Australia’s Population to Age Rapidly as Deaths Outnumber Births by 2060s, Treasury Report Warns

Seventh Intergenerational Report highlights demographic shifts, economic challenges, and the transformative role of artificial intelligence over the next four decades

Australia is projected to experience a significant demographic turning point within the next 40 years, with deaths expected to outnumber births by the 2060s, according to the federal Treasury’s seventh Intergenerational Report (IGR) published on 21 September 2026. This milestone, unprecedented in Australia’s modern history, reflects ongoing declines in fertility rates and an ageing population, posing profound implications for the nation’s economy, workforce, and public finances.

Key Demographic Trends and Projections

The IGR forecasts that Australia’s population will continue to grow, reaching approximately 39.3 million by 2065–66, but at a slower annual growth rate of 0.9%, down from an average of 1.4% over the past four decades. This slower growth is primarily driven by a projected fall in the total fertility rate to 1.34 children per woman by 2065–66, well below the replacement level of about 2.1.

As a result, natural population increase (births minus deaths) is expected to become negative by the 2060s, a demographic transition already experienced by countries such as Japan, Germany, Italy, and South Korea. The median age of Australians is projected to rise from around 38.5 years today to about 45 years by the mid-2060s, while the number of people aged 85 and over is expected to triple.

Despite these ageing trends, Australia’s working-age population (aged 15 to 64) is forecast to continue growing modestly, supported by a long-term net overseas migration (NOM) assumption of approximately 235,000 people annually. This migration is critical to maintaining demographic resilience, cushioning the impact of lower fertility and an ageing population on the labour force and economy.

Economic Outlook and Productivity Assumptions

The report projects Australia’s economy will more than double in size by 2065–66, with real per capita gross national income rising by 55%. However, average annual economic growth is expected to slow to around 2%, down from 3% over the previous 40 years, largely due to demographic pressures.

Labour productivity growth is assumed to recover to a long-term average of 1.2% per year, after recent years of near stagnation. The Treasury highlights the potential pivotal role of artificial intelligence (AI) in supporting this productivity growth, describing AI as “the biggest economic transformation of our lifetime.” Nonetheless, the report acknowledges significant uncertainty regarding AI’s adoption, its effects on the labour market, and the distribution of economic gains.

Fiscal Challenges and Government Spending

The ageing population will place increasing demands on government services, particularly health care, aged care, the National Disability Insurance Scheme, and defence. The IGR projects government payments as a share of GDP will rise to 27.7% by the mid-2060s, driven largely by ageing-related costs.

Despite an improved fiscal outlook compared to the 2023 report, the underlying cash balance is forecast to widen to a deficit of approximately 1.8% of GDP by 2065–66. The report stresses the need for ongoing policy reforms to manage growing spending and revenue challenges and to maintain a sustainable budget position over the long term.

Major Transitions Shaping Australia’s Future

The 2026 IGR identifies six major transitions expected to shape Australia’s economy and society over the next 40 years:

• Artificial intelligence revolution: Transforming productivity and labour markets with uncertain outcomes.
• Geopolitical fragmentation: Increasing global tensions and trade unpredictability.
• Energy transition: Moving towards net zero emissions by 2050, with opportunities to become a renewable energy superpower.
• Ageing and care economy: Rising demand for health and aged care services amid demographic shifts.
• Industrial transformation: Structural changes in the economy towards services and care sectors.
• Intergenerational equity: Challenges in balancing the economic and social needs of different generations.

Political and Social Implications

Treasurer Jim Chalmers, speaking at the Australian National University, emphasised the seriousness of these challenges but also Australia’s relative strengths compared to other advanced economies. He noted that while the demographic and technological changes are profound, Australia’s younger population and migration program provide a degree of resilience.

However, the report highlights political tensions surrounding migration policy, with some parties advocating for significant reductions in migration numbers. Experts warn that sustained cuts to migration could exacerbate workforce shortages and fiscal pressures, potentially leading to a shrinking and ageing population with increased reliance on automation and robotics.

Conclusion

The 2026 Intergenerational Report offers a comprehensive and sobering outlook on Australia’s demographic and economic future. It underscores the need for careful policy responses to manage the impacts of an ageing population, slower growth, and technological change. While the report projects ongoing growth and rising living standards, it also calls attention to the fiscal and social challenges ahead, particularly in supporting an older population and ensuring equitable economic opportunities across generations.

As Australia navigates these transitions, the balance between embracing innovation, sustaining migration, and reforming public policy will be critical to securing long-term prosperity and social cohesion.