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Ageing, Immigration and Optimal National Saving in Australia. a

Author

Listed:
  • Guest, R.S.
  • McDonald, I.M.

Abstract

By simulating a model of the optimal level of saving in a small open economy, this paper calculates the levels of optimal national saving for Australia for the period from 1997 to 2051. The calculations focus on the implications of making allowance for the ageing structure of the population. The effects of the ageing structure on employment participation, labour productivity and consumption demands are allowed for. Three different projections of future immigration are compared. The simulations suggest that in 1997 the optimal level of national saving in Australia is about nine percentage points of GDP greater than the actual rate of national saving. In the 50 years following 1997 the optimal saving response to the ageing of the Australian population is for national saving to increase up to the year 2011 and then to decline to the year 2051. If immigration is lower then the increase in optimal national saving is greater. Notwithstanding the large size of the shortfall of actual national saving below the optimal rate, we argue that the case for government intervention to increase national saving significantly above current levels is weak.

Suggested Citation

  • Guest, R.S. & McDonald, I.M., 1999. "Ageing, Immigration and Optimal National Saving in Australia. a," Department of Economics - Working Papers Series 690, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:690
    as

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    Citations

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    Cited by:

    1. Stiller, Silvia, 2000. "Welfare effects of demographic changes in a Ramsey growth model," HWWA Discussion Papers 107, Hamburg Institute of International Economics (HWWA).
    2. John Janssen, 2002. "Long-term fiscal projections and their relationship with the intertemporal budget constraint: An application to New Zealand," Treasury Working Paper Series 02/05, New Zealand Treasury.
    3. Ross Guest & John Bryant & Grant Scobie, 2003. "Population Ageing In New Zealand: Implications for Living Standards and the Optimal Rate of Saving," Treasury Working Paper Series 03/10, New Zealand Treasury.
    4. Stiller, Silvia, 2000. "Welfare Effects of Demographic Changes in a Ramsey Growth Model," Discussion Paper Series 26285, Hamburg Institute of International Economics.
    5. Malcom Edey & Luke Gower, 2000. "National Saving: Trends and Policy," RBA Annual Conference Volume (Discontinued), in: David Gruen & Sona Shrestha (ed.),The Australian Economy in the 1990s, Reserve Bank of Australia.

    More about this item

    Keywords

    SIMULATION ; AGED ; IMMIGRATION ; SAVINGS;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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