Illustration: Andrew Dyson To fine-tune its impact, his department has given $380,000 to Hall & Partners OpenMind, a specialist in "measuring consumer engagement". It has conducted 30 focus groups since November. Asked at last week's Senate hearing whether an advertising campaign would follow, a Treasury staff member said it was "working through the guidelines". It is an extraordinary approach to what is meant to be an information document. This approach is intended to do to the intergenerational report what the Prime Minister's statement did to national security - to make it an instrument of fear. The report is required by law every five years. It assesses the long-term sustainability of the government's policies 40 years into the future. This one will take us through to 2055. It is two months late, although that is not the fault of the Treasury. Finance Minister Mathias Cormann was keen to tell the Senate it is a report of the government, not the Treasury. It is inherently political. Sensitivities over its immigration projections (and possibly what it will say about climate change) have delayed it as government ministers have tossed drafts back and forth. My sincere advice when you read it is to stay level-headed, no matter how frightening its projections. What is prophesied almost never comes to pass, all the more so when it is focus-grouped and fine-tuned by a government losing its grip.

Treasurer Joe Hockey. Credit:Christopher Pearce Let's have a look at what happened to the projections of the first intergenerational report, released by Peter Costello in 2002. It said that by 2042 the ageing of the population and (largely unrelated) extra spending on health would help push up the deficit to $87 billion, about 5 per cent of gross domestic product. Five years later, Costello's second intergenerational report halved that figure, cutting it to less than 3 per cent of GDP. Even by 2047, the end of the new projection period, the budget wasn't to reach 3.5 per cent of GDP. Illustration: Andrew Dyson Many things had gone right. Spending on health had grown more slowly than expected, more of the population was working than expected, and higher-skilled migration meant the workforce was more productive than expected. Small changes to the important assumptions meant big changes to the projections.

And some of the assumptions were ridiculous. What is prophesied almost never comes to pass, all the more so when it is focus grouped and fine tuned by a government losing its grip. The first intergenerational report said spending on the Pharmaceutical Benefits Scheme would climb from 0.6 per cent of GDP to 3.4 per cent by 2042. Professors Ross Guest and Ian McDonald from Griffith and Melbourne universities pointed out that at that rate the scheme would account for one-third of GDP by 2100 and all of it by 2126. The projection was toned down in the second report, as the authors took to heart the implications of "Stein's law". Named after the legendary American economist Herbert Stein who advised both presidents Richard Nixon and Gerald Ford, Stein's law says that: "If something cannot go on forever, it will stop." It is a warning about the dangers of extrapolation. Problems have a way of solving themselves. If, for instance, we were on track to "run out of money" to pay for our health, welfare and education systems (as Hockey once said) we would either find more money or spend less on those services. If we were on track to run out of workers to service our ageing population, we would either find ways to use fewer workers (new technologies) or bid up their wages and call forth more of them, possibly from the ranks of the aged population itself. This is not to say the intergenerational report is not a useful exercise; merely that it cannot be a useful guide to the future. The mere act of publishing it changes that future.

The future changed again by the time of the third intergenerational report, published by Wayne Swan. It found that by 2042 the projected deficit would be a good deal less than 2 per cent of GDP, not 5 per cent as originally claimed. The 3.5 per cent projected for 2047 would also be nearer to 2 per cent, and even by 2050 (the end of the new projection period) the deficit would not hit 3 per cent. This week's report will project things out to 2055. Whatever its projection of the extra demands on the government by then, they are unlikely to be difficult to fund. Swan's report predicted that GDP per head would be 81 per cent higher by 2050, suggesting Australians would be well placed to fund any extra taxes required. Swan's report said that by 2050 there would be just 1.5 Australians of working age to support each Australian of dependent age, down from two at present. It would sound scary if you did not know that throughout the 1960s the ratio was 1.6. Back then, the Australians of dependent age were predominantly young rather than old, but we managed to support them. With the possible exception of climate change (and there it is too early to tell) the future is rarely as frightening as foretold, so exercise some scepticism on Thursday. If you read the word "timebomb", turn the page. Peter Martin is economics editor of The Age. Twitter: @1petermartin