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Higher productivity key to Australia’s future: Intergenerational Report
The next 40 years will see slower economic growth in Australia than the last 40, as an ageing population, the energy transformation and other major shifts reshape the economy and demand solutions to a declining-productivity problem, according to the federal government’s Intergenerational Report.
And while the economy should see gross domestic product (GDP) increase two and a half times by 2063, with incomes 50 per cent higher in real terms, population and productivity issues and growing spending pressures mean Australia cannot claim that growth through complacency, according to the Albanese government’s Intergenerational Report 2023, released Thursday.
By acting now to repair the budget, build the skill of the workforce, and foster a more dynamic, productive and resilient economy, Australians can ensure “our country has its best years ahead of it”, Treasurer Jim Chalmers said in the report.
“Powerful forces will continue to shape Australia’s economy over the coming decades, including population ageing, expanded use of digital and data technology, climate change and the net-zero transformation, rising demand for care and support services, and increased geopolitical risk and fragmentation,” the report stated. “These forces will influence the future path and structure of our economy and change how Australians live, work and engage with the world.”
Like other advanced economies, Australia is set to see slower going forward, the report explained, projecting the economy to grow two and a half times larger by 2062-3, with incomes 50 per cent higher in real terms. It projected the Australian economy to grow at an average rate of 2.2 per cent over the next 40 years, compared with a 3.1 per cent average over the past 40.
“This is driven by lower projected population growth and reduced participation due to ageing, along with an assumption of slower long-run productivity growth,” the report stated.
“Slower economic growth will place pressure on the tax base at a time of rising costs, creating a long-term fiscal challenge,” it added. “Despite recent improvements in Australia’s fiscal position, debt-to-GDP remains high by historical standards. “
Australia is facing rising long-term spending pressures across health, aged care, defence and the National Disability Insurance Scheme, as well as growing government debt costs. The report projects Australia’s gross debt will decline from historical highs and then rise again beginning in the late 2040s, reaching 32.1 per cent of GDP by 2062-3.
“Australia’s ability to meet challenges while seizing future opportunities depends on choices today. The government is repairing the budget, while also making the critical investments and productivity reforms necessary to grow the economy.”
These steps will also help Australia take advantage of emerging technologies and obtain maximum benefits from the transformation to net zero, the report stated.
“The government is also investing in people, sustainably providing essential care and support services, expanding opportunity and addressing disadvantage, and continuing to position the nation’s diplomatic and defence capability for regional security.”
