Australia’s economic debate centres on two connected trends: longer lives and fewer babies. Treasury warns these shifts will slow labour force growth and increase demand for public services. The pressure will unfold, but its budgetary effects could persist for decades. Governments therefore face choices about productivity, migration, taxation, retirement incomes, housing and care. The challenge is not longevity itself. It is adapting institutions quickly enough to support an older society.
Demographic balance shifts over four decades
Australia’s population will keep growing, yet its age structure will change. The 2023 Intergenerational Report projects 40.5 million residents by 2062–63. It expects the number of people aged 65 or older to more than double. The group aged 85 or older could more than triple. The centenarian population could increase sixfold. Improved survival, ageing baby boomers and sustained low fertility drive these changes.
The median age could rise from 38.5 years in 2022–23 to 43.1 by 2062–63. Treasury also expects fewer working-age people for each resident aged over 65. That ratio could fall from 3.7 to 2.6 during the projection period. It does not label every older person dependent, because many continue working and contributing. However, the measure highlights a narrower base for financing age-related services. That demographic shift leads directly to concerns about births.
Birth rates deepen the concern
The Australian Bureau of Statistics registered 286,998 births in 2023. The total fertility rate fell to 1.50 babies per woman, the lowest level recorded. It stood well below the approximate replacement level of 2.1. Australia has generally remained below replacement fertility since 1976. Without migration, prolonged low fertility eventually reduces natural population growth and future workforce entrants.
Families make decisions within economic, social and personal constraints. Later partnering, longer education and career timing have shifted births towards older ages. Housing costs, insecure work and childcare access can also influence decisions. No single factor explains the decline, and government cannot direct family choices. Even successful family policies would take decades to affect the number of experienced workers. The immediate economic task therefore extends beyond lifting births.
Slower workforce growth changes the economy
Ageing affects economic growth through labour supply, participation and savings. Treasury projects the participation rate to fall from 66.6 per cent to 63.8 per cent. It forecasts average real GDP growth of 2.2 per cent annually over the next 40 years. That compares with 3.1 per cent across the previous 40-year period. Slower population growth and weaker participation explain part of the difference.
Productivity remains the strongest route to higher living standards when worker growth slows. The report assumes labour productivity growth of 1.2 per cent annually over the long term. That assumption is not guaranteed. Poor investment, weak competition or skills gaps could produce worse outcomes. Conversely, technology, better management and stronger training could support more output per hour. Older workers also contribute experience and knowledge, so age alone does not determine performance.
Rising budgets meet slower revenue growth
An older population raises demand for hospitals, medicines, disability support and aged care. The Intergenerational Report projects Commonwealth health spending to rise from 4.2 per cent of GDP to 6.2 per cent. It projects aged care spending rising from 1.1 per cent to 2.5 per cent. These estimates cover 2022–23 through 2062–63 and remain sensitive to policy and economic conditions. Medical innovation improves lives, but new treatments can also increase costs.
Ageing does not push every program upward. Treasury projects Age and Service Pension spending to decline slightly as a GDP share. Maturing superannuation balances and pension means testing help explain that result. Nevertheless, health, care, defence, the NDIS and debt interest create substantial combined pressure. Slower wage and consumption growth could simultaneously restrain major tax bases. Budget choices will consequently become harder, especially if productivity disappoints.
Care systems face pressure beyond budgets
Fiscal totals only capture part of the challenge. More older Australians will need personal care, clinical support or help remaining at home. Providers already compete for nurses, doctors and care workers. Demand could intensify while workforce growth slows. Unpaid carers may shoulder more responsibility, affecting their incomes, health and participation. Better wages, training and career pathways can improve recruitment and retention.
Healthy ageing can reduce pressure and improve wellbeing. Prevention, safer housing, community health and earlier treatment can delay expensive care. Digital monitoring and telehealth may extend services, particularly outside major cities. Technology must complement human care, rather than become a substitute for safety or dignity. Regional planning matters because ageing patterns and service access vary widely. That variation also complicates national policy design.
Policy choices must work together
Migration helps, but cannot stop ageing
Migration can expand the working-age population and fill shortages faster than higher fertility. Skilled migrants already support health, engineering, construction and other essential sectors. However, migration cannot permanently stop population ageing, because migrants also grow older. Large inflows also increase near-term demand for homes, transport and services. Policy must therefore match migration settings with infrastructure, settlement and labour protections. A balanced approach treats migration as one tool, not a complete demographic solution.
Participation and productivity become more important
Australia can also use more of the workforce it already has. Affordable childcare, flexible work and carers’ support can lift participation. Retraining and age-friendly workplaces can help willing older employees remain productive. Employers must address age discrimination and redesign physically demanding roles where practical. Policies should recognise that health and occupation limit some people’s ability to work longer. Australia raised the Age Pension eligibility age to 67, but further changes would require careful equity analysis.
Investment provides the other main lever. Businesses need reliable energy, digital networks, research capacity and workers with current skills. Governments can support competition, education and efficient infrastructure without choosing every commercial outcome. Artificial intelligence and automation may ease shortages, although they will change tasks and training needs. Productivity reform rarely delivers instantly, but compounding gains matter greatly across four decades. This makes implementation as important as long-term forecasting.
Supporting family choices without promises
Family policy can remove barriers without guaranteeing a baby boom. Paid parental leave, childcare subsidies and secure employment can reduce the cost of raising children. Housing supply and affordability also shape whether adults can form independent households. From July 2026, Australia’s federal paid parental leave scheme reached 26 weeks for eligible families. Superannuation contributions on government parental leave payments began in July 2025. These measures support parents, although fertility responses remain uncertain.
Planning for change
Australia’s demographic shift is a warning, not a forecast of unavoidable decline. Early action on productivity, participation, care and fiscal planning can spread costs fairly. It can preserve longer lives as a shared national achievement.
