Australia at 40 million – grey-haired and in need of care

Australia’s population is on track to surpass 40 million within four decades, but it will be grey-haired and require an army of aged care workers that will increase the stress on the entire jobs market.

Treasurer Jim Chalmers will use the latest intergenerational report, to be released on Thursday, to reveal the ageing of the population will require significant new investments in skills and training to ensure older Australians receive the care they need.

Australia’s population is expected to reach 40.5 million by mid-2063. It will be older as well.Credit: Supplied

He will also confirm the financial outlook will be tougher, as a slowdown in productivity growth translates into a hit to living standards and the size of the country’s economic output.

Since the then treasurer Peter Costello unveiled the first intergenerational report in 2002 as a way to highlight the nation’s budget and demographic pressures, the nation’s population has swelled beyond expectations.

Australia was expected to have 25.3 million residents by 2042. It reached that population in June 2019.

But the surge in population changed in the most recent intergenerational report released by Josh Frydenberg during the depths of the pandemic in 2021. It was the first to downgrade the size of Australia’s forecast population, tipping it to reach 38.8 million in 2060.

Chalmers will forecast the population to reach 40.5 million, an increase of 14.2 million on today’s number, by the middle of 2063. It will be roughly in line with Frydenberg’s outlook.

Overall population growth is expected to slow to 1.1 per cent a year, down from the 1.4 per cent average of the past four decades.

Life expectancy, which has soared over the past 20 years, is expected to slow.

A male born today is expected to live for 81.3 years, while a female is expected to live 87 years. Thursday’s report will forecast life expectancy at birth to reach 87 for males and 89.5 for females born in 2062-63.

A woman who reaches 65 in 2062-63 is expected to live another 26.2 years while a man can expect to hold on for another 24.7 years.

The number of people over the age of 65 is expected to more than double while the number over 85 is tipped to more than triple.

That ageing of the population will put enormous pressure on the care economy. There are about 2.2 million people employed in the care sector now, but this is expected to reach almost 4.5 million by 2062-63.

The care sector now accounts for about 8 per cent of GDP. It is projected to reach 15 per cent of GDP in four decades.

Chalmers said the demographic changes facing Australia would be substantial.

The number of people needed to work in the care sector is expected to double in the next 40 years.Credit: Getty

“Our population will grow more slowly, our people will live longer, and our care economy will become an even more central focus in the decades ahead,” he said.

“Whether it’s health care, aged care, disabilities or early childhood education, we’ll need more well-trained workers to meet the growing demand for quality care over the next 40 years.”

The Coalition has raised concerns about the post-COVID surge in Australia’s population, which swelled by almost 500,000 through 2022. Part of the growth was driven by international students, kept out of the country by pandemic travel restrictions, returning to finish their education.

The intergenerational report will show migration continues to help Australia’s population grow, but its share of total growth will fall.

This week’s report will also reveal the economy will not grow as fast, and living standards will be lower, unless there is a step-up in productivity growth.

Previous intergenerational reports have assumed increases in productivity at odds with recent experience. The 2021 report assumed productivity growth of 1.5 per cent even though productivity had not grown that quickly since the 1990s.

Productivity growth, the size of the population and workforce participation are key drivers of forecasts made in the intergenerational report.

Chalmers’ report will be based on assumed productivity growth of 1.2 per cent, bringing it into line with other long-term forecasts made by countries such as the United States, Britain and Canada.

‘Our population will grow more slowly, our people will live longer, and our care economy will become an even more central focus in the decades ahead.’

Jim Chalmers, Treasurer

That one change will have a direct impact on the forecast size of the Australian economy and the living standards of all Australians.

In 2021, if the report assumed productivity growth of 1.2 per cent, then real GDP per person by 2060 would be $13,300, or almost 10 per cent lower than if productivity improved by 1.5 per cent a year.

The report, however, will argue there are areas of potential growth. The advance in artificial intelligence over the past two years has caught government policymakers by surprise. In the 2021 report, AI was mentioned just twice.

It will reveal other areas where productivity could be boosted, including through greater competition between businesses, better trained workers and a more diverse economy.

Chalmers said while the report assumed a slowdown in productivity growth, there were ways to arrest it.

“The intergenerational report will make the critical point that the trajectory of productivity growth in the future is not a foregone conclusion, and it will depend on how we respond to the big shifts impacting our economy,” he said.

“By maximising the opportunities of the energy transformation, embracing new technology, by investing in our people and their skills, we can build a more productive and prosperous economy.”

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