Australia is living longer and growing more slowly — who will carry the country?

Australians are expected to live longer, have fewer children and inhabit smaller households over the next four decades.

Those developments sound personal, but together they will reshape the national economy.

The latest Intergenerational Report will project that Australia’s population reaches approximately 39.3 million by 2065–66—about 1.8 million fewer people than forecast in the previous report.

Annual population growth is expected to slow from an average of 1.4 per cent over the past 40 years to 0.9 per cent over the next 40.

At the same time, life expectancy at birth is forecast to approach 89 years for women and 86 years for men, compared with approximately 86 and 82 years respectively today.

Living longer is an achievement. It reflects better medicine, public health, safer workplaces, improved living standards and the protection offered by institutions such as Medicare and the Pharmaceutical Benefits Scheme.

But longevity changes the arithmetic of a nation.

Australia must consider how a relatively smaller working-age population will provide the workers, taxes, housing and care required by a much larger older population.

The central question is not whether Australia can afford people living longer.

It is whether Australia can become productive enough to support longer lives well.

Fewer children, later in life

Lower fertility is expected to account for much of the reduction in Australia’s projected population.

Treasurer Jim Chalmers says almost half of the decline in fertility is attributable to fewer families having three or more children, with mothers also having children later in life.

This cannot be treated merely as a lifestyle trend.

The decision to have a child may be personal, but it is made within an economic environment shaped by housing costs, employment security, childcare availability and the ability of families to manage a period of reduced income.

Governments cannot—and should not—tell Australians how many children to have.

They can, however, ask whether the conditions surrounding family formation have become unnecessarily difficult.

A one-off baby bonus may make good politics, but it cannot resolve the long-term expense of housing, childcare and raising a family. The government is instead pointing to subsidised childcare, expanded paid parental leave and superannuation payments during parental leave.

These measures may reduce some of the pressure, although the deeper test is whether younger Australians believe they can establish secure lives.

A country cannot assume that people will form families according to a demographic model when the economic foundations of family life have become harder to obtain.

Population growth is not the same as economic strength

Australia has frequently relied on population growth to enlarge its economy.

More people create more demand for housing, food, transport, retail, education and other services. Migration can also bring skills, workers and new businesses.

But a larger economy is not necessarily a more productive economy.

If population growth occurs faster than the construction of homes, roads, hospitals and schools, the result may be a larger national economy accompanied by greater congestion and reduced living standards per person.

Conversely, slower population growth does not have to mean national decline.

Australia could become more prosperous with a more slowly growing population if each worker, business and institution becomes more productive.

That makes productivity—not simply population—the critical issue raised by the Intergenerational Report.

The promise being placed upon artificial intelligence

Treasury is expected to identify artificial intelligence as a defining influence on the Australian economy over the next four decades.

That is a significant expectation.

AI may help businesses produce more with fewer administrative resources. It could assist doctors with diagnosis, improve the management of hospitals, accelerate research, reduce repetitive government work and allow small businesses to use capabilities that were once available only to large corporations.

If deployed effectively, the technology could help a smaller proportion of workers support a larger population.

But productivity gains do not happen merely because technology exists.

Businesses must invest in it. Workers must be trained to use it. Governments must modernise their systems, and the benefits must extend beyond a small number of large companies.

There is also a practical limit to what can be automated.

Artificial intelligence may reduce the paperwork surrounding aged care, but it cannot provide all the human care an older person requires. It may help manage a hospital, but it does not eliminate the need for nurses, doctors, cleaners, cooks and technicians.

Many of the services most needed by an ageing society are labour-intensive.

Australia will therefore need technology and people. AI may make each worker more effective, but it will not remove the need to train, attract and retain a large health and care workforce.

Migration remains part of the equation

Lower fertility will inevitably strengthen the argument for continued migration.

Migration can add working-age people to the population, fill skills shortages and moderate the speed at which Australia ages.

It is not, however, a complete answer.

Migrants also require housing, infrastructure and services. They eventually grow older, meaning migration can delay the demographic effects of ageing without permanently eliminating them.

The quality and composition of migration will matter as much as its size.

Australia needs to consider whether arrivals possess skills the country genuinely requires, whether qualifications are recognised quickly and whether new residents are settling in places capable of accommodating population growth.

Migration works best when it is integrated with housing, infrastructure and workforce planning. Without that coordination, it may increase the headline population while intensifying the very pressures that discourage existing Australians from having children.

Australia’s housing must change too

Smaller households and longer lives will also change the type of housing Australia requires.

The country may have more people living alone, more older couples remaining in large family homes and more demand for accessible housing close to healthcare, shops and public transport.

Yet much of Australia’s housing system remains structured around detached homes in car-dependent suburbs or apartments that may not be suited to ageing residents.

Building sufficient homes is only part of the task.

Australia must build the right homes, in the right places, for the population it will actually have.

More adaptable apartments, single-level homes, supported accommodation and smaller dwellings could allow older Australians to move without leaving their communities. That may also release larger homes for younger families.

Housing policy and ageing policy can no longer be treated as separate subjects.

Longer lives will place pressure on public spending

An older population will increase demand for healthcare, medicines, aged care and income support.

Meanwhile, slower growth in the working-age population may limit the expansion of the tax base required to fund those services.

That does not automatically require Australians to work until they can work no longer.

It does require governments to remove barriers preventing people who want to remain in the workforce from doing so.

Flexible work, retraining, better management of chronic illness and less age discrimination could allow more Australians to continue contributing without turning longer life expectancy into an automatic increase in compulsory working life.

The goal should not be to extract more years of labour from people.

It should be to give people more healthy and productive years, with genuine choices about how they use them.

Forecasts are not destiny

An Intergenerational Report is not a precise description of Australia in 2066.

It is a projection based on assumptions about fertility, migration, productivity, participation and government policy. Over four decades, every one of those assumptions can change.

That is the value of the exercise.

The report does not tell Australians what must happen. It shows what may happen if present trends continue and exposes decisions that cannot be postponed indefinitely.

Australia’s future will not be determined by the number 39.3 million.

It will be determined by whether the country prepares its housing, workforce, healthcare system, infrastructure and economy for the population behind that number.

The Times View

A longer life should be regarded as progress, not as a fiscal problem.

But celebrating longevity does not excuse Australia from preparing for its consequences.

The country cannot rely indefinitely on population growth to conceal weak productivity, nor can it regard migration as a substitute for housing and infrastructure planning. Artificial intelligence may become an extraordinarily useful tool, but technology alone will not care for older Australians or make family life affordable for the young.

The true intergenerational compact is simple: each generation inherits institutions built by those before it and carries an obligation to leave them capable of supporting those who follow.

Australia’s challenge is not merely to add years to life.

It is to build a country capable of supporting the lives contained within those years.