Australia's rapidly ageing population is likely to take a heavy toll on the economy and has sparked controversial calls to raise the retirement age to 70 and tax elderly people who own expensive homes.
The warnings come in a federal government report on the ageing population which says a woman born in Australia today will live to 94.4, up from 84 for today's women, while men will live to 91.6, up from 80. The proportion of the nation's population aged 65 or older will go from 14 per cent to 25 per cent over the next 50 years.
According to the report released last week by the Productivity Commission, the government's independent advisory body, the ageing trend will slow economic growth and add A$90 billion (S$102billion) - or 6 per cent of gross domestic product (GDP) - to government budgets by 2060. During this period, the proportion of people working would drop from 65 to 60 per cent, as health care costs jump from a current 4 per cent of GDP to 7 per cent.
One way to ease the burden is to raise Australia's retirement age of 65 - due to be 67 from 2023 - to 70, the commission said.
It also proposed that elderly people who own homes be forced to pay for their aged care costs as their property value increases. The measure would involve equity release schemes such as selling a share of the house or using a reverse mortgage.
The money raised would offset public costs for aged care and could cut government spending by 30 per cent.
Commission chairman Peter Harris said the government needed to find ways to keep people in work, warning that "an ageing population will cost us".
"Plenty of people aged over 65 want to keep working so it's as much about convincing employers with this signal as it is about the employees," he told ABC Radio.