Applying Lee-Carter under conditions of variable mortality decline

The tee-Carter method of mortality forecasting assumes-an, invariant age component and most-applicitions have adopted a linear time component. The use of the method with Australian data is compromised by significant departures from linearity in the time component and changes over time in the age component. We modify the method to adjust the time component to reproduce the age distribution of. deaths, rather than total deaths, and to determine the optimal fitting period in order to address non-linearity in the time component. In the Australian case the modification has the added advantage that the assumption of invariance is better met. For Australian data, the modifications result in higher forecast life, expectancy,than the original Lee-Carter method and official projections, and a 50 per cent reduction in forecast error.. The model is also expanded to taken account of age-time interactions by incorporating additional terms, but these are not. readily incorporated into forecasts.