The Intergenerational Report (IGR) has projected that the growth rate of the economy over the next 40 years will be significantly lower than the last 40.
In introducing the report Treasurer Joe Hockey said:
“it is fantastic that Australians are living longer and healthier lives but we need to address these demographic changes. If we don’t do something, we risk reducing our available workforce, impacting negatively on growth and prosperity, and our income will come under increasing pressure.”
Released today, the report projected average economic growth of 2.8% per annum over the next 40 years with annual growth per person of 1.5%. This would see the annual income of the average Australian rise from $66,400 today to $117,300 by 2055.
This growth rate is expected to be slower than the 3.15% per annum, or 1.7% per person, achieved over the past 40 years due to an ageing population and gradual decline in the participation rate.
“To achieve this level of growth going forward, we must take steps to build jobs and opportunity. We also need to make choices today to prepare for the future”, the report said.
“We have a responsibility to plan and budget not only for today, but that tomorrow. But we are currently living beyond our means.”
The Australian government’s spending over $110 million per day more than it collects and his borrowing to meet the shortfall resulting in $40 million being spent per day on interest repayments.
However, the report said that if the government’s policies are fully implemented it projects the underlying ash balance to improve to a surplus of 1.4% of GDP in 2039 – 40, and then moderate to a surplus of around 0.5% of GDP in 2054 – 55. Net debt is projected to be fully paid off by around 2031 – 32.
The government is open to alternative measures to bring the budget back to surplus. The policies proposed by the government, if fully implemented, will improve Australia’s capacity to respond to the challenges and opportunities outlined in the Intergenerational Report.
Male life expectancy is projected to increase from 91.5 years today to 95.1 years in 2055. The number of Australians aged 65 and over is projected to more than double by 2055 compared with today.
The number of people aged between 15 and 64 for every person aged 65 and over has fallen from 7.3 people in 1975 to an estimated 4.5 people today. By 2055, this is projected to nearly halve again to 2.7 people.
— Mark Smith via the FINANCIAL STANDARD