Is Australia really a good place to grow old?

You may have been pleasantly surprised earlier this month to read in the newspapers that “Australia ranks 14th out of 91 countries in a new index of the best and worst places to grow old, and which warns many nations are ill-prepared to deal with the old age time bomb.  In a rapidly greying world, the Global AgeWatch Index – the first of its kind – found that Sweden, known for its generous welfare state, followed by Norway and Germany, were best equipped to deal with the challenges of an ageing population.”^[1]

14th in the world doesn’t sound too bad, does it?  But read on . . .  “Australia ranked behind New Zealand (7), the United States (8) and Britain (13).”  And Canada was ranked at number 5.  So we’re clearly not keeping up with some of the major countries that we would aspire to be as good as, or better than, in providing a great lifestyle for our senior citizens.  Let’s dig a bit deeper and find out why.

The AgeWatch^[2] Report Card for Australia shows that we have a “Global AgeWatch value” of 77.2, putting us 14th on this new scale, immediately behind Britain on 78.7 and just ahead of Finland on 77.1.  At the top of the table, Sweden had a value of 89.9.  But where are these numbers coming from?

The Global AgeWatch value for each country in the study has been created by combining values across four domains :

• Income security,
• Health status,
• Employment and education, and
• Enabling environment.

Interestingly, Australia was ranked 4th out of 91 countries in both the Health status and Employment and education domains, which could be viewed as an outstanding result.  We only managed a ranking of 25th for Enabling environment, but what really let us down was a ranking of 57 out of the 91 countries on Income security.^[3]

The report noted that “Although (Australia) scores highly in the health, and employment and education domains, it ranks lower on income security. For example nearly 36% of older people have an income less than half the country’s average income.”

The four factors taken into account in determining a country’s score for the Income security domain are :

• Pension coverage,
• Old age poverty rate,
• Relative welfare, and
• GDP per capita.

As an exercise, let’s see how we compare with Canada, which has perhaps more parallels with Australia than most other countries in the world, having a similar area, a similar population density, and having a predominantly resource-based economy.  Another similarity which is relevant to the figures we’re about to look at is that 20.8% of Canada’s population is over 60, compared with 19.6% for Australia.  In one further striking similarity, The Economist Intelligence Unit’s August 2013 “Global Liveability Ranking and Report”^[4], ranked three Canadian cities in the top 10 cities in the world, compared to Australia’s four (Melbourne, Adelaide, Sydney and Perth).

The AgeWatch Report uses a calculation of GDP per capita as a proxy for standard of living of people within a country, aiming to provide a basis for comparisons across countries.  This figure also highlights the similarity between the two countries, with Australia having a figure of USD$34.6K per head, compared to Canada’s USD$35.2K.  Pension coverage (the percentage of people over 65 receiving a pension) is also quite similar with Australia at 80.8% compared to Canada’s 78%.

But get ready for the bad news.

The report uses a calculation they call Relative welfare to measure the average income / consumption of people aged 60+ by expressing it as a percentage of average income / consumption of the rest of the population.  The figure for Canada is 90.8%, meaning that older Canadians do quite well when it comes to lifestyle spending compared to the rest of the population, while Australians aged 60+ make do with an average of only 69.7% of the spending money that their younger counterparts enjoy.

However the really disturbing figure is the Old age poverty rate, defined as the percentage of people aged 60+ with an income of less than half the country’s median income.

The Report shows that 35.5% of Australians aged 60 and above have an income of less than half the country’s median income, while the figure for Canada is 4.4%.

In the material I’ve seen, the AgeWatch report doesn’t specify exactly what figure it is using for Australia’s median income, but the concerning aspect of this statistic is that a figure of “half the country’s median income” is widely used as a benchmark for the poverty line, and is quoted by organisations including NATSEM (the National Centre for Social and Economic Modelling at the University of Canberra) and the OECD (Organisation for Economic Co-operation and Development).  By this definition, 35.5% of Australians aged 60 and above are living in poverty, placing us in 90th place out of the 91 countries for which this figure is available.

While I’m sure there will be much written and debated about why Australia finds itself in this situation, and who is to blame, and what should be done about it, there is one very clear message for all Australians.  If you aspire to a superior lifestyle later in life and you live in Australia, there is only one person you can rely on to provide the money to fund that lifestyle for you . . . yourself!

At Empower Wealth, our goal is to help Australians achieve their desired standard of living later in life by creating a superior financial outcome, and we have developed a suite of proprietary financial modelling tools to help people understand their current and potential future financial position, together with money management strategies to give people more control of their cashflows, get their money working harder for them and ultimately, get a better financial outcome in life.

If you would be interested in seeing how these tools and strategies could be applied to your own personal financial situation, please come and see us for a free one hour consultation. You can also learn more by visiting our Property Portfolio Plan page.

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[1]  “Where best to grow old, gracefully“  The Australian  2nd October 2013
URL: http://www.theaustralian.com.au/national-affairs/where-best-to-grow-old-gracefully/story-fn59niix-1226731659409
Accessed 9th October 2013
 

[2]  Global Age Watch Index 2013
URL : http://www.helpage.org/global-agewatch/
Accessed 9th October 2013
 

[3]  AgeWatch report card: Australia
URL : http://www.helpage.org/global-agewatch/population-ageing-data/country-ageing-data/?country=Australia
Accessed 9th October 2013
 

[4]  Global Liveability Ranking and Report August 2013
URL : https://www.eiu.com/public/topical_report.aspx?campaignid=Liveability2013
Accessed 9th October 2013