Australia's Intergenerational Report Forecasts Economic Growth Amid Ageing Population

Treasurer Jim Chalmers released the seventh Intergenerational Report on Monday, projecting that the Australian economy will more than double in size by 2066 with average incomes rising by 55 percent. The report identifies four primary transformations shaping the next four decades: the AI revolution, the energy transition toward net-zero by 2050, geopolitical fragmentation, and the growth of the care economy.

Demographic shifts present significant challenges, as fertility rates are projected to drop to 1.34 children per woman by 2065-66. For the first time in the nation's history, deaths are expected to outnumber births by the 2060s. While the population is projected to grow to 39.3 million through net overseas migration, the number of citizens aged 85 and over is expected to treble to 1.9 million. This ageing population will increase budgetary pressure on health, aged care, and the National Disability Insurance Scheme, shifting a larger tax burden onto working-age Australians.

To mitigate these pressures, the government forecasts productivity growth to reach 1.2 percent within five years, largely driven by AI. However, this figure is more optimistic than the Reserve Bank of Australia's 0.7 percent estimate. Critics, including Shadow Treasurer Tim Wilson, have questioned the feasibility of this turnaround, while economists warn that lower productivity could result in a standard of living $20,000 lower than forecasted and significantly higher gross debt to GDP.