Bye bye, babies: A nation living into its 90s is ageing faster than expected

Australia’s population is ageing more quickly than previously expected, driven by a rapid decline in the number of births per woman.

The federal government’s seventh intergenerational report, released by Treasurer Jim Chalmers on Monday, forecasts Australia’s median age, now 38.5 years, to reach 45 years by 2066 – nearly two years older than the previous intergenerational report forecast three years ago.

Over the next four decades, the population aged between 0 and 20 is projected to grow by a little over 10 per cent, but the population aged 65 and over will balloon by 87 per cent.

The number of Australians aged 85 and over is projected to reach 1.9 million, up from 625,000 today, with most of this growth occurring in the 2030s and 2040s.

The intergenerational report says lower fertility has “accelerated” the ageing of the population.

The nation’s fertility rate – the expected births per woman – last peaked in 2008 at 2.02, but it has since fallen by 25 per cent to a record low of 1.48 in 2024.

The intergenerational report predicts that will drop to just 1.34 by 2066, well down on the 1.62 births per woman forecast in the 2023 intergenerational report. (The 2015 report assumed a fertility rate of 1.9.)

A fertility rate of 2.1 is needed for the population to be replaced from one generation to the next without migration.

The lower forecast for fertility has a considerable impact on the rate at which the population ages.

“Lower fertility means fewer children, a proportionally smaller future workforce and a larger proportion of older Australians,” the report said.

The fertility slump is not unique to Australia – many nations in Europe and parts of Asia have had far steeper declines, triggering warnings of a “demographic winter” in some.

The combination of an ageing community and a relative decline in births will dramatically shift Australia’s population dynamics. By the 2060s, deaths are projected to outnumber births – at that point, migration will become the only driver of population growth.

That ageing trend means the share of Australian workers in their prime earning years is shrinking – now there are about 28 people aged over 65 for every 100 working-age Australians, but that will rise to 39 people by 2062-63.

That will reinforce a broader shift in Australia’s industrial base towards services by increasing the demand for household health services and aged care.

Over time, that will affect what many Australians do for work.

Healthcare and social assistance is already the nation’s largest employer with 2.4 million workers, or about 16 per cent of the workforce. Demographic change will ensure that a growing share of Australian workers find employment in that fastest-growing sector over the coming decade.

Population ageing will also pile pressure on the federal budget because older people typically use more healthcare and aged care services, which are costly to provide.

“Health will continue to be the single largest budget pressure,” the report said.

Rising workforce participation by older people will offset the budgetary impact of ageing to some extent. The share of Australians aged 65 years and over in the workforce has risen from about 6 per cent to 16 per cent since the first intergenerational report was published in 2002.

Australia’s maturing superannuation system is also supporting higher retirement incomes and easing pressure on the budget.

“By the mid-2040s, most retirees will have benefited from compulsory superannuation over a significant proportion of their working lives, making superannuation the primary source of retirement income for many retirees and reducing reliance on the age pension,” the report said.

Superannuation drawdowns will reach a huge 6 per cent of gross domestic product by 2065-66, the report predicts.

Another factor driving the ageing of Australia’s population is its longevity.

Australians already have one of the longest life expectancies in the world. But the intergenerational report predicts they will get even longer – by 2066, life expectancy will reach 89.5 years for women and 86.1 years for men due to improvements in healthcare and medical innovation.

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