We've been warned. Australians are on notice that our overall income levels will drop unless we can find ways to boost our productivity and create jobs to address the rising costs of providing for an ageing population.
The Organization for Economic Cooperation and Development (OECD) counsels us Australian per capita income levels are already dismal compared with other industrialized countries, and that labour efficiency must increase to cope with the pension and health-care costs of the retiring post-war "baby boom" generation.
With the Howard government already labelled - frequently and loudly - the highest taxing, highest spending government in our history, the report cites approvingly an official Australian study forecasting a sharp rise in health and aged care spending that could tip the public budget into deficit in the coming decades.
While our economy has achieved an "excellent" performance compared to other nations since the early 1990s, our per capita income and productivity levels are already plummeting below those of many of our fellow 30 members of the OECD.
The OECD says "further policy actions should not be delayed" to address the pressures of the ageing population on public finances, notably on public health costs and to a lesser extent on public pensions. And without improvements in productivity and employment rates, the Australian government projects the federal budget balance will go from maintaining a small surplus to a deficit of five percent of GDP in the early 2040s, without improvements in productivity and employment rates.
Still, at least we're not in as dire a position as the US government, where the soaring deficit and ever-increasing government expenditure - not even including the costs of Iraq and Afghanistan wars - are sending the country broke.
The Government Accountability Office (GAO) wants a comprehensive re-evaluation of federal spending, and sees fresh approaches to utilizing technology and boosting the nation's return on its research investments as part of the answer.
The White House predicts its budget deficit will reach a monstrous $US427 billion in 2005. But officials claim to be optimistic they can cut the deficit in half over five years, partly by controlling public spending.
At a February hearing, senators and US Comptroller General David Walker of the GAO warned that the government needs to dramatically curtail spending to prevent fiscal disaster.
"We've got to face this, and we've got to tighten our belt," said US Senator Joseph Lieberman, the ranking Democrat on the committee. He said the budget process "has broken down in Congress."
The GAO thinks the government can navigate its way out of disaster by finding ways to improve scientific and technological innovation, by such measures as increasing the return on investments in federally funded research, adding incentives to encourage private-sector collaboration, and developing a more technically proficient workforce. It also wants the government to explore using advanced technologies to better protect the nation.
"Based on this report, we are headed toward very troubled waters if we stay on this course," Walker said. "We're on an unsustainable path." Walker, the only witness before the panel, said the government largely operates based on decisions made in the 1950s and 1960s and that the massive review he envisions could take a generation.
It's probably time Australia followed suit.
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