Vol. 2 No. 2 March/April 2014 THE DEMOGRAPHIC FACTS OF AGEING IN AUSTRALIA: PATTERNS OF GROWTH

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1 Australian Population & Migration Research Centre Vol. 2 No. 2 March/April 2014 THE DEMOGRAPHIC FACTS OF AGEING IN AUSTRALIA: PATTERNS OF GROWTH By Graeme Hugo POLICY BRIEF It is well recognized that population ageing is one of the major challenges which Australia faces over the next quarter century. However the nature, scale and implications of ageing in Australia are not well understood. This is the first of three Policy Briefs which together seek to specify the demographic dimensions of ageing in Australia and explore its implications. In the first one we explain the future pattern of growth of Australia s older population. We stress that this growth is not crystal ball gazing but is able to be specified with a high degree of certainty. INTRODUCTION There is now widespread recognition that Australia s population is ageing and that this has important implications for the national economy and society. Despite this there is considerable misunderstanding of the nature, scale, location and implications of population ageing in Australia. This is even the case in the aged care sector which is to be so crucially impacted by the ageing of the population. The aim of this policy brief and the following two briefs (March and April, 2014) is to summarise the basic dimensions of the growth of Australia s older population over the next two decades. The note will use the most recent Australian Bureau of Statistics (ABS, 2013a) population projections. It must be stressed, however, that for older populations there is no element of crystal ball gazing in these projections. There is a very high degree of certainty around them and they can be used with a high degree of confidence. This is because Australia s older population of the 2020s and 2030s is already in Australia but are aged in their 40s and 50s. We not only know their numbers but also where they live and their economic and social characteristics. This can provide us with a clear window through which to view the size and characteristics of Australia s future older population. There are four demographic aspects of the ageing of Australia s population over the next two decades: The numbers of older people will increase different economic, social and cultural rapidly because the shockwave of baby boomers will all move past age 65. Accordingly the median ABS projections (ABS, 2013a) anticipate the numbers aged 65+ in Australia will increased by 84.8 percent from 3.1 million to 5.7 million between 2011 and The proportion that the older (65+) population will make up of the total population will increase from 13.8 percent in 2011 to 18.7 percent in This raises issues of worsening ratios between the working and non-working population and the effects of intergenerational transfers. The third dimension of population ageing in Australia is one which is often overlooked and relates to their characteristics. They are quite different to earlier generations entering the retirement stage of the life cycle economically, socially, and in their values, attitudes and their expectations. This is because each cohort lives through quite conditions, they have different levels of education, world experience, etc. Baby boomers will differ in a myriad of ways from the previous generation of older people. This will also have a major impact on the nature of the care and residential arrangements which they seek, prefer and can pay for. Finally, the geography of the future generation of the older Australian population will be different to that of the previous generation. The distribution of Australians aged 65+ and 80+ in 2021 and 2031 will be quite different to that of 2001 and Yet much of the aged care infrastructure, especially residential care are location specific capital (Da Vanzo, 1981). They have a fixed location which will be increasing mismatched with the location of older Australians. The first of these two dimensions will be explored in the first policy brief. This is the first of three policy briefs which are drawn from a paper prepared for the Aged Care Financing Authority by APMRC.

2 THE GROWTH OF AUSTRALIA S OLDER POPULATION Australia s population is currently growing at 1.8 percent per annum (ABS, 2014), one of the fastest population growth rates in the world and certainly the fastest among OECD countries. Table 1 shows that over the most recent intercensal period the 65+ population grew significantly faster than the total population and working age population. The most rapid growth was in the young aged ages as they begin to be entered by baby boomers. The projected growth over the next two decades, however, show that the growth of the 65+ population will be more than twice as fast as the total population (Table 2). Moreover the fastest growth will be in the old old 75+ age groups. These are the age groups which have the highest level of demand for aged care and other services, especially health. To underline the high degree of confidence we can place in these numbers, Table 3 provides the projections for the three main scenarios of future population which the ABS has provided Series A, B and C respectively high, medium and low population growth scenarios. It will be noted that there is little variation in the numbers of 65+ anticipated by all three scenarios (2.5 percent). This is because the aged population of the next three decades will not be influenced by fertility and little affected by migration. It will, however, be noted in Table 3 that there are significant difference in the percentage that the aged will represent in the total population under the different scenarios (8.8 percent). This is because the higher growth projections assume higher levels of migration and fertility which lead to greater increases of the young population and reduce the proportion that the aged comprise of the total population. The crucial point is that there is really only one realistic scenario with respect to the future numerical growth of Australia s older population. There are only different scenarios with respect to the proportion they make up of the total population. Table 1: Australia: Population Change by Age, Source: ABS 2011 Census % Change Total 19,855,291 21,507, ,373,435 1,627, ,270,935 1,384, ,644,370 3,012, ,273,710 14,351, Table 2: Australia: Population Change by Age, 2011 and Projected 2031 Source: ABS Estimated Resident Population and 2031 Projections Series B % Change Total 22,340,024 30,501, ,681,931 2,878, ,405,980 2,826, ,087,911 5,705, ,018,500 19,255, Table 3: Australia: Comparison of Projected Growth of Population, 2031 Source: ABS 2013 Projections 2011 Series A 2031 Series B 2031 Series C 2031 Difference Series A and C in 2031 Total Population Percent Table 4: Australia: Expectation of Life at Age 50, , , 1981 and 2011 Source: ABS Year Males Females APMRC Policy Briefs Vol. 2. No. 2 2

3 WHY IS AUSTRALIA S POPULATION AGEING? Trends in the numbers of older people (say those aged 65 years and over) in any area are a function of the following demographic processes. Fertility the rate at which women in that area were having children years ago. Mortality the rate at which older people are lost to death. Migration the extent to which older people move into or out of the area. The ageing in place of residents in the area into the 65+ age groups. In Australia all of these processes are contributing to an unprecedented increase in the older population and this will continue over the next two decades. The most salient demographic element in the ageing of the Australian populations over the next three decades is the Baby Boom generation moving into the retirement ages. Figure 1 shows the Australian Total Fertility Rate over the last century and it can be seen that the period following World War II saw an upswing in the number of babies women were having. While most countries experience an upswing in fertility after a war, the Australian post-world War II boom was sustained for two decades. This created a bulge in the Australian age pyramid which, as Figure 2 shows, moved upwards and is now entering the 65+ age group. Because fertility has subsequently almost halved, the baby boom has created a shock wave of rapidly increasing numbers in particular ages as the cohort has passed through different life cycle stages. Another factor contributing to ageing of the Australian population and Figure 3 shows the steep increase in life expectancy among Australians over the last century. In the period since World War II we have added 12.6 years of life to Australian males and 12.9 years to females. Hence more Australians are surviving their younger years than ever before. However, perhaps the biggest change has come in the older ages. Prior to 1970 we had added very few years of extra life to Australians aged 50 years or more, despite improving their chances of making it to age 50. Hence, Table 4 shows that between 1901 and 1970 only 1.8 extra years of life were added to Australian males aged 50. The increase was greater for women (4.6 years) because of the huge reduction in pregnancy/child birth related deaths. Figure 1: Australia: Total Fertility Rate, Source: CBCS, Demography and ABS, Births Australia, various issues APMRC Policy Briefs Vol. 2. No. 2 3

4 Figure 2: Australia: Age Structure 1961 to 2011 Showing Baby Boomer Cohort Source: ABS Censuses However the table shows that there has since been a dramatic change with 8.8 years being added to the life expectancy of Australian men aged 50 between 1970 and 2011 and 7.3 years for women of that age. This massive change was not anticipated by commentators at the time (National Population Inquiry, 1975, 1978) and was achieved on the one hand through medical breakthroughs such as better diagnosis of heart conditions, bypass operations and the development of Intensive Care Units. On the other hand, major improvements in lifestyle through better diet, reduced smoking and safer cars have also had an impact. As a result, not only are more Australians surviving to retirement age but more are having an extended period of retirement. This is contributing significantly to the growth of our older population. Australian postwar immigration has had a profound impact on the contemporary older population. With half its population being either overseas-born or Australian-born with an overseas-born parent, Australia is more influenced by migration than any other OECD country. Figure 4 shows how migration has been a consistent and major factor in postwar population growth in Australia. It is sometimes suggested that international migration in some way provides a solution to ageing of Australia s population. Since international migration is highly selective of young adults undoubtedly it has a younging impact on age structure. However the reality is that immigrants themselves age and their numbers are so small in relation to the total population that their effects on the overall age structure are relatively small. Undoubtedly Australia s consistent postwar migration has been a major factor in its having less severe ageing than other countries like Japan but its impact on overall ageing is limited (Young, 1988). Indeed Figure 5 shows that the ageing in place of immigrants in Australia has meant that the overseasborn population is older than the Australian-born population. In percent of the Australian-born population were aged 65 or older but 19 percent of the overseasborn population were in this age group. Hence past migration has contributed to the contemporary and future growth of Australia s older population. APMRC Policy Briefs Vol. 2. No. 2 4

5 Number Figure 3: Australia: Expectation of Life at Birth, Source: Hugo 1986 and ABS Deaths Australia, various issues Expectation of Life at Birth Males Females Figure 4: Australia: Total Population Growth Showing the Natural Increase and Net Migration Components, Source: ABS 1986 and ABS Australian Demographic Statistics, various issues 600, , , , , ,000 0 Net Migration Natural Increase -100,000 Year APMRC Policy Briefs Vol. 2. No. 2 5

6 Figure 5: Australia: Australia-born and Overseas-born Age-Sex Distribution, 2011 Source: ABS 2011 Census AN OPPORTUNITY AS WELL AS A CHALLENGE? The scenario of future growth of Australia s older population outlined here is almost universally portrayed as a national problem. With unprecedented numbers living to old age the prospect of overwhelming increases in age related disease, frailty, disability, inability to walk and all the associated costs and social burdens dominates the discourse. Undoubtedly ageing does present a series of major challenges especially to the economy, health system and the aged care sector not to mention individuals, families and communities. However, these challenges can be met. The Australian Treasurer s series of Intergenerational Reports has clearly demonstrated this with its Three P s mantra. The impact of ageing on the Australian economy needs to be offset by initiatives in Population, Participation and Productivity especially the latter. One could also add a forth P Planning. It is imperative that these initiatives begin now for them to have benefits in the coming decades. There is no single silver bullet or magic panacea to offset the negative effects of ageing. Action is needed across a range of fronts but that action must begin now, not when the full impact of baby boomer ageing becomes apparent in the 2020s and 2030s. While not minimizing the challenges of demographic ageing it is important to also identify the opportunities which are offered by ageing. The Baby Boomer generation represent a quarter of the national population and a huge repository of knowledge, experience, wealth, resources and productivity which potentially. With innovative policy can contribute in a major way to national prosperity and sustainability. Another dimension of this argument was presented in a paper in the Scientist (Olshanski, Perry, Miller and Butler, 2006) which argued that these can be a societal Longevity Dividend. Research is increasingly demonstrating our capacity not only to extend the life span of individuals but to increasingly compress the diseases of the old age into the final years of life. As Olshansky et al. (2006) argue: the science of ageing has the potential to do what no drug, surgical procedure or behaviour modification can do extend our years of youthful vigour and simultaneously postpone all the costly, disabling and lethal conditions expressed at later ages. This however will not just happen. It will need decisive and immediate intervention across a range of fronts to deliver a compression of mortality and morbidity. There will be a doubling of the number of Australians aged 75 years and over in the next two decades. This indeed is a challenge but to see the response as being purely in terms of doing what has always been done, but more of it, would be a mistake. APMRC Policy Briefs Vol. 2. No. 2 6

7 REFERENCES Australian Bureau of Statistics (ABS), 2013a. Population Projections Australia, 2012 to 2101, Catalogue No , ABS, Canberra, various issues. Australian Bureau of Statistics (ABS), Australian Demographic Statistics, September Quarter, 2013, Catalogue No , ABS, Canberra, various issues. Australian Bureau of Statistics (ABS). Deaths Australia, various issues, Catalogue No , ABS, Canberra. Commonwealth Bureau of Census and Statistics (CBCS). Demography, various Issues, Government Printer, Canberra. Costello, P., Intergenerational Report , Budget Paper No. 5. Commonwealth of Australia, Canberra, 94 pp. Costello, P., Australia s Demographic Challenges, Discussion Pater, 25 February, 28pp. Da Vanzo, J., Micro economic approaches to studying migration decisions, in Migration Decision Making: Multidisciplinary Approaches to Microlevel Studies in Developed and Developing Countries, G. F De Jong and R.W. Gardiner (eds.), 4, pp Department of Treasury, Intergenerational Report 2007, Commonwealth of Australia, Canberra. Hugo, G.J., Australia s Changing Population: Trends and Implications, Oxford University Press, Melbourne. National Population Inquiry (NPI), Population and Australia: A Demographic Analysis and Projection, two volumes, AGPS, Canberra. National Population Inquiry (NPI), Population and Australia: Recent Demographic Trends and their Implications, AGPS, Canberra. Olshansky, S.J., Perry, D., Miller, R.A., Butler, R.N In pursuit of the Longevity Dividend. The Scientist 20(3): Swan, W., Australia to 2050: Future Challenges, Intergenerational Report circulated by the Treasurer of the Commonwealth of Australia, January. Young, C., Towards a population policy. Myths and misperceptions concerning the demographic effects of immigration, Australian Quarterly, 60 (2): Australian Population and Migration Research Centre School of Social Sciences Room G17, Ground Floor, Napier Building The University of Adelaide South Australia 5005 Telephone ; Fax: APMRC Policy Briefs Vol. 2. No. 2 7