Let's just stop thinking for a moment about recession, job losses and government deficits created by trillion dollar rescue packages.

Instead, we are looking at a future of low productivity, rising public spending, more big government and skills shortages.

These are the problems of an ageing population captured in this United Nations report, World Population Ageing. "The impact of the financial crisis pales compared to demographic problems," the World Bank's Robert Holzmann has told the European Commission.

According to the UN report, the proportion of older people in the population will reach 22% by 2050, compared with 11% in 2009. Globally the population of older persons is growing at a rate of 2.6% per year, more than double the rate for the rest of humanity which is growing at 1.2% annually. Within the older person's group, the fastest growing segment is among those aged 80 and over.

What does this mean? To avoid fiscal meltdown, governments will have to streamline health care and pensions which means many older people will not be getting the care they might need. It also spells the end of retirement. The best way to put a lid on pensions is to encourage people to keep working because that generates more tax revenue while reducing the amount governments would spend on handouts. The problem is whether employers can be encouraged to take on, or keep, older workers. There are only a handful of companies, like Britain B&Q and America's Wal-Mart who have been good at it but these are far and few between. Without a good choice of jobs, many older workers will have to turn themselves

We can also expect to see governments becoming bigger. As The Economist says, the ageing of the population combined with the financial crisis means that big government is back. Inevitably, governments will start to cut back on spending. But the problem is this: how do you reduce government spending after decades of public sector reform?

Another issue is that an older society might be less innovative and more risk averse which will affect growth and entrepreneurs.

Australia's prime minister Kevin Rudd has announced infrastructure spending and a push for productivity to counter the effects of ageing. The looming productivity problem is obvious. As more people retire and fewer younger ones take their place, the work force will shrink so output growth will drop unless productivity increases faster. Rudd is on the right track but the problem is that his government will have to produce a procession of micro-economic reforms to lift productivity and that will cross state lines, something his government has struggled to do even with a majority of Labor governments in each state.

Other governments in developed countries will face similar problems.

Low productivity, low growth, and more government. An ageing population will produce the new normal