Australia faces significant economic challenges over the next four decades, according to the 2026 Intergenerational Report released on Tuesday. The report projects an ageing population, declining fertility rates, and mounting budgetary pressures that are expected to shape the nation’s future through 2065-66.
The report highlights a demographic shift, showing that Australia’s population growth will slow more than previously anticipated. The fertility rate has dropped to 1.3 children per woman, lower than the 1.5 forecasted for 2030 and well below the replacement rate of 2.1. This decline contributes to expectations that Australia’s population in the mid-2060s will reach around 39 million people, down from a 2023 projection of 40.5 million.
Longevity is also increasing, with life expectancy rising to an average of 89 years for women and 86 years for men. The report cautions that while longer and healthier lives are positive, they will add pressure to government budgets, particularly as the population ages.
Treasurer Jim Chalmers acknowledged the report outlines “very serious economic risks and very serious budget pressures,” despite forecasts showing the budget in better shape by mid-century compared to the 2023 report. He noted that some pressures are intensifying rather than easing.
The report places a strong emphasis on the transformative impact of artificial intelligence, urging Australia to harness rapid technological change to maintain economic vitality. At the same time, demographic challenges such as a shrinking workforce and increased demand for health and social services underscore the urgency for effective policy responses.
Addressing the falling fertility rate, Chalmers rejected calls for a baby bonus, instead advocating for policies that support families’ choices. Measures highlighted include expanding paid parental leave, enhancing early childhood education, and providing superannuation contributions on paid parental leave. “We think that’s a better combination of policies to deal with this challenge,” he said.
Migration is identified as a critical factor in offsetting population decline and sustaining economic growth. The Treasurer described migration as “a force for good” in light of demographic trends.
In a speech accompanying the report’s release, Chalmers warned against complacency, suggesting that maintaining the status quo risks alienating younger generations and exacerbating political divisions. He pointed to increasing global instability and inequality as factors contributing to a fraying intergenerational social contract. “If people are unmoored economically, generationally they feel disconnected from and disregarded in our politics,” he said.
The 2026 Intergenerational Report, produced once every parliamentary term since 2002, serves to outline the long-term economic and demographic challenges facing Australia and to guide policy development in response to those forecasts.