Population ageing may negatively impact on Australia’s productivity growth as older people reduce the extent of risk-taking and innovative behaviour in the economy, Reserve Bank Assistant Governor Christopher Kent told the Leading Age Services National Congress on Monday.
Dr Kent said there was evidence to show that older people tended to be less willing to take on risks including those associated with new business ventures, developing new products and services and pursuing innovation, which may weigh on productivity growth.
However, he said while older people may engage in less risk-taking behaviour this could be offset by an increase in risk-taking behaviour at other ages.
“It is also possible that longer life spans may make people much more willing to take on risks at any given age,” he said.
“Take the example of someone considering starting up a new business venture. They might be more willing to do so knowing that they will have more productive years to take advantage of a successful business,” he told the congress in Adelaide.
“In the event of a failure, they would still have many numbers of years ahead of them to generate a decent income doing something else. They could use those years to pursue a safer option or generate a living or even take on a different risky venture.”
Dr Kent’s speech, titled ‘Ageing and Australia’s economic outlook’ discussed the challenges but also the opportunities of population ageing.
He said the ageing of the population will have an “increasingly important bearing” on the economic outlook in areas such as growth in economic activity, labour force participation and public expenditure.
To respond to these challenges he said a combination of extra savings and a boost to labour participation rates was necessary, including by having people work longer.
However, he emphasised a longer working life did not mean fewer years in retirement.
“It is possible that we will actually increase the share of our lives in retirement,” he said as a result of higher life expectancy and increased wealth.
“Rising longevity will provide us with the ability and willingness to work later in life without necessarily implying a change in the share of our lifetimes we spend in retirement. This will also allow us to bolster participation rates, savings and reduce the burden on the public purse.”
In immediate reaction to Dr Kent’s speech on Twitter, some questioned the evidence the RBA used to conclude the impact on risk-behaviour and older people.
Emily Millane, a research fellow at Per Capita, said baby boomers have experimented and innovated their whole lives and wouldn’t stop once they reached 65. Others pointed to the rise of older age entrepreneurs as contrary evidence to the RBA’s warnings.
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