Australia Flags Economic Risks As Population Ages, Birth Rates Decline

Australia is forecasting that deaths will exceed births for the first time in the 2060s, marking a major demographic shift that could have significant implications for an economy facing an ageing population, falling birth rates and slowing immigration.

For decades, Australia has relied heavily on immigration to sustain population growth and offset relatively low fertility rates. However, with migration expected to slow, Australia is moving toward a demographic trend already seen in several advanced economies, including Japan, Germany and South Korea, where deaths have surpassed births.

The Treasury made the projection in its latest Intergenerational Report released on Monday. The report identified artificial intelligence, geopolitical fragmentation, the energy transition, population ageing and the shift toward a service-based economy as the five major transformations expected to shape Australia’s economic outlook over the next four decades.

Population Growth Expected To Slow

Treasury expects Australia’s population to grow by an average of 0.9% annually over the next 40 years, down from an average annual increase of 1.4% over the previous four decades.

The slowdown is expected to be driven by declining fertility rates and a reduction in net overseas migration — the difference between the number of people entering and leaving Australia — before migration levels eventually stabilise.

“Australia’s population will age more quickly and grow more slowly than projected,” Treasury said.

“Deaths are projected to outnumber births by the 2060s – the first time this has been forecast in an IGR – at which point natural increase will no longer be a driver of population growth.”

Ageing Population To Increase Labour Pressure

Treasury warned that population ageing would increase demand for care services, particularly healthcare and aged care.

Regions with older populations are expected to face greater labour shortages in these sectors, which currently depend significantly on migrant workers.

The demographic outlook comes as the Labor government has tightened immigration rules, while Prime Minister Anthony Albanese faces growing political pressure over migration.

The right-wing populist One Nation party has called for a sharp reduction in immigration. Albanese’s approval rating also fell this week to its lowest level since he became prime minister in 2022.

Cost Of Living, Tax Cuts Also Flagged

The report also highlighted the potential for tax cuts in future federal budgets as the government continues to provide cost-of-living support.

Australians are facing pressure from elevated inflation, higher mortgage rates and expensive housing, adding to the economic challenges posed by the country’s changing demographic profile.