Australia’s Deaths to Outnumber Births by 2060s, Treasury Warns

Australia’s seventh Intergenerational Report, released Monday by Treasurer Jim Chalmers, projects deaths will outnumber births by the mid-2060s for the first time as fertility rates fall to 1.34 children per woman. The economy will grow at 1.2% per person annually over the next 40 years, down from 1.5% historically. The report identifies artificial intelligence, geopolitical fragmentation, and energy transition as defining forces reshaping Australia’s economy and budget over four decades.

Why fertility is falling and what it means

Australia’s fertility rate is now 1.5 children per woman, down from the 2.1 replacement rate needed to maintain population without migration. Treasury projects it will drop further to 1.34 over the next 40 years. Treasurer Chalmers said Monday he will not repeat former Treasurer Peter Costello’s baby bonus or offer advice on family planning, calling such decisions personal. The shift means fewer workers will pay taxes to fund healthcare and aged care for a growing elderly population.

Migration becomes critical to offset ageing

The intergenerational report states that migration contributes to population growth and slows ageing, supporting a multicultural society and strengthening the economy through skills and innovation. Population growth is projected at 0.9% annually, down from 1.4% historically. The report directly counters anti-migration rhetoric by showing Australia needs sustained overseas migration to manage structural economic challenges posed by an ageing workforce.

AI productivity surge is the key assumption

Chalmers is betting on artificial intelligence to drive productivity back to its historical average of 1.2% annually, after it stalled at virtually zero in recent years. Without this productivity rebound, federal debt could exceed 55 per cent of GDP while the deficit quadruples. The report acknowledges AI’s effects remain deeply uncertain but identifies it as the most dramatic change since the last report in 2023.

Living standards will improve but more slowly

Despite lower growth, Australians are projected to live longer, healthier lives with higher living standards and more secure retirements by 2066, the report states. Real income per capita is expected to rise 55 per cent over the next 40 years. However, concerns about intergenerational inequality have deepened, particularly regarding housing access for younger Australians facing slower wealth accumulation.

Final Thoughts

Australia faces a demographic pivot that demands sustained migration and productivity gains to maintain living standards. The intergenerational report signals that policy choices made now on taxation, energy, and skills will determine whether the economy adapts or stagnates over the next four decades.

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