The short version
- Australia is projected to reach a demographic tipping point in the 2060s where deaths outnumber births, joining other advanced economies in facing an aging population structure.
- Economic growth forecasts have been revised downward, with per capita real GDP expansion expected to slow from 1.5 percent to approximately 1.2 percent over the next four decades.
- The report identifies artificial intelligence as a critical variable for maintaining productivity, while warning of structural budget deficits driven by rising government spending on an older populace.
Australia is approaching a fundamental demographic shift that will redefine its economic and social landscape over the coming four decades. The government’s seventh intergenerational report, released in September 2026, projects that deaths will outnumber births for the first time by the 2060s. This milestone marks a departure from historical trends and aligns Australia with other advanced economies such as Japan, Germany, Italy, and South Korea, which have already experienced this inversion. The change reflects sustained declines in fertility rates and an aging population structure that will place increasing pressure on public services and fiscal stability.
The economic implications of this demographic transition are significant. The report indicates that the economy has entered a period of lower growth, with population expansion slowing to 0.9 percent annually compared to the historical average of 1.4 percent. As the share of working-age Australians shrinks relative to the total population, the capacity to support economic activity and fund government budgets will diminish. Consequently, living standards are expected to improve at a slower pace than in previous decades. Per capita real GDP growth is projected to average 1.2 percent over the next forty years, a decline from the 1.5 percent growth rate observed in the prior four-decade period.
Central to these projections is the assumption that labor productivity will recover from recent stagnation to historical averages. The report places considerable weight on the adoption of artificial intelligence as the primary driver for this recovery. Treasury officials describe AI as potentially the most significant economic transformation of the current era, capable of offsetting the drag caused by a shrinking workforce. However, this reliance introduces uncertainty, as the actual impact of AI on productivity remains unproven over such a long horizon. The success of future growth models depends heavily on whether technological innovation can deliver the efficiency gains required to sustain living standards.
Fiscal challenges are expected to intensify as the population ages. The report forecasts an ongoing structural budget deficit, which may shrink in the short term but is likely to expand significantly over the long run. Government payments as a share of gross domestic product are projected to rise by 1.1 percentage points, reaching 27.4 percent by the mid-2060s. This increase reflects the growing cost of delivering services to an older population, including healthcare and aged care. The shrinking tax base, combined with rising expenditure needs, creates a tightrope for policymakers who must balance fiscal responsibility with the demand for social support.
The intergenerational report also highlights broader global risks that could complicate Australia’s economic trajectory. Treasurer Jim Chalmers noted that the current geopolitical environment is more fraught and unpredictable than in previous reporting cycles. The document outlines six major transitions expected to shape the next forty years, including geopolitical fragmentation, the energy transition, industrial transformation, and issues of intergenerational equity. These factors contribute to a less certain future, where external shocks could exacerbate domestic vulnerabilities. The report suggests that managing these risks requires proactive policy reforms to maintain economic resilience.
Policy responses will need to address both the opportunities and dangers posed by emerging technologies. While AI offers potential productivity gains, it also presents risks related to labor market disruption and inequality. The government faces the challenge of fostering innovation without stifling regulation or leaving workers behind. Chalmers emphasized that successful navigation of these challenges is essential to maintaining public trust and countering populist movements that may exploit economic discontent. The compulsory superannuation system has historically helped mitigate some budgetary pressures associated with aging, but its effectiveness will be tested as demographic trends accelerate.
The intergenerational report serves as a long-term planning tool, originally established in 1998 to provide transparency regarding how demographic shifts affect the budget. First released in 2002, each iteration has highlighted similar themes of aging populations and fiscal strain. This latest edition underscores the urgency of addressing structural issues before they become unmanageable. With the next report due in five years, policymakers have a narrow window to implement reforms that can adapt the economy to a new normal of slower growth and higher dependency ratios.
Looking ahead, the success of Australia’s economic model will depend on its ability to integrate technological advancements while managing social costs. The report does not offer easy solutions but rather outlines a complex set of trade-offs. Maintaining sustainable budget positions will require continuous policy adjustments to manage growing spending and revenue challenges. As the country moves toward a future where deaths outnumber births, the focus must shift from expansionary growth to efficiency and equity. The coming decades will test Australia’s capacity to innovate and adapt in an increasingly uncertain global environment.
Sources behind this briefing
Go to the original reporting
- The Guardian World↗More Australians will be dying than being born in 40 years as major report predicts future of lower growth
