Australians will live longer, work less, earn more, have fewer children and be more reliant on the wealth delivered by critical minerals to keep the economy strong.
That’s what the nation will look like in 40 years, according to the latest federal government Intergenerational Report released on Thursday.
It projects that by 2062/63, real incomes will be 50 per cent higher than they are today, and the economy will be 2.5 times bigger.
Life expectancies are set to increase, with the number of over-65s to double in the next four decades, while over-85s will triple and those older than 100 will increase sixfold.
Population growth is tipped to slow from 1.4 per cent during the past 40 years to 1.1 per cent in the coming four decades.
But an ageing population will be one of the biggest pressures on the country’s finances, as spending increases for aged and health care and the workforce in those sectors doubles.
Treasurer Jim Chalmers said despite an ageing population and more people working for longer, no changes were likely to be made to the aged pension.
“We are looking for ways to give older workers more options and more choices,” he told the National Press Club in Canberra.
“There is a major focus of ours to try to work out – in a world where there will be a smaller and smaller proportion of workers, how do we encourage people to work more if they want to?”
Health, aged care, the National Disability Insurance Scheme, defence and debt interest payments are forecast to make up about half of all government spending by 2063.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the report served as a wake-up call for economic reform.
“The Intergenerational Report is a sobering study that warns us the next 40 years could be very challenging,” he said.
“Even to maintain our level of prosperity for future generations of Australians, the priority must be on lifting productivity.”
Brendan Rynn, chief economist with consultancy firm KPMG, said the report should be above politics to get the tax settings right for the future.
“The Intergenerational Report confirms that the dynamics of population and evolution of business means current tax settings will not be fit for purpose over the mid to long term,” he said.