The federal government has released the latest Intergenerational Report on what Australia could look like over the next 40 years.
Here are some of the key predictions and what this could mean for our future.
1. An ageing population
Australians are living longer and they’re having fewer children.
So, even with net migration accounted for, the government is predicting slower population growth and lower workforce participation due to ageing.
As this chart projects, people aged 65 and over will more than double by 2063:
What does this mean? With older Australians spending more years in good health, it’s predicted there’ll be rising demand for government-funded services like aged and disability care.
And with fewer children, it’s predicted the size of the workforce relative to the dependent population will fall.
2. A higher skilled workforce
The ongoing digital and technological transformation is expected to continue to raise incomes and quality of life.
It’s also expected to increase the demand for specialised skills and to change the nature of work.
In particular, employment is anticipated to grow in the services industries, which include health care and social assistance, education and training services, as well as professional, scientific and technical services.
This projected trend is reflected in the rising share of jobs that currently require a bachelor’s degree or above, from 20 per cent in 1966 to to 34 per cent in 2021:
At the same time, this chart shows the share of jobs requiring high levels of cognitive skills has increased by 17 per cent:
What does this mean? It’s predicted the labour market will continue to demand skills that are complementary to existing and new technologies.
Meanwhile, the automation of routine tasks will result in a greater focus on foundational skills, such as communication, problem solving and team work.
3. Hotter temperatures
The government anticipates hotter temperatures, basing its projections on data from the Bureau of Meteorology:
Under a scenario where global temperatures increase by up to 3 degrees Celsius by 2100, Australia’s national average temperature is projected to increase by 1.7C.
As seen in the maps below, some parts of Australia will be more exposed than others depending on how high temperatures rise.
The map on the left shows temperature projections for a climate scenario under a 2C warming path, while the one on the right shows the possible impact of a 3C increase:
What does this mean? Besides health and environmental impacts, higher temperatures are predicted to impact labour productivity, with workers in exposed industries having to reduce their exposure to heat or the physical intensity of their work.
Weather changes are also projected to result in lower crop yields and higher government spending on natural disaster recovery and resilience efforts.
4. Slower labour productivity
With all of these changes considered, the government has revised down its long-term productivity projections.
It moved from a 30-year productivity growth average of 1.5 per cent per year to a 20-year average of 1.2 per cent:
What does this mean? The Australian economy is projected to grow at a slower pace over the next 40 years than in the past 40 years. This will influence the government’s fiscal and economic policy decisions.