(Australian Associated Press)
The increasing number of retirees in parts around the world and record low interest rate are a problem for the global economy.
Reserve Bank governor Glenn Stevens says while many believe the US Federal Reserve is likely to raise its interest rate next month the pace of subsequent increases are likely to be slow.
Meanwhile, central banks in Japan and Europe which also have an ageing population are a long way from considering an interest rate rise.
He added that China’s working age population is also shrinking as people move into retirement.
Mr Stevens said the problem with an ageing population was that there were less people in jobs causing a drag on the economy and the ability to pay welfare and public health care costs.
“Instead of five or six people for every retired person there’s two or two and a half,” he said.
“It may be that jobs will be robotised … in the long run we may need that to some extent.”
Mr Stevens says the share of services in most economies will continue to increase with health and aged care obvious areas for expansion because of an ageing population.
“The thing we have to most grapple with is to make our children more productive so they can earn enough to pay the taxes and help the capital return to keep us in our dotage,” he said.
Mr Stevens said continued low interest rates around the world would make it hard for people to fund their retirement.
“In a low interest rate world, the problems of providing retirement incomes will become ever more prominent,” he said.
“Overall, in a world where a higher proportion of the population wants to be retired and living – even if only in part – off the return on their savings, those returns are likely, all other things equal, to be lower.
“And there are more of such people, living longer.”