2060s Australia as seen by the Intergenerational Report
- Written by: Michelle Grattan, Professorial Fellow, University of Canberra
The Australia of the 2060s will be very different from the one we know today. It will be older, with slower economic growth, a big “care” economy, and an export sector that is radically transformed due to the imperatives of climate change.
The Intergenerational Report[1], released by Treasurer Jim Chalmers, says five main forces will shape Australia’s economy over the coming four decades.
They are:
population ageing
expanded use of digital and data technology
climate change and the net zero transformation
rising demand for care and support services
increased geopolitical risk and fragmentation.
These forces will “change how Australians live, work, and engage with the world”.
The economy will be about two and a half times as big, and real incomes are expected to be 50% higher by 2062-63. On the downside, economic growth will be slow – growing at an average pace of 2.2% over the coming four decades, from an average of 3.1% over the previous four decades.
Average annual growth
Note: Real income is defined as Real Gross National Income. Labour utilisation refers to total hours worked per capita.
The budget in 40 years will see already-familiar spending pressures – in health, aged care, the National Disability Insurance Scheme, defence, and debt interest.
Collectively, these are projected to increase from about a third to about a half of all government spending.
Total government spending is projected to rise by 3.8 percentage points of GDP over the next 40 years. About 40% of this increase is caused by ageing.
Total income support and education payments are expected to continue to rise in real terms per person but fall as a share of GDP as Australia ages. Spending on age and service pensions will fall as a share of GDP, with superannuation increasingly funding retirement.
Increase in payments across the five main spending pressuresPer cent of GDP, 2022–23 to 2062–63
Note: ‘NDIS’ refers to Australian Government participant payments, excluding state contributions. ‘Interest payments’ are interest payments on Australian Government securities.
Commonwealth Treasury[3]
There will be pressure in the coming 40 years on the revenue base, which will be eroded by the decarbonisation of transport and also a hit to tobacco excise.
Australia’s gross debt as a share of GDP is set to decline over coming decades, but there will be deficits. The budget is currently in surplus but the report says “deficits are projected to remain over the long term”. Initially narrow. they will widen from the 2040s because of spending pressures.
Launching the report at the National Press Club Chalmers said the government’s immediate obligation was to do what it could to ease cost-of-living pressures without adding to inflation.
“But the critics out there who say that we need to wait before engaging with our long-term prospects just don’t seem to get it,” he said.
“There will never be a quiet time to think about the future. There will always be competing pressures and urgent calls on our attention.
"The best leaders can focus on more than one thing, more than one horizon, more than one set of opportunities.”
Answering questions, Chalmers acknowledged the uncertainty in long-term projections.
“There’s always an element of uncertainty; there will always be things like global financial crises and pandemics that will knock a country off course and make us think about the starting point differently and, therefore, the end destination differently as well. So none of it is preordained.”
Read more:
Slower ageing, but slower economic growth: the Intergenerational Report in 7 charts[4]
References^ Intergenerational Report (treasury.gov.au)^ Commonwealth Treasury (treasury.gov.au)^ Commonwealth Treasury (treasury.gov.au)^ Slower ageing, but slower economic growth: the Intergenerational Report in 7 charts (theconversation.com)
