The short version
- Australia’s fertility rate has remained below the replacement level for five decades and is projected to decline further, leading to a future where deaths outnumber births by the mid-2060s.
- Treasury modeling indicates that reducing net overseas migration would result in higher government debt, larger budget deficits, and a worse dependency ratio compared to baseline forecasts.
- The Labor government has declined to implement direct incentives for higher birth rates, relying instead on migration policy to support economic growth and fund an ageing population.
Australia faces a deepening structural challenge as its population ages and birth rates continue to fall well below the level needed to sustain numbers without immigration. The seventh intergenerational report released by the Treasury underscores the tension between current political debates over migration levels and the long-term economic realities of a shrinking workforce. With fertility rates hovering around 1.5 children per woman and projected to drop to 1.34 over the next four decades, the nation is on track to see deaths outnumber births for the first time in history by the mid-2060s.
This demographic shift carries significant implications for public finances and economic stability. As the proportion of older Australians grows, the tax base supporting healthcare and aged care services becomes relatively smaller. The report highlights that migration plays a critical role in mitigating these pressures by contributing to population growth, slowing the pace of ageing, and bolstering the economy through skills and innovation. Without this influx of new residents, the fiscal burden on the working-age population would intensify considerably.
The Treasury’s baseline forecast assumes a long-run net overseas migration figure of 235,000 people annually. Under this scenario, real gross domestic product per person is expected to rise from approximately $99,200 in the current financial year to $157,300 in forty years. This growth trajectory serves as a proxy for improving average living standards and suggests that maintaining robust migration levels supports broader economic prosperity.
However, alternative modeling reveals the costs of reducing immigration. When economists simulated a scenario with net overseas migration 50,000 people lower per year and a fertility rate of 1.24 instead of 1.34, the outcomes were less favorable. In this lower population growth model, real GDP per person would be $400 lower in 2065-66 compared to the baseline. While this difference may appear modest on an individual level, it signals a negative trend for overall economic performance and living standards.
The disparities become more pronounced when examining the dependency ratio, which measures the number of people aged 65 and over relative to every 100 working-age Australians. Currently standing at 27.4, this ratio is projected to climb to 40 by the mid-2060s under baseline assumptions. In the scenario with reduced migration, the ratio would reach 43, indicating a heavier burden on the workforce to support retirees and dependents.
Fiscal projections further illustrate the strain of lower population growth. The underlying cash deficit is forecast to be 2.4% in 2065-66 under the low-migration scenario, compared to 1.8% under existing assumptions. Additionally, gross debt as a share of GDP would rise by nearly ten percentage points, reaching 32.2%. These figures suggest that restricting migration could lead to significantly higher public debt and larger budget shortfalls over the long term.
Despite these warnings, the Labor government has indicated it will not pursue policies aimed directly at increasing birth rates. Treasurer Jim Chalmers stated that the government does not intend to offer free advice on family planning or replicate previous initiatives such as the baby bonus introduced by former treasurer Peter Costello. This stance reflects a decision to avoid intervening in personal decisions about starting and growing families.
The absence of direct fertility incentives places greater emphasis on migration policy as a tool for managing demographic challenges. The intergenerational report provides evidence that reducing migration would likely exacerbate fiscal pressures rather than alleviate them. As political rhetoric around immigration continues, policymakers must weigh these economic projections against public sentiment, recognizing that the data points toward the necessity of maintaining healthy migration levels to support an ageing society.
The findings serve as a reminder of the complex trade-offs involved in population policy. While some argue for reduced migration, the Treasury’s analysis suggests that such measures could undermine economic resilience and increase the financial strain on future generations. The report offers a clear framework for understanding how demographic trends intersect with fiscal responsibility, highlighting the importance of evidence-based decision-making in navigating these issues.
As Australia looks toward the mid-century, the intergenerational report provides a sobering assessment of the path ahead. The data indicates that without sustained migration, the country faces higher debt, larger deficits, and a more strained dependency ratio. These projections underscore the need for careful consideration of migration policies in light of long-term economic and social sustainability.
Sources behind this briefing
Go to the original reporting
- The Guardian World↗Think Australia would be better off with less migration? The numbers tell a different story
