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More young to pay for the old -

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ELIZABETH JACKSON: It's a challenge which the Federal Treasurer says is as great as climate change
- dealing with a bigger and older population.

In a classic good news bad news story the latest Intergenerational Report predicts Australia's
population will rise to 35 million in 40 years' time.

The number of older Australians is growing but there will also be more younger people to help
support those heading into old age.

The Treasurer Wayne Swan has spent the morning looking at the challenges of the ageing population.

Our chief political correspondent Lyndal Curtis reports.

LYNDAL CURTIS: The Treasurer has been out counting heads.

WAYNE SWAN: I can tell you today that Australia's population is projected to grow by 65 per cent to
reach over 35 million people in 2049. That is up from around 21.5 million people right now.

This projection of 35 million people is significantly higher than those that were produced in the
second intergenerational report. The projection there was 28.5 million in 2047.

LYNDAL CURTIS: Higher migration and women having more children will push Australia's population up.
But it is a population that is aging.

Mr Swan has told the launch of a new Institute For Population Ageing Research that over the next 40
years the number of people aged 65 to 84 will more than double and there will be four-and-a-half
times the number of people over 85.

Dealing with those population changes is one of the big challenges.

WAYNE SWAN: I think along with climate change this is the most substantial challenge we face. It's
an intergenerational challenge, it's an economic challenge, it's a social challenge and it goes to
the core in the end of the type of country we want to be.

LYNDAL CURTIS: The Government has already pushed up the retirement age but Mr Swan says more will
need to be done.

WAYNE SWAN: The Government needs to facilitate the significant contribution that older people can
make to the economy and the community and that also means an unparalleled degree of social
engagement and changes of approach in that area.

LYNDAL CURTIS: There is good news in the figures: there will be more younger people than predicted
in previous intergenerational reports.

Peter McDonald is a demographer at the Australian National University. He says that will help pay
for the costs of a rising population and a growing number of older Australians.

PETER MCDONALD: The demographic changes we've seen are making us relatively younger than we would
have been otherwise. And the effects there are quite substantial on budget in fact because a lot of
the costs associated with ageing are health costs and the income support costs. They won't be quite
as big as, relatively, as compared to the size of the labour force, as we'd predicated in the past.

As we've gone through these intergenerational reports the first one was very pessimistic, the
second one was a bit more optimistic and now this one is even more optimistic again in respect to
the costs of ageing.

LYNDAL CURTIS: He does believe that the increase in population will provide some challenges.

PETER MCDONALD: Particularly for cities. Cities will be bigger than we'd projected in the past and
there are, you know we already have problems in our cities. So urban infrastructure is going to be
very, very important.

We have to be considering the potential environmental effects of a bigger population but I think we
can deal with those.

What we're talking about here is a bigger labour force and that labour force will be generating
wealth and so Australia is liable to be quite a wealthy country and I think that's going to give us
the income to make all the environmental changes that we have to make.

LYNDAL CURTIS: But does it give us enough of a source of income to deal with the extra pressures on
the health and social security budgets that will come from having an older population?

PETER MCDONALD: Oh yes, certainly. We're much better off under this population regime than we were
when the first intergenerational report was published with the demographic trends at that time.

LYNDAL CURTIS: The Labor backbencher Kelvin Thomson is less relaxed about the increased population.
He warns Australia is sleepwalking into an environmental disaster.

KELVIN THOMSON: There will be impact on the availability of food, water, energy and land. These
things are already stretched and a 60 per cent population increase will only drive up the cost of
these essentials and lower our living standards.

And what about the impact on our major cities? Declining housing affordability, traffic congestion,
over-crowded concrete jungles.

LYNDAL CURTIS: Mr Thomson wants Australia's immigration rate cut.

KELVIN THOMSON: I think what we need to do is to go back to the sorts of levels that prevailed in
the early to mid-1990s and indeed for many years prior to that. That will produce better outcomes
than the ones we're getting now.

LYNDAL CURTIS: The institute Mr Swan launched has produced a longevity index to track the ability
of people to maintain living standards over their lifetime.

Professor John Evans from actuarial studies at the University of New South Wales is one of those
who have developed the index.

He says Australia isn't particularly good at doing the numbers on population changes but says it's
not the exact numbers that matter.

JOHN EVANS: You don't need to worry too much about the actual decimal places. I don't think that's
all that relevant. What is showing up is that people are definitely living longer than we thought
and therefore we are going to have to provide retirement income for people.

LYNDAL CURTIS: The figures may be tricky to predict; what to do about them though will be the
greater challenge.

ELIZABETH JACKSON: Lyndal Curtis reporting.