Australia is projected to spend proportionately less on the age pension thanks to superannuation despite a projected doubling of people aged 65 and older, the intergenerational report will show.
The report, set to be released in full on Thursday, is also expected to show a substantial change in Australia’s tax base over four decades, including a dramatic reduction in fuel excise as motorists increasingly opt for electric vehicles.
While the intergenerational report tracks four decades of trends in population, government receipts and payments, no major revenue measures are expected in the near-term beyond taxing big super balances, the petroleum resource rent tax and multinational tax avoidance.
Labor is instead preparing a sequence of near-term reforms in key areas including competition, participation including super on paid parental leave, and migration.
Australia is on track for pension payments to shrink from 2.3% of gross domestic product today to just 2% by 2062-63, as superannuation balances balloon from 116% of GDP today to about 218%.
In 2062-63 some 9m Australians will be aged 65 or over but a smaller proportion will receive the pension or other income support, down 15% from 2022-23.
That is due to the increasing proportion of Australians benefiting from super, with those retiring from the mid-2040s having received super payments of 9% or more for for their whole working lives.
“The age pension is among the Australian government’s largest spending programs, and this trend will contribute significantly to the sustainability of the budget,” the report says.
“Superannuation tax concessions as a proportion of GDP are projected to increase from around 1.9% in 2022–23 to 2.4% in 2062–63,” it says, overtaking the age pension in the 2040s.
The treasurer, Jim Chalmers, said “our population is ageing but our spending on the age pension will fall – that’s the intergenerational genius of super”.
“Super is delivering on its promise – providing a better retirement for more Australians and a better outcome for the budget over the next 40 years,” he said.
“Labor built the super system and we’ve always worked to protect it and make it stronger.”
In February the Albanese government announced it will reduce tax concessions on earnings from super balances above $3m.
The release of the intergenerational report on Thursday will be a springboard for a renewed focus on economic and productivity reform this year.
These include competition reforms to be announced imminently by the assistant minister for competition, Andrew Leigh, streamlining the foreign investment review process for trusted investors, and an employment white paper to be released in the next few months.
At its national conference on Thursday, Labor committed “to implement payment of superannuation on government paid parental leave as a priority reform”, raising hopes it will be legislated after the white paper.
Other changes including revamping punitive mutual obligations and improving jobseeker services are still under consideration but unlikely to be enacted immediately after the paper. Those reforms are being considered by an inquiry chaired by Labor MP Julian Hill, to report by 30 November.
The Albanese government expects the final budget surplus for the last financial year to be $21bn to $22bn but is preparing for a difficult two years ahead with flat growth.
Australia is still expected to avoid a technical recession thanks in part to increased migration, but the risks are all on the downside with weak household consumption, the delayed impact of 12 consecutive interest rate rises and a sluggish Chinese economy.
Within three months, the prime minister, Anthony Albanese, will release the government’s South-East Asia Economic Strategy, developed by envoy Nicholas Moore, identifying investment opportunities in the region.
The home affairs minister, Clare O’Neil, will also release the government’s response to the migration review this year, at a time when tourists, international students and lower than average departures from Australia are helping provide a buffer against weaker domestic consumption.
Second only to cost of living, the energy transition is considered the most time consuming and important plank of government’s reform agenda.
On Wednesday the industry minister, Ed Husic, will tell the American Chamber of Commerce in Australia that rebuilding industrial capacity will “help us seize the once-in-a-generation economic opportunities emerging from the global energy transition”.
“We cannot meet our net zero targets, we cannot transform our energy landscape, we cannot help fight climate change without Australian manufacturing at the core of our efforts,” he says in an advance copy of the speech.
“Battery storage, wind turbines, solar panels all are needed – and we have the ability to make them here if we are just willing to grasp it.”
