The Australian government released its sixth intergenerational report on Thursday which attempts to map the country’s “future to 2063”.
Here are seven of the top takeaways:
1. Gross national income up 1% per person
The Australian economy, like other advanced economies, is projected to grow at a slower pace over the next 40 years than in the past 40 years. Real GDP is projected to grow at an average annual pace of 2.2% – 0.9 percentage points lower than the past average.
After increases in population are accounted for, the average annual growth rate of income per person is projected to be 1%, compared with 2.1% over the past 40 years.
2. We’re living longer
Australians are living longer, with more years in full health and more time using government-funded services. Over the next 40 years, life expectancy at birth is projected to continue to increase, from 81.3 years for men and 85.2 years for women in 2022-23, to 87 years for men, narrowing the gap with women, who are projected to have a life expectancy of 89.5 years by 2062-63.
3. Slowing population growth
Australians are expected to continue living longer and remain healthier to an older age, while having fewer children. This is leading to an ageing and a slower-growing population.
The average annual population growth rate is projected to slow to 1.1% over the next 40 years, compared to 1.4% for the past 40 years. This is a similar population growth rate to the 2021 IGR projection. Australia’s population is projected to reach 40.5 million in 2062-63.
4. Decline in working age population
The participation rate – the proportion of the working age population in a job or looking for one – is expected to gradually decline from 66.6% in 2022-23 to 63.8% by 2062-63.
The gender gap in participation is expected to continue to narrow, with men’s participation just seven percentage points higher than women in 2062-63.
5. Tax changes as EVs increase and smoking rates decrease
Indirect sources of revenue are expected to decline as increased uptake of electric vehicles hits petrol excise tax and decreasing smoking rates reduce tobacco excise.
Company tax, goods and services tax (GST), and other taxes are projected to broadly track economic growth.
Personal income taxes are projected to increase as a share of GDP, reflecting rising incomes and wages and continued population growth but are limited by the technical assumption for the tax-to-GDP ratio.
That means at some point the government expects it will have to cut income taxes to hand back some of the “bracket creep”, to counteract rising nominal wages pushing income earners into higher brackets.
6. Government debt
Gross government debt is projected to decline to 22.5% of GDP in 2048-49, before rising to 32.1% of GDP by 2062-63.
The IGR found that in 2060-61 “gross debt-to-GDP is projected to be 11.3%” better than was projected in the 2021 report. It credited “faster-than-expected recovery from the Covid-19 pandemic, and disciplined fiscal policy including decisions in recent budgets to direct tax upgrades to budget repair”.
7. Impact of climate change
Treasury bases its projections on three scenarios – the world sharply cuts greenhouse gas emissions (for a sub-2C warming path), moderated cuts (sub-3C), and a third where warming exceeds 4C. At the hot end, productivity declines alone will cost $423bn in today’s dollars over the four decades. But as Treasury notes, it cannot pick tipping points that may trigger climate chaos (and mass migration that does not get mentioned), and its own disaster recovery estimates exclude heatwaves and drought.
