Australia will face a moment 40 years from now when the number of deaths exceeds the number of births, according to the latest intergenerational report (IGR) from the Australian government. This is the seventh such report, outlining a new and uncertain era defined by artificial intelligence that will shape the economy and society over the next four decades.
The Treasurer, Jim Chalmers, delivered a speech at the Australian National University on the occasion of the analysis release. "This intergenerational report illuminates the path ahead," Chalmers said. He added that no previous IGR had faced such global challenges, such complex policy, or such an uncertain future. "The risks are significant, but the opportunities for Australia are boundless," he said.
Projections for the next 40 years show that the population will continue to age as people have fewer children. The falling fertility rate means that for the first time, deaths are projected to exceed births in the 2060s. "This is a milestone that many advanced economies have already passed, including Japan, Germany, Italy, and the Republic of Korea, with most others following in the coming decades," the report states.
The population will grow at a rate of 0.9 per cent in the near future, compared with 1.4 per cent historically. The IGR projects that the economy has entered a new normal of lower growth. Living standards will continue to improve, but not as quickly as in the past. Real GDP per person will grow by around 1.2 per cent over the next 40 years, a decline from 1.5 per cent in the previous four decades. The outlook depends on productivity rebounding from near zero in recent years to the historical average of 1.2 per cent.
Chalmers described artificial intelligence as "the greatest transformation of our lives," and its role as "critical." The report states that the rise and adoption of artificial intelligence will likely support the achievement of long-term assumptions regarding labour productivity growth. "As a mid-sized economy, Australia's productivity will depend on the adoption of innovations, support for investment, skills development, and the implementation of regulatory reforms that improve the efficient functioning of the economy," the report states.
The IGR is a five-year exercise, although the last was published in 2023 following a disruption to the schedule by the pandemic. The first was published in 2002.
The report forecasts a persistent structural budget deficit over the next few decades, which will decrease over the next 10 years before expanding again over the following 40. Government spending as a share of GDP is projected to rise by 1.1 percentage points to 27.4 per cent by the mid-2060s. "As the scale and interplay of these structural trends intensify, maintaining a sustainable fiscal position will require policies and lasting reforms that manage the growing challenges of spending and revenue," it states.
This year's report includes a section on six "great transitions" for the next 40 years, led by the artificial intelligence revolution and geopolitical fragmentation. The next four challenges are the energy transition, the care economy, industrial transformation, and intergenerational equity.
Chalmers warned that the world is becoming more dangerous, unpredictable, unequal, and divided. "These are not isolated threads, but part of a larger tapestry of a better future," he said. The response to these great challenges will be crucial in countering populist uprisings that seek to exploit public discontent for political ends, the Treasurer added.
The IGRs provide a strong argument for a mandatory superannuation system, which has largely mitigated the huge fiscal impact faced by other countries in funding pensions.
