Fears of the future should not be a burden on the present

To realise that living standards will increase substantially rather changes one’s view about the future. There is no dark cloud. An increase in taxation of even 2.5 per cent of GDP does not look like a terrible impost on people who are to be so much better off than we are today. Indeed to deny someone today health expenditures on the basis that there will be an increase in taxation of 2.5 per cent of GDP in 40 years time is inequitable.

But where does this leave the PBS scheme? The answer is that this scheme should be managed today on considerations about today, not on some poorly based notion of what will happen in 40 years time. Even the current level of spending on the PBS, 0.6 per cent of GDP, is a considerable sum. The allocation of that amount of GDP should be done to ensure that people are getting value now. It may be that the efficient size of the PBS today is greater than 0.6 per cent of GDP. If so it should be expanded. And it maybe that increased co-payments for benefits under the PBS will increase the efficient allocation of the resources used. It is this argument, not a budget deficit in 40 years time, that is relevant.

Of course, health experts, economists and public servants have been working and will continue to work on ways to improve the efficient allocation of resources in the PBS and indeed in health in general.

In summary, a reasonable interpretation of the IGR is that the future ageing of the Australian population is shown to be not a problem. The idea that if we do not act now things must get worse and even out of control is not supported. Instead we should focus on the benefits people get today from government outlays, attempting by efficient allocation of resources to maximise these benefits. And we should not penalise people alive today in order to further increase the well-being of people alive in the future.