Treasury Intergenerational report predicts deaths will outnumber births by 2060s for the first time ever

Deaths will outnumber births by the 2060s for the first time ever as fertility levels hit a new record low and the elderly proportion of the population doubles, Treasury fears.

The first Intergenerational Report since 2023 is predicting Australia will be home to 1.7 million fewer people than would otherwise have been the case, as the nation continued to rely on immigration to provide workers to look after more older people with fewer younger adults in the labour force.

Australia’s median age is tipped to increase from 38 years and seven months now to 45 by 2062-63, which is almost two years higher than the 43 years and one month forecast previously.

During that time, the proportion of the population aged 65 or over is projected to almost double, growing by 87.1 per cent over the next four decades.

The proportion of Australians aged 85 or older is forecast to triple to 1.9m, up from 625,000 now, with most of that growth occurring in the 2030s and 2040s.

Life expectancy during that time is forecast to increase to 89 years and six months for women and 86 years and one month for men, up from 85 years and one month now for women and 81 years and one month now for men.

An ageing population is expected to be a drain on Australia’s finances with only wider Budget deficits forecast in four decades from now that are set to make up a bigger proportion of the economy as the working-age population shouldered a heavier tax burden to finance government services.

Unemployment was expected to remain at low levels, with fewer working age people, as artificial intelligence created more demand for labour.

Treasurer Jim Chalmers noted that an ageing population would consume one third of healthcare spending by mid-2066.

“What is new is that for the first time in this one is that deaths are projected to outnumber births by the 2060s,” he told an audience at Australian National University in Canberra on Monday.

“That’s later than most OECD countries, but fewer births mean much lower increases in Australians aged under 20.

“Australians living longer and healthier lives is obviously, overwhelmingly, a good thing.”

Australia would also need to rely on immigration to cater for an older population.

“Our working-age population will continue growing, supporting economic growth,” Dr Chalmers said.

“Migration will play an important role here as well, an important source of skills that complements our domestic workforce.”

With couples having fewer children and later in life, Australia within four decades’ time is tipped to join Japan, Germany, Italy and South Korea in having deaths outnumber births in four decades’ time.

“Australia’s population will age more quickly and grow more slowly than projected in the 2023 IGR, due primarily to lower fertility rates - a trend common across advanced economies,” the Intergenerational Report released on Monday said.

“Deaths are projected to outnumber births by the 2060s - the first time his has been forecast in an IGR - at which point natural increase will no longer be a driver of population growth.”

The fertility rate for every woman is expected fall to a new record low of 1.34 in four decades from now, which is even lower than the existing record-low of 1.481 and significantly lower than the 1.6 level forecast just three years ago.

This was projected to mean 1.7m fewer people living in Australia by 2065-66 than would otherwise have been the case.

“Lower fertility means fewer children, a proportionally smaller future workforce and a larger proportion of older Australians,” Treasury said.

Apart from a brief uptick in 2008, following the introduction of a baby bonus, it’s been below the replacement level of “two” since 1978.

Australia will be home to 39.3 million people by 2065-66, which would be 11m higher this year’s population tally of 28m.

Just three years ago, Treasury was forecasting a population of 40.5m by 2062-63, but it is now predicting Australia’s annual population growth will average 0.9 per cent during the next four decades.

That would be slower than the 1.1 per cent predicted three years ago and would be significantly lower than the present population growth pace of 1.4 per cent.

An ageing population and more geopolitical uncertainty is also expected to put more pressure on the Budget with only deficits forecast over the coming decade.

The 2026-27 Budget had a deficit making up 1 per cent of gross domestic product which Treasury forecast would shrink to 0.3 per cent in 2036-37 widening to 1.8 per cent in 2065-66.

Treasury predicted the working age population was likely to shoulder a heavier tax burden to finance care for the elderly.

“Against this backdrop, intergenerational equity is being strained by the long-term decline in home ownership and the pressures that an ageing population and structural trends in the tax base are placing on working-age Australians,” it said.

The rapid pace of new artificial intelligence has marked the biggest change since Treasury’s last Intergenerational Report, which is expected to make the labour market more productive in coming decades.

“While there is not yet evidence of significant labour market impacts, it is expected that productivity gains will arise from some tasks being automated using AI, and that demand for labour will increase and drive change in other areas,” it said.

“AI has the potential to drive significant social progress, as well as amplify risks such as cybersecurity and misinformation.”

Unemployment was expected to settle at 4.5 per cent over the longer-term, which is similar to the existing level considered to be full employment.

After peaking at 67.7 per cent in 2039-40, labour force participation is expected to decline as a result of an ageing population.