Is Saving the Answer to Population Aging in Australia?
The Government’s Role We know that Australia’s population is aging, and that aging can produce an intergenerational imbalance of production and consumption. Guest and McDonald estimate that the aging population and the relatively high consumption demands of the elderly will “imply a fall in the labor force relative to consumption demands of the population by about 12% by 2051” (Guest and McDonald 3, p 235). This being said, most politicians, along with many economists, have argued that Australia is not saving enough. These policy makers believe that the current generations will have to increase savings in order to counteract the effects of decreasing support ratios. Though Guest and McDonald disagree with this conclusion, they outline three reasons why it may appear that Australia has a savings problem. First, the rate of national saving in Australia has decreased more or less continuously over the last few decades. Secondly, over the same period Australia has experienced an increase i
