Australia is leading the charge in responding to the global problem of an ageing population, according to Deloitte’s Global Managing Director for the Public Sector, Greg Pellegrino.

In Australia to launch a new global research report titled “Serving the ageing citizen”, Mr Pellegrino said Australia’s national strategy to deal with this issue placed it well ahead of most OECD countries.

“Australia identified this as a significant issue over five years ago, at a time when a lot of other countries still hadn’t realised the potential impact this would have on their economic future,” Mr Pellegrino said.

“Watching this issue unfold is like watching a hurricane come towards us. We can see it slowly approach but we won’t know how well we’ve prepared for it until it has hit us.”

Mr Pellegrino said that the ageing of the baby boomer generation - and with it, the significant transfer of wealth from the boomers - would be a one-off occurrence.

“Never again in history are we likely to have a demographic challenge like this one where the number of people over 50 years of age is likely to outnumber people under 50 years of age at a ratio of two to one.”

Mr Pellegrino said there were some aspects of Australia’s changing demographic that were different to the average changes expected in other countries.

“Australians enjoy a longer lifespan which means there will be more people aged 80 years and over than there will be in most other countries. Couple that with the fact that Australia will experience a relative decline in its entry level workforce and you realise the size of the problem.”

Mr Pellegrino said the ageing global population will force governments worldwide to revisit the services they provide to their constituents and to rethink how they will continue to fund public services.

“By 2011, the first wave of the baby boom generation will reach retirement age, which will mark a new era for governments across the globe.”

The report suggests that Japan, Germany and European Union-14 countries may be hardest hit by this demographic shift.

“As the population and workforce ages, governments will have to examine how the growing number of elderly will impact the design and mix of services they offer, the funding sources they rely upon, and the channels they use to deliver services to their people.

“Government leaders are going to have to step up to a new set of challenges, and a new way of delivering government services, to keep up with the changing demands and expectations of their citizens.

“For example, Australia’s focus on lifestyle issues in providing healthcare for an ageing population will be duplicated by other countries,” he said.

The report covers how shifting demographics will also force governments to rethink how they will finance government services. This will likely cause four trends to become more prominent in the next few decades:

1. tax system modernisation. Governments will have to modernise their tax systems to reduce their dependence on personal income tax revenues. This means fewer exemptions that poke holes in the tax base and a shift away from narrow-based, idiosyncratic tax structures
2. rise in the average retirement age. The erosion of the tax revenues from income and payroll taxes can be somewhat offset by extending the average retirement age. The retirement age in the OECD countries has started to tick up since the end of the 1990s, but a meaningful impact is unlikely without significant changes in the demand for older workers 
3. increased reliance on user fees. Citizens may be required to pay user fees for access to government services
4. growth of public-private partnerships. The emergence of a much bigger and more sophisticated non-profit sector will create new opportunities for partnering and leveraging private dollars for public causes.