Australia is on course for a major demographic transformation, with deaths expected to surpass births by the 2060s as fertility rates decline and the population grows older. From that point, net migration would become the nation’s only source of population growth.
Treasurer Jim Chalmers said migration would remain vital as Australia faces a smaller proportion of younger people alongside a rapidly ageing population.
‘Despite these pressures, we’re better placed than many others. Migration will play a role here too, an important source of skills that complements our domestic workforce.’
According to the report, new migrants have a median age of 26, significantly lower than the median age of 38 among Australia’s existing population.
Australia’s population is still forecast to expand, although growth is expected to slow sharply, reaching 39.3 million by 2065–66.
‘Deaths are projected to outnumber births by the 2060s – the first time this has been forecast in an IGR – at which point natural increase will no longer be a driver of population growth,’ the report states.
Japan, South Korea and Germany are among the advanced economies that have already reached this point. For Australia, however, it would represent a profound shift in the country’s demographic outlook.
The national fertility rate is forecast to drop from 1.48 babies per woman today to 1.34 by 2065–66.
Jim Chalmers (pictured) said that Australia was in a better place compared to other nations
The number of Australians aged under 20 is now expected to rise by only 10.4 per cent by the early 2060s, well below the almost 28 per cent increase predicted in the 2023 report.
By contrast, the population aged 85 and over is projected to triple during the next 40 years.
Chalmers said the fact that Australians are living longer was overwhelmingly positive, even though it would add to pressure on the federal budget.
‘Australians living longer and healthier lives is obviously overwhelmingly a good thing,’ he said.
‘It’s welcome recognition of the quality of our universal healthcare and the contribution that older people make, and it’s worth every dollar of extra pressure that it puts on our budgets.’
An ageing population is expected to intensify pressure on public finances as demand increases for hospitals, aged care, disability support and other healthcare services.
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Federal government payments are projected to rise to 27.7 per cent of GDP over the next four decades, with population ageing listed as a major contributor to increased spending.
Chalmers said ageing alone would account for one-third of all additional health expenditure over the next 40 years.
Treasury now forecasts average annual population growth of 0.9 per cent over the next four decades. That is below the 1.1 per cent estimate in the 2023 Intergenerational Report and the 1.4 per cent average recorded over the past 40 years.
One-third of all new health spending over the next 40 years will be driven by ageing alone
Chalmers also appeared to take a veiled swipe at Pauline Hanson while discussing the report.
‘Of course the findings and forecasts in this Report will challenge us and some of them in confronting ways,’ he said.
‘And of course much of it will be weaponised by those who always see things through a more pessimistic and often more political lens.
‘If people are unmoored economically, generationally, they feel disconnected from and disregarded in our politics. At worst, that’s what we’re seeing now. At best, it’s what’s at stake.
‘Accelerating change is putting more pressure on people. It’s eroding trust in the institutions of democracy. It’s exacerbating the strain felt by younger Australians and younger generations in particular.
And so the division in politics now is not between those who accept all of this and those who don’t. It’s between those who prey on it, and pick at it, and politicise it, and catastrophise it, and those who seek to alleviate it.’
He also suggested extending political terms could help governments focus more on long-term challenges.
‘So much of the incentive in our political system encourages people to think in shorter and shorter term ways, in shorter and shorter term cycles,’ he said.
The Treasurer said Australia’s future prosperity would increasingly depend on emerging industries as the economy adapts to an older population and changing global demand.
He added that renewable energy, critical minerals and AI-powered industries would become increasingly important sources of growth.