Intergenerational Report 2023: What will Australia look like in 40 years?
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By Rhiana Dabboussy
In late August 2023, Federal Treasurer Dr. Jim Chalmers released Australia’s sixth Intergenerational Report. Published every five years, the Report provides a comprehensive analysis of Australia’s long-term economic and demographic trends.
Predicting Australia’s future over the next 40 years, the sixth Report offers a holistic view of the factors that will influence our economy to ‘create prosperity, expand opportunity, and build a stronger, more sustainable and inclusive nation’.
So, in short, it enables greater clarity for future planning across a range of sectors. So, what does the Intergenerational Report tell us?
Australia’s economic outlook is prosperous. By 2062–63, the economy is projected to be approximately two and a half times larger and real incomes around 50 per cent higher.
Five major forces will shape this:
1. Population ageing
2. Expanded use of digital and data technology
3. Climate change and the net zero transformation
4. Rising demand for care and support services
5. Increased geopolitical risk and fragmentation
Population ageing
Over the next 40 years, Australia’s population will continue to age, while its growth will stagnate. It is estimated that the number of people aged 65 and over will more than double and the number aged 85 and over will more than triple.
While the population ages, life expectancies are projected to increase. Currently, life expectancies are 81.3 years for men and 85.2 years for women. These are expected to grow to 87.0 years for men and 89.5 years for women by 2062–63. Not only will life expectancies rise, but Australians are expected to spend more years in full health.
This ageing demographic presents both challenges and opportunities, particularly in terms of healthcare, aged care services, and workforce participation.
For example, participation in paid work is ‘projected to decline gradually from 66.6 per cent to 63.8 per cent in 2062–63’.
Expanded use of digital and data technology
Digital transformation will continue to have a great impact on Australians’ quality of life and drive significant economic growth over the next forty years.
New technologies, including automations powered by Artificial Intelligence, will change the way we work, shape the job landscape, and provide valuable new products across health, science and education.
Climate change and the net zero transformation
In an era of increasing environmental awareness, the Report promotes the importance of sustainability and details the profound impact climate change will have on the economy.
Over the next 40 years, Australia’s national average temperature is projected to increase by 1.7°C. Higher temperatures will impact labour productivity and present unique challenges and risks for workers and businesses, resulting in significant economic cost. The Report predicts that ‘If global temperatures were to increase by up to 3°C or over 4°C … Australia’s aggregate labour productivity levels could decrease by 0.2 to 0.8 per cent by 2063’, reducing economic output by $135 billion ($423 billion in today’s dollars).
The Report underscores the importance of transitioning to a more sustainable and resilient economy to mitigate the risks associated with climate change.
Rising demand for care and support services
As the population ages, the demand for care and support services will rise. ‘Government payments for health care, aged care and the NDIS are projected to increase as a share of GDP from 6.2 per cent in 2022–23 to 10.7 per cent in 2062–63’. Demographic ageing accounts for 40 per cent of this increase.
While this demand will have a profound economic impact, it will also provide valuable job opportunities and industry growth.
Increased geopolitical risk and fragmentation
Australia must prioritise security and resilience to promote global integration and economic prosperity. Securing economic ties with other nations will provide Australia with the opportunity to benefit from two-way trade agreements and to create new and diverse supply chains.
This will ensure Australia’s economic prosperity for future decades. For example, in 2021-22, ‘two-way trade exceeded $1 trillion, supporting one-in-four jobs’.
The 2023 Intergenerational Report offers an extensive and forward-thinking examination of Australia’s trajectory. It highlights the challenges and opportunities presented by demographic changes, economic growth, and climate change.
To secure a prosperous future for generations to come, Australia must prioritise considered policy decisions, infrastructure investments, and workforce development. By addressing these key areas, Australia can navigate the complexities of the 21st century and create a brighter future for all.
