Population ageing in New Zealand: Implications for living standards and the optimal rate of national saving

Abstract

Over the next 50 years, New Zealand's population will age substantially. There has been wide debate about whether New Zealand should prepare for population ageing by increasing national savings. This question is addressed by choosing time paths for consumption, savings and debt, through the use of a Ramsey‐Solow model of optimal saving, adapted for investigating problems of population ageing. The simulation results suggest that population ageing alone would not justify increases in national savings rates beyond those envisaged by current policy. The cost of ageing in terms of reduced real consumption is not large enough to justify large additional savings, and the concomitant reduction in current consumption.

Notes

Corresponding author: Professor Ross Guest, Graduate School of Management, Griffith University, PMB SO Gold Coast Mail Centre, Queensland 4216, Australia r. [email protected]

John Bryant and Grant Scobie, New Zealand Treasury

DISCLAIMER The views expressed in this Working Paper are those of the authors and do not necessarily reflect the views of the New Zealand Treasury