In addition, there are more of us living well into retirement. Life expectancy in the United States in 1915 was 47 and in Australia in 1947 it was 68. Medical advances have seen more people making it into retirement than at any time in history. In the context of providing a pension to retirees, what was once a pension of a few years post retirement for the ones that made it, can now be decades. The Australian population aged over 65 is projected to increase from 3.6 million to 8.9 million by 2054, so demand on the government balance sheet will continue to increase just by the sheer numbers.
The number of taxpayers is expected to remain constant, however if global interest rates rise, there is less revenue for expenditure. If, at the same time the demands for health expenditure and pension payments increase dramatically then there will be limited funds for other services such as defence, education, infrastructure and social welfare.
On this basis, expect tax reform to be continually debated for the next decade. As the ageing population is a global phenomenon, as is indebtedness, these issues impact almost every country on the planet.
From a commercial real estate perspective, the ageing population and those over 65 bring with them superannuation and retirement savings. This pool of capital is expected to grow to over $10 trillion in the future. For retirees income generating investments are most appealing, so they hunt for yield. The effect for commercial real estate is that there will be a large pool of retirement capital seeking higher yielding investments, in a low yield world.
To learn what’s next for an ageing investor population, contact Tony Crabb, National Director, Research.
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