ECONOMICS: Of Foolishness And Forecasts

Give us some economic predictions for 2020, the editor instructed. If I was gifted with that sort of foresight, I replied, I would be wealthy bloke and have no need to write columns. Anyway, there are too many uncertainties. The Government has announced 2020 target range to take to the UN Climate Change Conference in Copenhagen in December, for example. It will aim to reduce greenhouse gas emissions 10 to 20 percent below 1990 levels by 2020 (with all sorts of ramifications for energy-dependent industries and our export competitiveness) if there is comprehensive global agreement. Much of what will happen to our economy and how it is energised over the next 10 or so years, accordingly, will be influenced by what happens in Copenhagen, although environmental responsibilities increasingly are likely to temper economic developments regardless.
Let’s humour the editor nevertheless with forecast: today’s children will find the national superannuation rules have changed by 2020. This forecast stems from warning sounded when The Treasury issued its Long Term Fiscal Statement, series of projections of government spending and revenue over 40 years. Treasury secretary John Whitehead called for serious consideration to be given to pegging the costs of superannuation, or else other public services will suffer. He highlighted superannuation as the area of spending expected to grow the most over the next 40 years, because of the ageing population. Options for cost savings include raising the age of eligibility as life expectancy increases, income testing, and adjusting payments by inflation rather than by the average wage.
Finance Minister Bill English and Labour finance spokesman David Cunliffe rebuffed the advice, saying their parties were committed to the current age and level of superannuation. Fiscal realities will force them to review those commitments.
The Department of Labour’s Workforce 2020 project – set up in response to our population becoming older and more diverse – has produced four reports focused on issues affecting the productive employment and job mobility of New Zealanders aged 55 years and over. The reports are designed to promote discussion of the challenges and opportunities for older workers in changing labour market.
Among the expectations: the proportion of New Zealand’s labour force aged 55 years and over is likely to grow from about one in six in 2007 to around one in four by 2020. While labour force growth has been prime driver of prosperity – the labour force grew by 500,000 between 1991 and 2006 – population ageing will result in dramatic slowdown in growth.
The labour force is forecast to grow by only 15,000 year after 2016, less than half the recent rate. But the proportion of older workers compared to younger ones will dramatically increase, phenomenon that will be more prevalent in some sectors and industries than others. The reports say this will pose extra challenges in terms of maintaining and using the skills of an expanding and increasingly diverse group of older people in the workforce.
The rapid ageing of our society due to decline in the fertility rate and increases in life expectancy will be aided and abetted by technological changes. The Volvo car company’s aim, as it goes about designing new safety features, is that by 2020 no one will be killed or injured in Volvo. Other car-makers are bound to want to keep up.
If you escape premature death on the highways, however, you will find disability increases with age, along with the need for care. This opens opportunities for care providers. The number of paid caregivers needs to almost treble over the next 30 years from 17,900 to 48,200 in 2036 to meet the likely demand, according to the Department of Labour.
AgResearch is 2020 visionary, too. It has produced “2020 Science” brochure and video outlining vision for how the crown research institute can keep New Zealand prosperous to 2020 and beyond. Among the big ideas: doubling the value of the dairy industry while halving the costs and impacts on the environment. One example: increasing antibodies in cows’ milk to help human health.
The dairy industry has its own programme, the Strategy for New Zealand Dairy Farming 2009/2020, setting out the direction for the sector over the next 10 years. It outlines ways in which the industry will increase the profitability, sustainability, and competitiveness of the country’s dairy farmers.
But not all strategies will deliver the goods. In 1999 the Soil and Health Association launched the idea of Organic 2020, movement to create an organic New Zealand within 20 years. That looks likely to go the way of carbon-neutral New Zealand. Make that prophecy, if you like. M

Bob Edlin is leading economic commentator and NZ Management’s regular economics columnist.

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