The Australian government’s seventh Intergenerational Report (IGR) has revealed a stark demographic shift, projecting that by the 2060s, the nation’s death rate will surpass its birth rate for the first time in history. This fundamental transition marks a turning point for the country, as it grapples with the long-term challenges of an aging population, a shrinking workforce, and a projected era of sustained lower economic growth.
Treasurer Jim Chalmers, delivering a keynote address at the Australian National University to mark the release of the analysis, characterized the findings as a roadmap for a future defined by rapid change and heightened uncertainty. The report suggests that Australia is entering a "new normal," where the tailwinds of the past 40 years are replaced by structural headwinds that will require significant policy interventions to manage.
The projection that more Australians will be dying than being born in 40 years is a milestone that has already been reached by other advanced economies, such as Japan, Italy, and Germany. However, for Australia, a nation historically defined by its youthful profile and rapid expansion, the shift represents a profound change in the social and economic fabric.
A Demographic Shift: More Australians Dying Than Being Born in 40 Years
The decline in the natural increase of the population is driven by two primary factors: falling fertility rates and an aging citizenry. As life expectancy continues to rise, a larger portion of the population will move into their 80s and 90s, placing unprecedented pressure on the healthcare system and the federal budget.
According to the report, the national population is expected to grow by approximately 0.9% annually over the next four decades. This is a significant deceleration from the historical average of 1.4%. Because the birth rate is expected to remain below replacement levels, future population growth will become increasingly dependent on net overseas migration to sustain the labor force.
The "death-to-birth" crossover, slated for the 2060s, underscores the urgency of addressing the "care economy." With fewer young people entering the workforce to support a growing cohort of retirees, the old-age dependency ratio—the number of working-age people for every person aged 65 and over—is set to decline sharply. This shift threatens to erode the tax base while simultaneously increasing the demand for government services.
Lower Growth and the Challenge of an Aging Population
The IGR paints a picture of an economy that is slowing down. While living standards are expected to continue improving, the pace of that improvement will be noticeably slower than in previous generations. Real GDP per person is projected to grow by an average of 1.2% over the next 40 years, a drop from the 1.5% average seen over the last four decades.
This slowdown is largely attributed to the shrinking share of the population that is of working age. As the "baby boomer" generation fully transitions into retirement and is followed by smaller successive generations, the participation rate is expected to fall. This leaves the heavy lifting of economic expansion to productivity growth, which has been stagnant in recent years.
To maintain even the modest growth rates projected in the report, Australia must find a way to return productivity to its historical average of 1.2%. This is a tall order, considering that productivity growth has hovered near zero recently. The government is betting heavily on technological innovation and regulatory reform to bridge this gap, aiming to revitalize an economy that risks becoming sclerotic under the weight of its own demographics.
The AI Revolution as an Economic Catalyst
Central to the government’s strategy for navigating a future of lower growth is the adoption of artificial intelligence. Treasurer Chalmers described AI as "the biggest economic transformation of our lifetime," suggesting that the technology will be pivotal in meeting the Treasury’s long-term labor productivity assumptions.
The report highlights AI as a "double-edged sword." While it offers the potential to automate routine tasks and unlock new levels of efficiency in sectors ranging from retail to manufacturing, it also poses risks to job security and social cohesion. The government faces a delicate balancing act: it must encourage the rapid adoption of AI to drive prosperity while implementing safeguards to protect workers from displacement.
The rise of AI is listed as the primary "major transition" facing the country over the next 40 years. The report suggests that Australia’s performance as a medium-sized economy will depend on its ability to adopt innovation, support capital investment, and develop the specific skills required for a digital-first workforce. Without a significant boost from AI and related technologies, the outlook for living standards would be considerably more pessimistic.
Managing Structural Deficits and the Care Economy
The fiscal outlook presented in the IGR is one of persistent structural deficits. As the population ages, the cost of providing essential services—particularly health, aged care, and the National Disability Insurance Scheme (NDIS)—is expected to soar. Government payments as a share of GDP are anticipated to rise to 27.4% by the mid-2060s, an increase of 1.1 percentage points.
This spending pressure comes at a time when the revenue base is under threat. A smaller pool of workers means less income tax revenue, while the transition away from fossil fuels will likely reduce receipts from traditional energy exports and fuel excises. The report notes that maintaining a sustainable budget will require "ongoing reforms" to both spending and revenue, hinting at the possibility of future tax overhauls or service rationalizations.
The "care economy" is set to become one of the largest sectors of the Australian workforce. However, this sector is traditionally labor-intensive and has historically seen lower productivity growth than the manufacturing or technology sectors. The challenge for future governments will be to professionalize and modernize this sector to ensure it can meet the needs of an aging population without bankrupting the state.
Geopolitical Risks and the Future of the Intergenerational Promise
Beyond domestic demographic and economic concerns, the IGR identifies "geopolitical fragmentation" as a major risk to Australia’s future. The world is becoming more dangerous and divided, with trade tensions and regional instability threatening the open, rules-based order that has historically benefited Australia’s export-driven economy.
Treasurer Chalmers noted that these global risks are fraying the "intergenerational promise"—the idea that each successive generation should enjoy a better quality of life than the one before it. He warned that if the government fails to respond effectively to these challenges, the resulting public discontent could fuel "populist insurgencies" that seek to exploit economic anxiety for political gain.
The energy transition also looms large as a critical transformation. As Australia moves toward a net-zero economy, the industrial landscape will undergo a massive shift. This transition is expected to create new opportunities in critical minerals and renewable energy, but it also requires a total reimagining of the country’s industrial base.
The Role of Superannuation and Long-Term Stability
One bright spot in the otherwise sober report is the performance of Australia’s compulsory superannuation system. The IGR provides a robust defense of the retirement savings regime, noting that it has largely offset the massive budgetary impacts seen in other developed nations that rely on taxpayer-funded pensions.
By requiring citizens to save for their own retirement, Australia has created a massive pool of capital that supports both individual financial security and national economic stability. The report suggests that without this system, the fiscal pressures of an aging population would be significantly more dire, potentially leading to a collapse in public services or unsustainable levels of national debt.
As Australia looks toward the 2060s, the IGR serves as both a warning and a guide. The transition to a society where more Australians are dying than being born is inevitable, but the economic consequences of that shift are not yet set in stone. Through a combination of technological adoption, fiscal discipline, and social reform, the government hopes to navigate this "new normal" and preserve the nation’s prosperity for the generations to come.
