The 2023 Intergenerational Report
The 2023 Intergenerational Report (IGR) offers a unique window into the future of Australian society, projecting what our nation may look like in four decades and the challenges we must address.
The report identifies several significant factors that will shape Australia’s future:
1. Ageing Population: Australia is rapidly ageing, with the number of individuals aged 65 and older expected to more than double and those aged 85 and older to more than triple. Life expectancy is also on the rise, posing challenges for the younger generation.
The increasing proportion of elderly citizens will have a significant impact on our tax system, with personal taxes likely to rise as workers bear a growing tax burden. The report labels this trend as an “intergenerational tragedy” and calls for wholesale tax reform to prevent it from negatively affecting the economy.
2. Services and Funding: The demographic shift toward an older population will lead to a surge in demand for care and support services. This increased demand is expected to strain the Federal Budget, potentially leading to deficits if current policies remain unchanged.
As government resources become constrained, individuals will need to take greater responsibility for funding their old age, potentially necessitating longer working years or alternative income-generation strategies.
3. Superannuation: Australia’s superannuation system is set to become a cornerstone of retirement planning for most citizens. As our superannuation system matures, government support is expected to decline as a percentage of GDP.
However, the report warns that the cost of superannuation concessions will rise, particularly for those with large super balances, and suggests the possibility of additional taxes on future earnings. Managing superannuation will be a priority for the government to maximise retirement savings and reduce reliance on government support.
4. Growth of Services: Similar to other advanced economies, Australia’s economic base is shifting from goods production to services, with 90% of jobs now in the service sector. With an ageing population, the demand for healthcare and care services is set to soar.
The government’s most significant spending pressures will be in healthcare, aged care, the National Disability Insurance Scheme (NDIS), defence and interest payments on government debt.
5. Role of Technology: The report acknowledges the unpredictable pace of technological change. Technological advancements have significantly boosted labour productivity in the past, but this growth has slowed since the mid-2000s.
The role of artificial intelligence and technology accessibility will be pivotal in determining how technology shapes our future, potentially polarising society between those who benefit from technological change and those who do not.
6. Climate Change Transformation: Climate change poses dual challenges for Australia—rising costs associated with temperature increases and opportunities in the shift to renewable energy. Rising temperatures are expected to result in more frequent and severe climate disasters, affecting agriculture, tourism, outdoor industries, and more.
On the positive side, Australia could benefit from emerging “green” industries, such as hydrogen and clean energy exports, providing new avenues for economic growth while reducing emissions.
7. Geopolitical Risks: Australia’s reliance on open international markets exposes it to external threats, including trade disputes and military conflicts. While the IGR cannot predict these events, it underscores the importance of investing in national security, including cybersecurity, ensuring access to international markets, and strengthening regional partnerships to minimise supply chain vulnerabilities.
The 2023 Intergenerational Report is the sixth report and projects the outlook of the economy and the Australian Government’s budget to 2062-63. Its analysis and projections of the key drivers of economic growth will help inform and improve public policy settings to better position Australia for the next 40 years. Read or download a copy from https://treasury.gov.au/publication/2023-intergenerational-report.