How emerging technologies of the 4th Industrial Revolution, could reduce the impact of Australia's ageing population

For Australia the effects of ageing will be felt more over this coming decade than in the past due to the impact of the Baby Boomer generation retiring. This massive ageing trend has implications for nearly all aspects of society, including labour and financial markets, healthcare, the demand for goods and services such as housing, transportation and social protection, as well as family structures and their intergenerational ties.?

This article is based on the research in my latest book?‘Australia 2030 – Where the Bloody Hell Are We’. Whilst the chapter on demographics in the book covers a broader range of issues Australia is facing such as population growth, urbanisation, youth, life expectancy etc, this article considers how our current producitivty issue will become increasing compounded by our aging population but could be addressed by opportunities presented by the 4th?Industrial Revolutions.?

The ageing population?– the increasing proportion of older persons in a population – is poised to become one of the most significant global social transformations of the 21st century. Historically, low levels of fertility combined with increased longevity ensure that populations in virtually all countries are growing older.?

According to the United Nations, between 2010 and 2030 the number of people in the world aged 65 years or over is projected to grow by 53 per cent, from 526 million to 1 billion[i]?(see Exhibit 1). Between 2010 and 2030, Millennials (20–39 years) will remain a significant proportion (one third) of the world’s population. The number of people aged 80 years or over, the ‘oldest-old’ persons, is growing even faster and the United Nations predicts it will almost triple between 2010 and 2030 to 434 million.

Exhibit 1: Annual total world population (both sexes combined) 1910–2030 (thousands)

Source: United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019?

For Australia, between 2010 and 2030 the number of people aged 65 years or over is projected to grow by 54 per cent, from 3 million to 5.4 million (see Exhibit 2). Between 2010 and 2030, Millennials (20–39 years) will remain a significant proportion (one third) of the world’s population. The number of people aged 100+ years or over, is growing even faster and predicted to double between 2020 and 2030 to 40,000 million.

Exhibit 2: Annual Australian population (both sexes combined) 1910–2030 (thousands)

Source: United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019?

The economic impact - From an economic perspective, ageing will reduce the tax revenue and add to spending pressures for the government. Over the coming decade the ageing population is projected to subtract 0.4 per cent or $20 billion from the federal government’s annual growth in income in 2028–29 and add 0.3 per cent or $16 billion in spending growth[ii]. In real dollar terms, this equates to an annual cost to the government’s budget of around $36 billion by 2028–29. This is larger than the projected cost of Medicare that same year, the National Disability Insurance Scheme, Commonwealth funding for schools and hospitals, family tax benefit or the disability support pension.??

Population ageing will have a profound effect on the potential support ratio, defined here as the number of people of working age (25 to 64 years) per person aged 65 years or over. For Australia in 2019, the ratio has 3.2 persons aged 25 to 64 for each person aged 65 or over. This is predicted to decline to 2.6 by 2030. For the Asia region, it is predicted to be 4.5, for China 3.3 and at 1.8, Japan in 2019 had the lowest potential support ratio of all countries or areas with at least 90,000 inhabitants. Another 29 other countries or areas, mostly in Europe and the Caribbean, have potential support ratios below three (see Exhibit 3).?

Exhibit 3: Estimated and projected potential support ratio, 2010 – 2100. (Persons aged 25–64 per person aged 65 or over)?

Source: United Nations, Department of Economic and Social Affairs, Population Division (2019). World Population Prospects 2019?

For Australia, the old-age dependency ratio has sharply declined in the past decade from 4 to 3.2 persons aged 25 to 64 for each person aged 65 or over. This follows closely the same trend as that of the United States. This decline is predicted to continue to 2.6 by 2030. From that point, like the United States and Europe, Australia will flatten.??

For Australia this coming decade – just like Japan, Europe and North America, opportunities of advanced technologies and scientific developments of the 4th Industrial Revolution will play a pivotal role in addressing their current productivity issues. For these advanced economies, emerging industries such as biotechnology, robotics, space, nanotechnology, agritech, synthetic biology, information technology just name a few, will become critical to the compounding productivity issues and old age dependency ratio to support their ageing populations?

For more information, see my new book ‘Australia 2030! - Where the bloody hell are we?? which includes 37 predictions about what to expect this coming decade as the 4th Industrial Revolution unfolds and importantly, the tipping points or sign posts to watch out for and what there impact will mean to you.?

Hope it inspires you for 2021 and beyond.

[i]?United Nations, (2015), ‘World Population Aging’

[ii]?Australia’s Ageing Population, (February 2019), ‘Understanding the fiscal impacts over the coming decade’ Parliamentary Budget Office