The Federal Government released a report today projecting how Australia will look up to 2066.
It predicts Australians will live longer, have fewer children and work later into life, and the population and economy will grow more slowly than in previous decades.
AI and the energy transition is expected to change Australia’s economy and jobs.
Shadow Treasurer Tim Wilson said the long-term outlook of the report “gives a big F to the Albanese Government and its economic model”.
Background
The Federal Treasury publishes the Intergenerational Report (IGR) every few years.
The report projects what Australia’s economy will look like over the next 40 years.
The purpose is to examine the long-term sustainability of current policies, and how society-wide trends may affect the economy and the budget.
The IGR released today is the seventh edition of the report, with the previous report released in 2023.
Quick facts
Compared to 2026, in 2066:
- Australia’s economy will be 2.25x bigger.
- Real incomes (accounting for inflation) will be 55% higher.
- The median super balance at age 65-69 will be $450,000, compared to $204,000 in 2024.
- The population will have grown from 28 million to almost 40 million.
- The life expectancy for women will be 89.5, up from 86; for men, it will be 86.1, up from 81.
- The fertility rate will be 1.34, down from 1.48.
- This refers to the average number of children women are expected to have.
- The median age will be 45, up from 38.6.
- Deaths will outpace births for the first time.
- Personal income tax will make up 14.1% of the GDP, up from 12.3%.
Equity
In this context, intergenerational equity is the idea of fairness in how the costs and benefits of government policies are shared between people born in different generations.
Long-term demographic trends and economic pressures have worsened intergenerational equity, and Treasury expects that without further reforms, these pressures will intensify over the next 40 years.
Australians born in the 1980s and 1990s have not seen significant generational gains to their net worths, and home ownership rates among young Australians have declined.
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Every other generation had more wealth than the previous.
Those born in the 1980s and 1990s have accumulated less than or just about as much wealth as people born in the 1970s had at the same age.
Each successive generation has entered home ownership later and at lower rates than the one before.
Changes
According to the IGR, without reforms to housing and the tax system, an ageing population will intensify pressures on intergenerational equity.
An older population puts pressure on the Government in several ways.
Many older people are in the aged care system, which the Federal Government funds.
One of the Government’s main sources of income is personal income tax.
At the same time as more funding is needed for aged care, older people may move out of work and onto living on their super and the pension, changing Australia’s tax income and economy.
According to the IGR, the number of Australians aged over 85 is expected to triple by 2066.
That being said, the IGR shows Australians are working later in life compared to previous generations, and Treasury expects this trend to continue.
On housing, the Government says the changes to negative gearing and capital gains tax introduced in the last Federal Budget will add 75,000 owner-occupiers over the next decade.
Home ownership among those aged 25 to 34 fell by 17% from 1981 to 2021.
Jobs
With the ageing population, there is set to be an increase in the demand for jobs in health and aged care.
This is part of a broader trend driving Australia’s economy toward being more service-based than goods-based.
While its impact is still uncertain, AI is expected to improve Australia’s productivity as tasks are automated.
Govt response
Releasing the report, Treasurer Jim Chalmers said: “Australians are expected to live longer, healthier lives, with higher living standards and more secure retirements.”
“Concerns about intergenerational inequality have deepened, particularly when it comes to housing, and democracies are being disrupted,” he added.
Chalmers said the Government had “an ambitious reform agenda” to tackle these concerns.
Opposition
Addressing the media, Shadow Treasurer Tim Wilson noted the report’s projections of “higher inflation, lower living standards, the destruction of wealth and wages, a potential compounding of debt”.
Wilson also believed the assumptions used in the IGR were not achieveable: “What we have is a report from the Albanese Government that seeks to cook the books to justify their economic model.”
