportional spending on pensions among advanced economies by 2035 and just a fifth of the Organisation for Economic Co-operation and Development average by the mid-2060s.
The proportion of those receiving an age pension is projected to drop by 15 percentage points by 2062-63, according to the intergenerational report.
Internationally, age pension payments loom as a fast-growing drag on public finances and is currently one of biggest areas of spending for the federal government.
But the trend towards greater reliance on superannuation will "contribute significantly to the sustainability of the budget", the intergenerational report is expected to say.
"The superannuation system is maturing, with around 17 million Australians collectively owning around $3.5 trillion in assets," an extract of the report says.
The outlook comes amid expectations the government will confirm a surplus of around $21 billion or $22 billion for 2022-23 when the final budget outcome is released late next month.
Large income and company tax receipts from the strong labour market and high commodity prices have driven a big short-term improvement in government finance.
But it is understood the government is sceptical about the estimates of some economists that there could also be a second surplus this financial year.
READ MORE:
Instead, the economy is expected to weaken significantly over the next nine to 12 months, though it is believed the government does not expect there to be a recession.
Longer term, the intergenerational report projects the economy will slow under the influence of an aging population and reduced population growth.
Slower growth and developing spending pressures in areas such as the National Disability Insurance Scheme, intertest payments, defence and health care are anticipated to weigh on the budget.
The intergenerational report also warns that indirect sources of revenue such as fuel and tobacco excises will likely decline as the transport systems shifts away from fossil fuels and fewer people smoke.
And it is expected to show that the government will become increasingly reliant on wage-earners for revenue.
The outlook has reinforced calls for far-reaching tax reforms but it is understood the government is not planning any major changes beyond the stage three tax cuts and increased taxation of resources and multinationals.
Our journalists work hard to provide local, up-to-date news to the community. This is how you can continue to access our trusted content:
- Bookmark canberratimes.com.au
- Download our app
- Make sure you are signed up for our breaking and regular headlines newsletters
- Follow us on Twitter
- Follow us on Instagram