The intergenerational report lays bare how today’s growing anti-migration rhetoric clashes with a future where we need to attract people from overseas to help grow the economy and pay for our ageing population. The “replacement” fertility rate is 2.1 children per woman – this is the average number of births to keep the population steady without migration and we’ve been below this level for 50 years. The fertility rate is about 1.5 now and the IGR projects it will drop to 1.34 over the coming 40 years.
This is how Treasury makes the alarming prediction that by the mid-2060s deaths will outnumber births for the first time. There is no direct plan to reverse the trend for smaller Australian families, and Chalmers has made it clear Labor has no intention of repeating Peter Costello’s baby bonus or the former Liberal treasurer’s free advice on how many babies we should be having. Fair enough, but the seventh IGR tells a very familiar story that Australians are, on average, getting older – and this has big implications for the economy and the budget.
It means there is a smaller share of workers paying the taxes to fund the growing burden of paying for things associated with an ageing population, like healthcare and aged care. Maintaining a healthy migration program has helped – and will help – Australia overcome these structural challenges. As the IGR says: “Migration contributes to population growth and slows ageing, while supporting a multicultural society and strengthening the economy through skills, innovation and international connections.” For those who think we would be better off with less migration, Treasury’s analysis provides some evidence that the opposite is true.
The IGR’s “baseline forecast” assumes a long-run net overseas migration (Nom) figure of 235,000 people a year. This central case predicts real GDP per person – a reasonable proxy for average living standards – to grow from $99,200 in this financial year, to $157,300 in 40 years’ time. Treasury economists then ran the numbers under a lower population scenario, where Nom was 50,000 a year less, and where the long-run fertility rate was 1.24, instead of 1.34.
Under this scenario, real GDP per person would be $400 lower in 2065-66 than under the baseline. That’s not much, but it’s working in the wrong direction. The impacts of lower population growth are more stark when it comes to forecasts of what’s known as the “dependency ratio”.
In 2025-26, there will be 27.4 people aged 65 and over for every 100 working-age Australians. The IGR projects this ratio will soar to 40 by the mid-2060s; with lower migration it reaches 43. The projected underlying cash deficit with lower population growth is 2.4% in 2065-66, instead of 1.8% under the existing assumptions.
Extract — continue reading at the source.
