For the first time, Australia has a projected date when deaths will outpace births. Japan, Italy and South Korea have already passed the point where their populations no longer grow via 'natural increase', and from the 2060s onwards Australia will join them, meaning the population will shrink without ongoing migration.
Australians are getting much older and having fewer babies, with both trends accelerating according to the latest Intergenerational Report. By 2066, the median age will be 45, up from 38 and a half today, and the population aged over 65 is expected to grow eight times faster than those aged 0 to 20.
Treasurer Jim Chalmers said the decline in birth rates was one of the biggest changes from three years ago. He said the government expects "fertility rates to fall further and faster", but caveated that Australia would not cross the threshold of more deaths than births until decades later than nations like Japan and South Korea, adding those were "really quite good" economies.
Old Age Dependency Ratio
The report uses the Old Age Dependency Ratio to measure pressure on the workforce. Currently, there are 29 people aged over 65 for every 100 working-age Australians. By 2066, that will rise to 39 per 100 working-age people.
The obvious conclusion, the report states, is that "a smaller share of working-age Australians will need to support a growing number of retirees who are living longer".
The federal budget will be more strained by health and aged care demands and more dependent on income tax from workers. People aged over 85 cost the federal budget as much as four working-age people contribute, and the number of 85-year-olds is expected to triple over the next 40 years. This will increase the risk of higher debt, "passing the cost of spending to future generations", unless new revenue sources are found.
Migration as a source of resilience
Continued migration is expected to be the key source of 'resilience' against the aging population, with the report describing it as a security blanket. However, the report notes a fierce political contest to cut migration could up-end that resilience.
There is expected to be a small offset from more people working later in life (with workforce participation expected to grow by 1 per cent) and from more women participating. However, an older workforce could also drag on productivity, making it harder for wages and living standards to grow.