Treasurer Jim Chalmers will today release one of the most important documents that will help shape public policy for decades to come.
Called the Intergenerational Report, it offers a snapshot of Australia over the next 40 years.
It’s a document that governments release periodically, most recently in 2021, and 2015 before that.
While we are yet to see the full picture, we have been getting a sense of what the report includes.
So what do we know already?
Population growing, people living longer
Australia’s population looks set to grow by around 50 per cent in the next 40 years.
That would see the population increase 13.8 million people to 40.5 million and while that might sound like a huge number, if realised, it would be the slowest rate of growth in any 40-year period since federation.
Australia won’t just have more people, it will have older people.
The report forecasts that the number of people aged 65 and older will double and there will be triple the number of people aged 85 and older.
Life expectancy for Australians in 2062-63 is tipped to be 89.5 years for women and 87 years for men.
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Older people, fewer pension payments
The aged pension is among the biggest single line items in the federal budget.
But Australia is fast approaching a tipping point, where workers will be retiring after having spent their whole career earning superannuation.
It means that while Australians will be older and living longer, aged pension payments, as a proportion of gross domestic product (GDP), will decline.
This will set Australia apart from many other nations, with the intergenerational report forecasting the lowest public spend on pensions, as a proportion of GDP, in the OECD by the mid-2030s.
But superannuation tax concessions, as a share of GDP, will rise from 1.9 per cent to 2.4 per cent. If realised, that will see these concessions overtake aged pension spending in the 2040s.
“The superannuation system is maturing, with around 17 million Australians collectively owning around $3.5 trillion in superannuation assets,” the report states.
“By the mid-2040s most people retiring will have been receiving the superannuation guarantee at 9 per cent or more for the duration of their working lives.”
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Tax receipts tipped to fall
The Intergenerational Report forecasts that Australia’s economy will be 2.5 times larger in real terms in 2062-63.
Forecasters expect growth to slow in the coming decades because of Australia’s ageing population and slower population growth.
An ageing and growing population is also forecast to contribute to driving up how much the federal government spends on health and aged care, with Australia’s ageing population estimated to account for about 40 per cent of the increase.
Currently, Mr Chalmers’ federal budget is benefiting from a strong labour market with low unemployment. That helps the government in two ways — a higher personal income take and fewer unemployment payments.
But the government expects that will be short-lived.
Spending on health, aged care, the National Disability Insurance Scheme, defence and interest payments on government debt will go from accounting for a third to half of government spending.
Extracts, released by the government earlier this week, show government spending in these five areas looks set to rise by $140 billion by 2062-63.
The care economy is forecast to account for 15 per cent of GDP by 2063, up from 8 per cent at the moment.
Revenue from fuel excise will also take a hit as Australians switch to electric vehicles.
But don’t expect a tax overhaul anytime soon.
Tax overhaul ruled out in the short-term
Despite growing pressures on the budget, the government has ruled out a major overhaul of taxes ahead of the next election.
Dismissing calls for a major tax shake-up, the government intends to continue pursuing incremental reform in what it calls “bite-sized chunks”, including its already announced changes to superannuation tax breaks, tobacco excise and the Petroleum Resource Rent Tax.
Sources have also told the ABC there would be neither GST changes nor income tax changes beyond the already legislated stage-three tax cuts.
Demand for critical minerals growing
Australia is the world’s largest producer of lithium, the exports of which are expected to double in the next five years.
That comes on the back of insatiable global demand for critical minerals — like lithium, nickel, zinc and bauxite — which are forecast to increase 350 per cent by 2040.
“Australia is one of the few countries in the world that has all three key elements of the aluminium industry: bauxite mining, alumina refining, and aluminium smelter operations,” the report states.
“Aluminium is an important input to a number of technologies critical to the energy transition.
“It features in electric vehicles, wind turbines, batteries and is a more sustainable building material due to its recyclable properties.”
Demand for Australia’s thermal coal is expected to fall as the global community shifts to a cleaner, renewable energy markets.
The report will forecasts thermal coal exports could be down 50 per cent by 2063, while demand for lithium is expected to be eight-times higher.
Climate change a factor of forecasts
The Intergenerational Report will consider the consequences of global temperatures increasing beyond two degrees Celsius.
The government expects that would reduce economic output in the next four decades by between $135 billion and $423 billion in 2023 today terms.
Without considering the rainfall implications, the temperature change alone is tipped to reduce agricultural crop yields by 4 per cent by 2063, with an increase expected in the frequency and ferocity of natural disasters.