Federal Treasurer unveils the 2023 Intergenerational Report
Federal Treasurer Jim Chalmers unveiled the 2023 Intergenerational Report recently, identifying five key factors that will shape the Australian economy in the decades to come. These five key factors are: population ageing, expanded use of digital and data technology, climate change and the net zero transformation, rising demand for care and support services, and increased geopolitical risk and fragmentation.
Where will the Australian economy be in forty years?
The economy is projected to be around two and a half times larger and real incomes around 50% higher by 2062–63.
But, like other advanced economies, our economy is projected to grow at a slower rate over the next 40 years than in the past, at an average of 2.2% a year.
Population growth projections
Australians are expected to live longer and spend more years in full health.
Australia’s population is projected to grow more slowly over the next 40 years – at an average of 1.1% a year, compared to 1.4% over the past 40 years.
The population is projected to reach 40.5 million in 2062–63, similar to projections in the 2021 IGR.
Migration will continue to contribute to population growth but is projected to fall as a share of the population.
Australia’s population will continue to age over the next 40 years. The number of Australians aged 65 and over will more than double and the number aged 85 and over will more than triple. The number of centenarians is expected to increase six-fold.
Workforce participation
More people are participating in paid work than ever before, and the labour force participation rate is near record highs.
But as the population continues to age over the next 40 years, the overall participation rate is projected to decline gradually from 66.6% to 63.8% in 2062–63. Average hours worked is also expected to decline slightly.
The gender gap in participation is expected to continue to narrow. Further broadening labour market opportunities can increase overall participation and contribute to a more inclusive workforce.
Productivity growth
Productivity growth is assumed to grow at 1.2% a year, around the average of the past 20 years. The future path of productivity is not a foregone conclusion and will be influenced by decisions taken by governments, businesses, and investors, and the big shifts underway in the global and domestic economy.
Forces that will have an impact on the Australian economy
The ageing population, adoption of new technologies, net zero transformation, growing demand for care and support services, and geopolitical uncertainty are changing the composition of our economy.
The ageing population will reinforce the trend towards a services-based economy, with the care and support sector and its workforce potentially doubling over the next 40 years.
Digitalisation will change how we work, raising productivity, improving workplace safety and providing us with the agility we need to face the challenges of the future.
The net zero transformation will see global demand for some exports decline, while creating new markets and opportunities for our industries. Critical minerals could become key exports for Australia as the world transitions to net zero. Australia is already the world’s largest producer of lithium, supplying more than half of all global production. Global demand for lithium could be more than eight times higher in 40 years’ time.
Climate change will have profound impacts on the economy and society. It will affect where and how Australians choose to live and work, food and energy security and our environment.
You can read the 2023 Intergenerational Report in full here.