Baby-boomers have much to fret about, despite signs of an economic improvement. Their prospects of enjoying the same Super deal as today’s over-65s have been badly dented by the Treasury’s latest statement on the Govt’s long-term fiscal position, which peers 40 years into the future and warns we must hoist taxes or debt to keep doing what we’ve done with state spending. Trimming costs and shaping sensible long-term policies means looking at the impact of population ageing and what will work across generations. The Treasury doesn’t want readers to focus too much on the details of its projections - it says this is a case where the bigger picture (not a pretty one) is important. For starters, the ratio of people aged 65 and older relative to the working-age population (15 - 64) rises from 19% in 2009 to 42% in 2050. These population shifts are already under way but are about to accelerate, reducing the relative numbers of people to drive the economy and raising the numbers requiring state services (mainly health) and support (mainly superannuation). One solution would require people to continue working later in life.

Don’t Forget Health. Rising health costs are problematic too. Publicly-funded spending on health care has more than doubled as a share of GDP in the past 60 years, from around 3% in 1950 to 6.9% in 2009. It has surged from $550 per person in 1950 to $2,870 this year. Under Treasury’s historic trends scenario, health spending would grow by 5% a year from 6.9% of GDP in 2009 to 10.7% of GDP in 2050. Officials say enough’s enough - the rate of spending growth over the past decade is unsustainable.

What To Do? They prescribe stiff medicine on the supply side (improving the health sector’s performance and productivity) and demand side (managing the clamour for public health services). For starters, Govt can encourage better use of community-based primary care, through contractual arrangements with providers, to reduce unnecessary and relatively expensive hospital admissions. It should also temper public expectations. This would require an examination of the range of care publicly provided versus areas where individuals should pay for their own health care. Yep. We are talking about greater private financing of health care and increased targeting of public funding on the basis of need and ability to pay. The baby-boomers might blanch, but the health insurance sector and private hospitals should be cheered by Treasury’s diagnosis and prescription.

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