Activity 8(c)

Activity 8c: Impact on budget outcome?

In relation to the ageing population, while the government will certainly receive less income tax revenue it will, to some extent, also be forced to increase expenditure on healthcare (as older people demand more health services) and welfare (to the extent that some of those entering retirement will be relying on the government provided aged pension).


In relation to the large decrease in the consumption of alcohol and tobacco, it is true that a major impact will be on the revenue side of the budget, as the government receives less indirect tax revenue. However, government expenditure in the future is also likely to fall given that reduced consumption of these demerit goods leads to better health outcomes, on average, which reduces pressure on the government’s health budget.