For decades, demographers were too pessimistic on life expectancy and had to revise up their forecasts. Are they now too optimistic? Recent data suggest that UK ‘death rates’ have stopped improving. If sustained, life expectancy projections would need to be revised down. This would have profound implications for government and pension finances.
What happens when babyboomers retire? Have we saved enough for retirement or are we living beyond our means? Academics argue high savings by prime-aged babyboomers in their 'summer' have depressed real interest rates in recent decades. But the community is split as to what happens next as 'winter' comes.
This blog comes with a health warning: Higher fee pots die younger. And the UK government is taking notice.
The BoE is in a difficult spot. Lower trend growth and a weaker pound mean that if it doesn't hike rates, inflation could remain above target. But if it raises rates too fast, the economy could be hurt should downside risks materialise.
US wage inflation remains subdued. Many believe this is due to workers' fears about automation and offshoring. Yet US consumers believe jobs are 'easy to get' and companies struggle to find labour. This contrasts with Germany in 2004 when the EU expanded eastwards. So second-round effects from low oil prices and ageing demographics appear more plausible explanations.
Developing countries face more favourable demographic prospects than the ageing developed markets. But it takes more than favourable age structure to boost growth. To reap the demographic dividend, many developing countries need much better conditions for employment and investment.
Just like cars, it costs more to maintain an older person than a younger one. Government borrowing could rise by 3% of GDP over the next 20 years as a result of ageing. To offset this, the UK government has squeezed the rest of the public sector in an attempt to balance the books. This seems politically unsustainable. Is the government about to reverse course by ending public sector pay caps?