Australia is bracing for a profound demographic and economic transformation over the coming four decades, according to the government’s latest intergenerational report. The Treasury document, released in advance of its full publication on Monday, projects that Australians will live significantly longer, the population will grow at a markedly slower pace, and artificial intelligence will become the single most influential force reshaping the nation’s economy. Treasurer Jim Chalmers described the report as both confronting and optimistic, insisting that Australians are well equipped to navigate the accelerating changes ahead.
A Nation Living Longer, But Having Fewer Children
One of the most striking findings in the report concerns the remarkable rise in life expectancy. Women born in Australia can expect to reach 89 years by 2065/66, up from approximately 86 today, while men are projected to live to 86, compared with 82 at present. The Treasury attributes much of this gain to the strength of the country’s universal healthcare system and sustained investment in medical research.
The report emphasises the importance of continued funding for Medicare, the Pharmaceutical Benefits Scheme, and the recent expansion of urgent care clinics. These institutions, Chalmers argued, will be central to supporting an increasingly aged population.
Yet longevity is only half the story. Australia’s population is forecast to reach 39.3 million by the mid-2060s — some 1.8 million fewer than the 2023 projection. Annual population growth is expected to slow to 0.9 per cent, down from the 1.4 per cent recorded over the previous four decades. The primary driver is a sustained decline in fertility rates.
Chalmers pointed to shifting social patterns as the root cause. “Almost half the decline in fertility rates is actually because fewer people are having three or more kids, and what that reflects is mums having fewer kids later in life,” he said. The government, he added, is committed to making it easier for families to expand — through subsidised childcare, enhanced paid parental leave, and higher mandatory superannuation contributions.
Australian households are expected to shrink accordingly, reshaping the social and economic fabric of the nation.
Artificial Intelligence: Opportunity and Risk in Equal Measure
The Treasury report identifies artificial intelligence as the “defining influence” on Australia’s economy over the next 40 years. Chalmers acknowledged that AI presents enormous potential for productivity gains across both the public and private sectors, but warned of “very substantial risks” that must be carefully managed.
Previous Treasury advice had suggested that nations which keep pace with the global shift towards AI stand to benefit enormously. Australia, Chalmers said, must seize that opportunity while remaining vigilant about the disruptions that accompany rapid technological change.
The prime minister, Anthony Albanese, is currently in the United States to advocate for a global framework governing the rollout of AI. He has urged the world’s two foremost powers — the United States and China — to cooperate in the interest of humanity. Drawing a parallel with the nuclear non-proliferation treaty, Albanese argued that agreements and protocols are essential to ensuring that emerging technologies serve the common good.
“We want to see cooperation,” he told ABC’s Insiders programme. “I think middle powers such as Australia have a role to play here as well.”
On the other side of the Pacific, US President Donald Trump announced plans to appoint an artificial intelligence tsar and establish an “AI Force” to monitor the technology — though he offered almost no details. Notably, Trump dismissed concerns about AI as a “hoax.”
Fiscal Outlook: Debt Relief Amid Persistent Pressures
Despite the demographic headwinds, the report offers a surprisingly positive fiscal picture. Future government debt is projected to fall by half a trillion dollars compared with forecasts in the 2023 intergenerational report. Much of this improvement, however, hinges on the successful adoption of emerging technologies, including AI.
Chalmers struck a measured tone. “Overwhelmingly, the fiscal story is a little bit better; but still, lots, lots more work to do to manage some of these pressures and risks,” he said.
The growing and ageing population remains at the heart of long-term budget pressures. Sustaining healthcare, superannuation, and social services for an older citizenry will demand difficult policy choices in the years ahead. Chalmers, however, framed the report not as a pessimistic document, but as a realistic assessment of the challenges — and the tools — at Australia’s disposal.
“There are elements of the intergenerational report which are confronting, but it’s not a pessimistic report … because Australians are genuinely better placed and better prepared for all of this accelerating change,” he told News24’s Sunday Agenda.
Why it Matters
Australia’s intergenerational report is far more than a policy document — it is a mirror held up to a society in transition. The convergence of rising longevity, declining birth rates, and the rapid advance of artificial intelligence presents a trio of challenges that will define the nation’s trajectory for generations. How Australia manages this trifecta will have ramifications well beyond its own borders, particularly as it seeks to shape international norms around AI governance alongside global powers. For policymakers, businesses, and citizens alike, the message is clear: the future is not predetermined, but it will be shaped by the choices made today.
