Intergenerationality

• Extreme weather is expected to upend lives and livelihoods, intensifying wildfires and pushing ecosystems towards collapse as ocean heatwaves savage coral reefs.
• It may surprise you, but most economic models predict climate change will just be a blip, with a minor impact on gross domestic product (GDP).
• Most predict a hit of around 1% to 7%, while the most pessimistic modelling suggests GDP shrinking by 23%.
• Inevitably, models can’t come close to capturing the upheavals climate change could cause in markets fundamental to human life, such as agriculture.

Economic models aren’t capturing the reality

• The report estimated what it would do to labour productivity –  Australia’s GDP would be lower by between A$135 and $423 billion.
• Over 40 years, that figure is actually vanishingly small, implying an average yearly effect of around 0.3% of today’s GDP.
• The report stressed that a number of impacts of severe climate change were not modelled.
• Even so, it appears the damages that were included weren’t likely to be major economic concerns.
• Most economic models in this area rely on a fundamental premise – that we can gain useful insight into future damage by looking at how economies have been hit by earlier weather shocks.
• Yet the risk of global food insecurity is not captured in economic models of climate change.

Global shocks are greater than the sum of their parts

• Climate change also threatens crop yields and damage to homes and infrastructure from extreme weather and sea level rise.
• The Intergenerational Report did just this by focusing on the climate impact on labour productivity and crop yields.
• Because our global economy is so tightly interwoven, what happens elsewhere affects us here in many ways, as we saw during the early COVID years and the global financial crisis.

We need better economic models of climate damage

• My research – as well as that of other other economists – is working towards building global weather shocks into modelling of what climate change will do to individual economies, which should radically change economic predictions.
• In the meantime, when you see economic modelling suggesting climate change won’t do much, you should treat it with serious scepticism.
• The impact of climate change on natural systems is well understood.

• MIAMI, Sept. 27, 2023 /PRNewswire/ -- Urban Health Partnerships (UHP), a prominent South Florida-based nonprofit organization dedicated to public health, proudly announces receipt of a $1.1 million award this year with an anticipated overall award of $6 million over 5 years (09/21/2023 - 09/20/2028) from the National Institutes of Health (NIH).
• "Collaboration is one of the greatest determining factors in addressing complex health challenges.
• We are wholeheartedly dedicated to addressing the underlying factors contributing to health inequities alongside our partners and with community voices as our guide."
• The research reported in this press release is supported by the NIH Common Fund under award number 1OT2OD035935-01.

• As a community, we will need to spend more on aged care than we do today, with aged-care spending expected to more than double its share of gross domestic product by 2063.
• It needs to be planned so access is protected and all older people, regardless of income, are able to get the aged care they need.

Two distinct types of services

Most experts now accept the two main types of services older people receive in aged care facilities or in their home require different policy responses:


Read more:
Lump sum, daily payments or a combination? What to consider when paying for nursing home accommodation

Funding ‘care’ services

• The same arguments apply to the aspects of aged care which look more like health care.
• There is usually some form of health assessment for these services and so consumers don’t initiate these services themselves.
• In these circumstances, funding should come from the public purse.

So how should ‘care’ costs be funded?

• An “aged-care levy”, effectively an increase in income tax modelled on the Medicare levy is an alternative option.
• An aged-care levy might be specifically allocated – or “hypothecated” – to aged care or, as with the Medicare levy, just go into the total pot of Commonwealth revenue.
• Adding a Medicare-style levy to everyone's tax bill is the wrong way to increase aged-care funding

Funding ‘ordinary costs of living’ in later life

Most people meet the full cost of their meals, accommodation, cleaning and so on during their working life, so the normal expectation is that they would meet them later in life too. However, there are a few reasonable exceptions to the rule:
• Currently there is a mish-mash of policies for consumer co-payments for the ordinary costs of living.
• Consumers face a bewildering array of choices for contributions toward accommodation (capital) costs.
• A complex web of payment arrangements for accommodation costs in residential care has evolved, and a shake up of these arrangements is overdue.

So how should ‘ordinary costs of living’ be paid for?

• There should also be more consistency across providers in the co-payments consumers have to pay.
• Increased contributions from the public purse will be required through income tax, with an aged-care levy one option, or reduced tax loopholes.

• Expenditure on age and service pensions is projected to fall from about 2.3% of GDP in 2022–23 to 2% in the early 2060s.
• These tax concessions are projected to overtake spending on the age pension in the 2040s.
• The increase is driven primarily by earnings tax concessions rising from about 1% of GDP in 2022–23 to 1.5% in 2062–63.
• The figures will refocus attention on the generous tax breaks for superannuation, although attempting change is politically fraught.
• The intergenerational report puts the number of people 65 and over at about nine million by the early 2060s – up from nearly 4.4 million in the 2021 census.
• Beyond the Stage 3 tax cuts, which Anthony Albanese has said repeatedly will go ahead, the government is not contemplating other income tax changes this term.
• And despite the Business Council of Australia’s call for comprehensive tax reform, the government favours any longer term tax reform to be in bite size increments.