Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)
Australia faces a major challenge of an ageing population, made worse by the lingering effects of the COVID-19 pandemic, Josh Frydenberg has warned.
Releasing the 2021 Intergenerational Report, the treasurer said the economy will be smaller and the population will be older than it otherwise would have been with flow-on implications for economic and fiscal outcomes.
The report shows Australia faces 40 years of budget deficits, relatively high levels of debt and slower economic growth than had been previously experienced.
“The fact that we are living longer is to be welcomed but the impacts on our economy and our budget are profound,” Mr Frydenberg said, launching the report at a Committee for Economic Development of Australia (CEDA) event on Monday.
The five-yearly IGR provides a guide to how the economy will look over the next 40 years and what it means for the budget.
It is the fifth in the series, which was first introduced by former Liberal treasurer Peter Costello in 2002.
Deloitte Access Economics economist Chris Richardson said the new IGR should start some overdue national conversations.
“Australians don’t spend enough time thinking about the future,” Mr Richardson told AAP.
“And when we do, we focus on squabbles over slices of the pie, rather than over the size of the pie. We can and should do better than that.”
CEDA chief executive Melinda Cilento agreed the report shows Australia can’t afford another lost decade of policy reform.
She said Australia must tackle the costs of climate change, the reliance on income tax, boost productivity and fund essential services like health and aged care to manage the impacts of our ageing population.
“Now is the time to take serious action to address these challenges,” Ms Cilento said.
Mr Frydenberg expects the economy to grow by an average annual rate of 2.6 per cent from 2020/21 to 2060/61, 0.4 percentage points lower than the past 40 years.
Australia’s population is expected to grow to 38.8 million by 2060/61.
In the last IGR released by former Liberal treasurer Joe Hockey in 2015, the population was projected to hit almost 40 million by 2054/55.
“This is the first time there has been a downward revision of the long-term population projections in an Intergenerational Report,” Mr Frydenberg said.
As such, he said the composition of the migration program when borders reopen has to be well targeted and skills focused so it can supplement the stock of working-age people and slow the transition to an older population.
He said economic growth will continue to be highly dependent on productivity gains and a vital ingredient in lifting long term living standards and wages.
Earlier the treasurer pledged on ABC radio to fully fund the NDIS, while noting health and education spending were also at record highs.
“We want to continue to pursue reforms that encourage more investment by business, improve the provision of skills across the country and also ensure a more flexible workplace,” he said.
But Opposition Leader Anthony Albanese says the government has given up on reform and doesn’t even try to pretend to deliver it.
“It’s given up on a future agenda. This is a government where productivity was going backwards for two quarters in a row before the pandemic. We had a productivity recession,” he told Sky News.
Australian Industry Group chief executive Innes Willox also pointed out that most of the challenges identified in the report pre-date COVID.
“Hopefully the need for action to maintain the COVID recovery will spur governments, businesses and the community more broadly to act more decisively on the numerous issues that have been clear for many years,” Mr Willox said.