The 2010 Intergenerational Report has confirmed that an ageing population combined with a slower rate of economic growth spells long-term challenges for government finances.
"Population ageing will mean that there will be fewer workers to support retirees and young dependants," the Treasury report said.
According to the report, the proportion of Australia's population aged 65 and over is projected to almost double over the next 40 years. By 2050 there will be 2.7 working-aged people to every person aged 65 and over, down from the current rate of five.
The cost of ageing and health pressures will mean a projected increase in total government spending from 22.4 per cent of GDP in 2015/16 to 27.1 per cent of GDP by 2049/50.
The Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos said this was further evidence that Australians will need to fund their own retirement.
"The need for an increase in the superannuation guarantee (SG) and the need for an increase in the [concessional] caps again, particularly for people over 45, have never been more important," Vamos said.
The Australian Institute of Superannuation Trustees (AIST) agreed.
"As the costs of an ageing population continue to escalate, it becomes even more critical that we lift the SG to 12 per cent to ensure that as a nation we are less vulnerable to a blowout in age pension costs and that, as individuals, our retirement savings last longer," AIST chief executive Fiona Reynolds said.
However, the report does show that as the super system grows there will be less reliance on the full aged pension, with more Australians receiving a part pension.
"This is a good thing and confirms that our system is heading in the right direction," Reynolds said.
The report also revealed the government is taking steps to incentivise Australians who choose to remain in the workforce in their later years.
The government has launched a $43.3 million Productive Ageing Package to provide vital training and support for older Australians who want to stay in the workforce.
Vamos welcomed this but said work patterns may change as a result and the government needed to address this.
"People who are in their 60s may not want to work nine to five and will work on contracts. As they are self-employed, they will not be receiving the SG - the government must look into this," Vamos said.
