April 24, 2011

NEW ZEALAND: Nation at mercy of age crisis

AUCKLAND, North Island / The New Zealand Herald / Economy / News / April 24, 2011

By Maria Slade

New Zealand authorities and businesses need to wake up to the looming crisis posed by the retiring baby-boomer generation, a university demographer says.

Professor Natalie Jackson says the downstream effects of New Zealand's baby boom will be more severe than in most other countries.

The post-war population burst was much greater here than in other places - New Zealand's baby-boom birth rate was 4.2 births per woman, compared with Australia's 3.6.

Added to that, the baby boomers were living much longer than anticipated and New Zealand had suffered a "bite" out of its 20- and 30-something population thanks to migration.

Businesses and government agencies tended to focus only on the particular demographic that affected them, the University of Waikato academic said. "But the whole age structure is the story ... There is a crisis unfolding."

Between 1996 and 2001, 24,000 young men and 12,000 young women disappeared from New Zealand's population because of migration.

That was one of the reasons this year's cancelled Census needed to be rescheduled, she said.

While births and deaths could be measured easily, migration was much more volatile. "We do desperately need a Census to ensure that bite isn't deeper."

Gains in life expectancy for the baby boomers were also greater than had been forecast. "We are seriously underestimating the numbers of older people that will come through in the next 15 to 20 years."

When pensions were first introduced only 4 per cent of the population was elderly. In 1934 the average woman could expect to live to 68. Now she can expect to live past 82.

In five years, 19 per cent of people would be of retirement age and costs such as superannuation and healthcare would place an impossible tax burden on the young, she said.

"No one really imagined a world where we would have 20 per cent of the population over the age of 65.

"By 2023 there will be more elderly than children. Then it's a short stop to having more deaths than births.

"Once your age structure turns upside down the potential for growth is gone."

It was already happening in provincial areas - 12 per cent of New Zealand's regional authorities had more people over 65 than under 14, and more than a third had more people exiting the labour market than entering it, Jackson said. If taxes were put up to compensate it could create a "fertility taxation spiral", with women having fewer babies as they worked longer and harder to meet the additional costs.

Montage by Age Concern New Zealand

New Zealanders had been complacent about these consequences for a number of reasons. Our birth rate - at 2.1 births per woman - was the highest in the developed world and we enjoyed relatively high net migration.

There were also "baby blips" in the early 1990s and in the past five years. But because of other unusual features of New Zealand's ageing population that was not enough to counter the effects, Jackson said. We were struggling to pay the costs of educating those entering the workforce and there were fewer of them.

Meanwhile, employers would be competing for young workers. Westpac economist Dominick Stephens said the retirement of baby boomers would have a massive effect on New Zealand's economy.

"The proportion of the population that chooses to participate in the labour force has already been falling as a result of population ageing. That is going to get more rapid in the next 10 years."

The country had seen skills shortages in good economic times, and while that was not a problem at the moment New Zealand would find itself in that situation more frequently.

Jeff McDonald, client solutions manager for recruitment firm Randstad NZ, said severe shortages were already evident in construction and healthcare sectors.

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