Measuring the economic impact of illness - a microsimulation approach to measuring the impacts on government and individuals

The Australian government’s economic policy is currently driven by the findings of the Intergenerational Report which found that ageing of the population, coupled with strong growth in health and disability support pension spending, would force the Australian Government unsustainably into deficit over the long term. One of the main solutions identified by the Australian Government as a central part of its strategy to manage the anticipated costs of population ageing has been to increase the labour force participation of older workers. However, high rates of chronic illness amongst the older working age population currently reduce the potential of this policy for managing long-term government budget balances and for improving the living standards of older Australians.In this paper, we describe a new approach within Australia to measure the relationship between illness and the economy.This paper was prepared for the 30th General Conference of The International Association for Research in Income and Wealth and was written by Deborah Schofield, Rupendra Shrestha, Richard Percival, Simon Kelly, Megan Passey and Arul Earnest