Budget blowout a headache for Rudd

A new report on the cost of Australia's ageing population out today will reveal a $100 billion budget blow out due to the Opposition blocking a change to private health insurance.

The third inter-generational report, the first to be released by Treasurer Wayne Swan, will also reveal just how badly the nation's finances have been damaged by the global financial crisis.

To coincide with the launch, Kevin Rudd is expected to unveil tax breaks to keep older Australians in work longer amid findings the ratio of working-aged Australians to those aged 65 and over would almost halve from five to one now, to 2.7 to one in 2050.

The report, the first of which was handed down by Peter Costello to outline long-term costs facing the country due to demographic changes, will update national population predictions, with Australia expected to be home to 35 million people by 2050.

But the Prime Minister revealed yesterday that the report has looked at the long-term financial repercussions of not means-testing the private health insurance rebate.

The Budget measure, which was expected to save $1.9 billion over four years, was rejected by the Senate last September although the Government has vowed to re-introduce it in coming days. That would deliver a double dissolution trigger if it was knocked back again.

Mr Rudd said that measure, which includes a higher Medicare levy surcharge for high income earners who opted out of private insurance, would cost the Government $100 billion in lost revenue over the period to 2050.

"If we don't have that extra hundred billion dollars for future investment that means less money to invest in the much-needed extra hospital beds, much less money to invest in improving waiting times and accident emergency, less money to invest in elective surgery waiting times," he told Channel 9.

The report comes out as new research for the Investment and Financial Services Association found a $240 billion blow out in the difference between what Australians are saving for their retirement and what they'll need to live comfortably away from work.

The study, by actuaries Rice Warner, estimates that for every Australian there is a shortfall of $73,000 between what they'll get in their super and what they'll need, an increase of $26,000 over the same measure as made in 2004. The total shortfall is now $695 billion, up from $452 billion.