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October 20, 2021

Pensions funding and healthcare shadow Covid-19 costs – leading macroeconomic influencers

Costs related to an ageing population are expected to weigh down Covid-19 costs.

The OECD has warned that the deceleration in large emerging economies, demographic changes, and slowing productivity will drag down economic growth of all member countries, from the current 3% to 1.5% by 2060.

Stephen Kinsella

Stephen Kinsella, economist and associate professor of economics at the University of Limerick’s Kemmy Business School in Ireland, retweeted an article shared by Ed Brophy, founder of Tyrconnell Strategy and former chief advisor to the Minister for Finance and President of the Eurogroup, on an Organisation for Economic Co-operation and Development (OECD) report highlighting future funding requirements to dwarf pressures associated with Covid-19.

The OCED stated that an ageing population and the rising price of services due to the pandemic-recession, will put significant pressure on public finances in the future. As a result, in order to maintain public services and benefits, while stabilising debt, governments would have to raise revenues by nearly 8% of GDP. For countries like Japan and France, this would mean growing revenues by more than 10% of the output, which does not include climate change expenditures.

The report suggests countries to not necessarily increase taxes to meet the future population challenges, but calls for reforms to boost employment and raise retirement ages.

Steve Keen

Steve Keen, economist and associate professor of economics and finance at the University of Western Sydney, retweeted an article shared by the leader of The New Liberals (TNL) and director of the Refugee Law Project, Victor Kline, on the federal government rethinking Australia’s migration programme to drive economic growth and standards of living of Australians after the Covid-19 pandemic.

Treasurer Josh Frydenberg stated that a change in immigrant composition and numbers was being measured, after an agency warned of the Covid-19 pandemic having disrupted Australia’s migration intake to such an extent that it was likely to weigh the economy for years.

The government had slashed the migration cap from 190,000 to 160,000 before Covid-19 struck and for the next four years. Prime Minister Scott Morrison had stated that people were complaining about major cities being overpopulated.

The changes increase immigration could imply returning to the same numbers prior Covid-19, or targeting more skilled migrants. However, Australia faces stiff competition from Canada, which has announced plans to take 1.2 million migrants over the next three years to help tackle the problem of labour shortages.

Chris Williamson

Chris Williamson, chief business economist at IHS Markit, shared an article on economic growth stalling in Sub-Saharan Africa due to renewed Covid-19 lockdowns and supply chain disruption. The country witnessed declining growth in the third quarter of 2021, due to a rise in Delta variant cases and subsequent fall in demand.

The region also experienced heightened supply constraints, which curbed production and led to a rise in costs and output charges. However, the stringent lockdown measures helped in curbing the spread of the virus towards the end of the quarter, leading to a modest recovery of demand.

New businesses struggled to rise in the third quarter, with the weakest rise reported in July 2021 due to rising Covid-19 cases across the region that impeded economic growth. Businesses reported difficulties in processing new orders due to raw material shortages caused by strong inflationary pressures.

 

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