Magazine article New Zealand Management

IN TOUCH : Ageing Population Will Demand More Private/public Cooperation

Magazine article New Zealand Management

IN TOUCH : Ageing Population Will Demand More Private/public Cooperation

Article excerpt

An ageing global population will force governments worldwide to revisit the services they provide and rethink how they will continue to fund public services, according to "Serving the Ageing Citizen", a new global study from Deloitte.

By 2011, the first wave of the Baby Boom generation will reach retirement age meaning the dependency ratio (the ratio of working age people to children and elderly) will rise in most developed countries, demanding a new era for governments across the globe. While Japan, Germany and the European Union-14 countries are likely to be hardest hit, New Zealand's demographics indicate similar patterns towards a rising dependency ratio (from 51 percent in 2005 to an estimated 66 percent in 2050).

The study discusses the consequences of shifting demographics forcing governments to rethink how they will finance government services. As the number of elderly increases, there will be a smaller percentage of workers to cover the tax burden. Given that tax cuts are more politically acceptable than increases, governments will have to find other ways of generating the revenue they need to fund public services, while simultaneously reducing cost to serve.

Bill Eggers, study author and Deloitte's global director for research, public sector, was in New Zealand to facilitate some public sector leaders roundtable forums and promote his research.

He says the responses to his findings are likely to appear in four trends becoming more prominent in the next few decades:

1 the need to modernise tax systems to reduce dependence on personal income tax revenues;

2 a rise in the average retirement age;

3 increased reliance on user fees; and,

4 growth of public-private partnerships to create new opportunities for partnering and leveraging private dollars for public causes, across a number of sectors, and in particular health and transport.

"As the population and workforce ages, governments will have to examine how the growing number of elderly will impact the design and mix of services they offer, the funding sources they rely upon, and the delivery methods they use to deliver services to their people," says Murray Jack, chief executive of Deloitte New Zealand.

"We have already seen some initiatives to shore up the state retirement 'war chest' and to encourage New Zealanders to save, through the NZ Superannuation Fund and KiwiSaver, but it's less clear how the broader economic growth and sustainability challenges are being addressed," he says. …

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