I am specifically looking at the problems surrounding an ageing population, the effects on supply and demand, issues with the government and impacts on the economy.
Australia’s population is steadily ageing and implications that the country faces as a result of this, is something that economists and governments alike fear. Leading factors such as significant increases in demand for health care, medical services, financial aid from the government and a decrease in the supply that will be available to cater these needs and financial pressures on the government are just some of the many, threatening to jeopardise the economy in the next forty years. The ageing population is not only effecting the economy but there are also opinions from a social perspective. In my opinion, one of the main implications and focus’s regarding an ageing population is on health care and other medical related services. Body of Report
Relevance of the implications of an ageing population to Economics, the effects on supply and demand and the financial pressures this problem will create. The issue of an ageing population in Australia is intertwined with the issue of a sustainable economy in Australia. It is a situation of Macroeconomics, impacting the economy as a whole. The Australian Local Government Association, in their article: Economic implications of an ageing population, pg 2(2004) confirm that the number of people aged over 65 years old will increase from the current 2.5 million to around 7.2 million by 2051. Such an increase in the aged will decrease the number of working citizens, decrease the number of tax payers and decrease supply in a variety of areas in Australia thus decreasing the economy as a whole. As stated in Principles of Economics, pg 64, demand is the quantity of a good that consumers are willing and able to purchase. Since the population of people around retirement ages (65) is increasing, consequently as result of their low income they are not able to purchase as many goods, thus demand for many consumer goods will fall dramatically whilst demand for things such as medical related services will rise dramatically. This also leads to an increasing financial pressure on the government to provide cheaper services to the aged and to help aid them in areas such as health care. David Parker, the executive Director, Macroeconomic group, stated in his address to CEDA pg 4(2007),’ the pattern of supply and demand in the economy is going to be significantly effected.’ He explores the reasoning behind this is due to the different demands of the aged and the supply that is required to meet their demands especially in the health care department. Medical services and health care are two examples of the areas that will have a significant shift in demand with the population ageing. These examples are all items that are more inelastic, being more necessities and needs than wants. This proposes a problem for the government as the aged do not have much money of their own, thus again adding to the financial pressure that an ageing population is creating. With this will also come a need for an increase in supply of these services, but with the population ageing will there be an ability to supply enough for the amount that is demanded? In my opinion unless measures are put into place at an early stage, Australia and other countries around the world are going to find themselves in economic turmoil in years to come when the supply for the needs of the elderly cannot keep up with the demand. Impacts on the government and what governments are doing and are planning to do to control the situation Governments intervene and place policies to help shape the economy in a positive way. Lesson 7, in economics actually states that government intervention can sometimes improve market outcomes. As seen in Principles of Economics, pages 28-29, policy is normally based on normative...