By Professor Michael Sherris, CEPAR Chief Investigator and Director of Industry Engagement, UNSW Business School
From the early days of CEPAR, significant contributions have been made to research into the financing of the needs of an ageing population, whether that be how to optimally fund a long, healthy life in retirement or to managing the risks of ageing including chronic diseases and aged care. An important part of this research initially focussed on retirement income products from both a supply and demand perspective. Another area of focus was on quantifying the risks of ageing, not only in terms of mortality and living longer, but also functional disability and chronic disease.
Although government financing from the age pension, health and aged care funding is the major way that Australians finance retirement income and risks, there is an increasing awareness of the importance of individual superannuation savings, housing, and other savings. As balances in superannuation accounts at retirement become a more significant contributor to retirement income, and as superannuation funds develop retirement products that allow retirees to manage their longevity and inflation risk, the integration of public and private retirement financing, including for health and aged care will require more focus. With the Australian election of a new Labor government with aged care and health as key priorities, there is the prospect for a longer-term view to be taken on financing health, disability, and aged care beyond rationing of services and funding.
We know that these areas require increased funding and that this will be a challenge given the debt built up through the COVID-19 pandemic. We also know that, because of this COVID debt, the Australian economy will face increased inflation, increasing interest rates and increased equity market volatility over coming years. The challenge will be to take a longer-term view, to develop approaches that integrate private and public funding solutions to retirement income and insuring risks such as longevity, inflation, and aged care.
There will be a need for increased responsibility by individuals who have the resources, tax policy and means testing that will provide the incentives to ensure cost and risks are shared equitably. These are all areas that have been the focus of CEPAR research and over the years CEPAR has supported and developed many emerging researchers who will contribute to these critical policy issues and challenges.