As is so often the case, Borowitz in the New Yorker summed up the current state of US politics: “Iran offers to mediate talks between Republicans and Obama”.  The ongoing deadlock between political parties in the US over the last few years has seen the number of laws passed by congress falling to a record low.  Increasingly, the US president has relied on executive powers, rather than initiating legislation subject to debate and review by the other pillars of government. Not unsurprisingly, US public approval in politicians is down.

Sadly, we have not been immune to these trends, this side of the Pacific. Australia’s political process has ground almost to a halt as our political parties seem to adopt a similar “block or bust” mentality on major policy issues.  The current government looks set to give up on its first budget and try to pass it’s second.  On one level it could be just desserts for this government, which like most opposition parties, too often refused to negotiate when in opposition. This power play offers plenty of fodder – never mind its quality – for the media.

The 2015 Intergenerational Report (IGR) has arrived and upset this apparent tennis match of insults between major political parties from election to election. It is clear that future demographic changes will have a profound effect on our government’s ability to raise revenue. Australia’s ageing population will, at the same time put upwards pressure on health expenditure and the cost of the aged pension.  Significant changes are required to address the balance of spending otherwise we look set to face unsustainable debt and push an unfair burden onto our country’s youth to support the health and retirement of asset rich baby boomers.

The outcomes of the 2015 IGR will not be a surprise to anyone who has read, or prepared contributions to, the 2010 IGR. In the longer term all political parties know that something needs to be done to avoid a slide into financial oblivion. However, any corrective action would almost certainly result in reduced transfers of funds  to older Australians from younger Australians, just as the proportion of older Australians is increasing.

We are all too familiar with how difficult it can be to persuade young Australians to take their retirement finances seriously, never mind making them contemplate their future morbidity and health. Consequently, political power rests with older Australians, and there is a political reluctance to deal with the issues. The solution has to be a bipartisan approach based on objective financial evidence rather than political ideology.

The government used the IGR to make the case for economic reform, and following its publication, made a gesture of asking for bipartisan support for change.

Sadly, they also used the IGR to slap down their political opponents putting forward the “previous policy” scenario as representative of the previous Labor government without allowing for all the revenue sources or corrective policy strategies that would have possibly occurred.

Discussion of climate change barely stretches to four pages of the full report, and isn’t mentioned once in the executive summary.  The 2010 IGR included detailed projections and analysis of the costs to the economy of the changing climate.  The 2015 IGR contains so little of substance on climate change that you might well wonder why the Treasurer included any mention of it at all.

I suspect that political tunnel vision to the next election will stifle any semblance of bipartisan action on the IGR.  And we’ll all be poorer for that. 

CPD: Actuaries Institute Members can claim two CPD points for every hour of reading articles on Actuaries Digital.