Speaking at a luncheon in Sydney yesterday, Tyndall AM portfolio manager and senior analyst Jason Kim pointed to Population Reference Bureau (PRB) and Australian Bureau of Statistics (ABS) data that shows 25 per cent of Japanese are currently aged over 65.
“[Japan is a] country that has experienced this demographic shift much earlier and [in a] more pronounced [way] than any other country in the developed world,” said Mr Kim.
There are three main reasons for the ageing population, he said: negligible immigration, low birth rates, and a “very significant” rise in life expectancy.
According to the PRB and ABS data, 15 per cent of Australians are currently aged over 65, said Mr Kim – but that figure is projected to rise to 27 per cent of the population by 2050.
“That will be worse than Japan is facing right now,” he said.
One thing to note in the Japanese experience is that the demographic shift has changed the way people invest, said Mr Kim.
“This demographic shift … does impact economic growth and therefore interest rates in Japan. Yield is negligible in the domestic market in respect to fixed interest and cash,” he said.
Indeed, part of the run-up in high-yielding Australian stocks has been fuelled by Japanese retirees’ hunt for yield, said Mr Kim.
When it comes to Australia, he pointed to the supply/demand dynamic between those in the 20-34 cohort (those looking to take out loans for homes and cars) and those in the 40-49 (who are effectively loaning out money).
“In the ‘70s and ‘80s when the baby boomers came of age and started buying their own homes and buying their cars, interest rates were quite elevated for some time,” said Mr Kim.
“Now those baby boomers are ageing and moving into the older cohorts, having largely paid off their mortgage and saving for retirement,” he said.
“But there haven’t been enough kids born prior to that to move into that 20-34 cohort, and what it suggests here is that interest rates will stay lower for longer because of this demographic shift,” said Mr Kim.
“[It] suggests the range will be about four to six per cent – [but there will be] cycles within that, quite clearly,” he said.
