One consequence of the government’s desire for the Reserve Bank to do most of the work to stimulate growth has been the fall in interest rates, making life tough for savers – especially those who were planning to retire.

Right now, there is a greater percentage of adults in the labour force than ever before. A large reason for that is the increase in women entering the workforce, but another important factor is pressure on older workers putting off retirement.

As of July this year the retirement age in Australia is 66 years. After two years, it will rise again to 66-and-a-half, and in July 2023 it will reach 67.

The main reason for the policy decision to raise the pension age was the ageing of our population – a trend which can be clearly seen in a comparison of two age groups.

Forty years ago, the number of 15- to 19-year-olds roughly matched the number of Australians over the age of 65. Now, around 4 million people are over 65, with just 1.5 million aged 15-19:

Forty years ago, working with someone over 65 was pretty rare. On the current trend, within a couple years there will be more over-65s in the workplace than 15- to 19-year-olds:

There are a couple reasons for this. Firstly the rise in the schooling age and the general increase in the importance of education mean more teenagers stay in school than in the past, and secondly, those over 65 are now much more likely to work.

In 1979 fewer than 7% of those over 65 were in the labour force; now over 14% are:

The big rise began in the early 2000s, coinciding with the mining boom. Between 2004 and 2012, both men and women over 65 increased their participation quite steadily.

But then the rate of men working levelled off. From 2012 until the middle of 2017, the participation of men over 65 remained around 17%, while the rate for women over 65 rose from 7% to over 9%.

Then, from the middle of 2017, coinciding with the first rise in the pension age from 65 to 65-and-a-half, the participation rate of men over 65 took off.

The retirement age is not the only factor in play, however. In the past two years, we also saw a very strong rise in the participation rate of men aged 60-64 – an increase not in step with the trend among younger men.

The rise in the participation rate of women is steady across all ages – if anything, it is more pronounced among women in their 20s and 30s. But for men, it is all about older workers:

What was also happening in 2017 was that earning income from the interest on term deposits became much less viable.

Throughout the mining boom years, and even through the global financial crisis, life was pretty good for those with superannuation nest eggs earning interest in term deposits.

Between 2002 and 2012, the average real interest rate you could get for “special” term deposits of a minimum $10,000 was 2.6% – that is, 2.6% points higher than the inflation rate.

That is a very sweet deal. A 2.6% real return for essentially no risk? Sign me up!

But by 2017, the falling cash rate (set by the Reserve Bank) had caused term deposit rates to fall so far that they were barely above inflation. In 2017 the average term deposit rate was 2.3% while inflation was running at 1.9% – a mere 0.4% real return.

Now, the average term deposit rate is even lower – around 1.3% below the most recent inflation rate of 1.6%.

That’s an investment that will make your money worth less in real terms than it was when you gave it to the bank.

It does not make for a fun retirement – and certainly not a situation that has you thinking you can afford to retire if you are nearing 65.

And so the confluence of a rising retirement age and falling interest rates has led to an increase in the number of over-65s working.

This has an impact on a broader level.

One of the reasons the Reserve Bank and the treasurer thought the recent solid employment growth would lift wages was they believed it would lead to a fall in the unemployment rate.

But greater participation means you need more new jobs just to keep the unemployment rate steady; as a result the rise in participation has meant the recent job growth has not been enough to lower unemployment and put upward pressure on wages.

Had the over-65 participation rate remained where it was in August 2017, the overall participation rate would be 0.3% points lower:

That translates to significant gain in the number of older workers whose jobs could be filled by younger people looking for work (or for more hours).

There is nothing wrong with older people staying in work, and it sure as heck is not their fault that wages growth is lower than it should be. But it highlights the real consequences of fiscal policy that has forced the Reserve Bank to cut rates rather than hold them higher due to growth being buoyed by fiscal stimulus.

In effect, it sets up a vicious circle where lower rates reinforce low wages growth, which is one of the reasons that lower interest rates are needed.

And it means retiring will continue to be a tough choice for many.

• Greg Jericho writes on economics for Guardian Australia