Australia warns of risks from ageing population, falling birth rates

Australia anticipates deaths surpassing births starting in the 2060s, marking a demographic shift that could significantly impact an economy already grappling with an aging population, declining birth rates, and reduced immigration. For decades, Australia has maintained population growth by relying on immigration to counteract low birth rates; however, as immigration slows, the country is exploring a trajectory followed by advanced economies like Japan, Germany, and South Korea, where deaths have already outpaced births.

The Treasury department's Intergenerational Report, published on Monday, highlights AI, geopolitical fragmentation, the energy transition, an aging population, and a shift to a service-based economy as the five most critical transformations affecting Australia's economic outlook over the next four decades. The report projects a deceleration in population growth to 0.9% annually over the next four decades, down from the 1.4% average growth observed in the past 40 years, primarily due to declining fertility rates and a decrease in net overseas migration, which is expected to stabilize.

This slower growth and aging population will place additional pressure on healthcare and aged care services, which often rely on migrant workers. Additionally, the report warns that an aging populace will heighten demand for care services, exacerbating labor shortages in these vital sectors. In response to these challenges, the left-leaning Labor government has tightened immigration rules in recent weeks, as Prime Minister Anthony Albanese attempts to counter a rise in support for the right-wing populist One Nation party, which seeks to significantly reduce immigration.

Albanese's approval ratings have plummeted to their lowest point since his ascension to the prime ministership in 2022. The report also underscores that an aging population will necessitate increased funding for care services, as regions with larger elderly populations confront heightened labor shortages in healthcare and aged care, which heavily depend on migrant labor.

Amidst these economic and demographic shifts, Labor plans to deploy tax cuts in future budgets to provide additional relief to Australians contending with rising inflation, higher mortgage rates, and housing costs.