Intergenerational Report tips Australia to be smaller, older as deficits predicted for 40 years
Australia will be smaller sized and older than formerly forecasted, and the aftershocks of Covid -19 will resound through the economy into the 2060s, the Treasurer anticipates.
Unveiling Australia’s Intergenerational Report (IGR on Monday, Treasurer Josh Frydenberg forecasted deficit spending for a minimum of the next 40 years and cautioned the effects of the pandemic would not be short-term.
Mr Frydenberg argued “hard and contested” financial reform was needed to reduce the impacts of the crisis, which he referred to as the “most severe global economic shock since the Great Depression”.
“(It means that the economy will be smaller and Australia’s population will be older than it otherwise would have been, with flow-on implications for our economic and fiscal outcomes,” Mr Frydenberg informed the Committee for the Economic Development of Australia.
The IGR, launched every 5 years and predicting 4 years into the future, has for the very first time modified down its population development forecast.
Australia’s population is now predicted to reach 38.8 m by 2060-61, having actually been tipped to reach 39.7 m by 2054-55 in the 2015 report.
Mr Frydenberg stated a smaller sized, older population would position additional pressure on federal government coffers by requiring a “dramatic increase” in health and aged care costs.
The record $161b deficit spending was predicted to narrow somewhat in the 2030s however broaden once again as the population aged.
“The fact that we are living longer is to be welcomed, but the impacts on our economy and our budget are profound,” Mr Frydenberg stated.
“It is a warning sign and underlines why growing the economy is so important. Only by growing the economy can we continue to guarantee the essential services Australians rely on.”
The 2015 IGR was based upon a presumption of a 1.9 fertility rate, though that was modified to 1.65 in Monday’s report.
That “exacerbated” a remarkable drop in migration induced by the Covid -19 pandemic, which had actually put population development “at least six years behind” where it otherwise would be, Mr Frydenberg stated.
The Treasurer verified migrants would “continue to be our largest source” of population development moving forward, exposing the federal government was “thinking through” opportunities for experienced migrants to get here in the short-term.
“I think Australia has a really good opportunity, given how well how the nation has responded to this pandemic, to go and attract the best and the brightest from around the world,” he stated.
Monday’s report was a remarkable shift from the 2015 IGR, provided already-Treasurer Joe Hockey, that made bullish forecasts of continuous budget plan surpluses.
With Australia plunged into its very first economic crisis in nearly 4 years, Mr Frydenberg yielded long-lasting forecasts were “inherently uncertain”.
But he explained reform focused on performance as the “vital ingredient” to Australia’s long-lasting healing.
“If we want to maintain our living standards, generate higher wages, and create more jobs, Australia has no alternative than to pursue economic reform, much of which is hard and contested. It is a national imperative,” he stated.