What you need to know about the 2023 Intergenerational Report
The 2023 Intergenerational report has been handed down by the Government with climate change, aged care and the economy front of mind. Here's what you need to know.
In 40 years, the Australian economy is projected to be around two and a half times larger than it is today and workers can expect incomes 50% higher.
But with an ageing population, a rising demand for care services and the continuing challenge of climate change, there are plenty of obstacles to overcome.
The 2023 Intergenerational Report was handed down by Treasurer Jim Chalmers on Thursday, outlining projections for the outlook of the economy to 2062-63. The economy is projected to grow by an average of 2.2% per year in real terms over the next 40 years compared to 3.1% over the past 40 years.
According to the government, there are five major forces that "will influence the future path and structure of our economy" over the coming four decades: population ageing, technological and digital transformation, climate change and the net zero transformation, rising demand for aged care and support services, and geopolitical risk and fragmentation.
Here are some other takeaways:
Life expectancy
While Australia's population will grow more slowly over the next 40 years, in 2062-63 it is projected to reach 40.5 million. Life expectancy is projected to increase, from 81.3 years for men and 85.2 years for women in 2022-23, to 87 years for men and 89.5 years for women by 2062-63.
Australia's population is ageing as a result of longer life expectancies and low fertility rates. The median age is expected to increase to 43.1 years, from 38.5 years in 2022-23. By 2062-63, the number of people aged 65 and older will more than double. The number aged 85 and older will more than triple.
Superannuation
Spending on Age and Service Pensions is projected to fall from 2.3%, to 2.0% of GDP in 2062-63 despite the ageing population, with superannuation increasingly funding retirements.
However, the report says the cost of superannuation concessions will increase, driven by earnings on the larger superannuation balances held by Australians.
Home ownership
The report asserts recent trends in home ownership rates - home ownership fell by 18 percentage points from 1981 to 2021 for those aged between 30 and 34, for example - and mortgage debt, present a fiscal risk to Age Pension spending in the future and may impact patterns of how superannuation is drawn down.
Workforce participation
As the population ages over the next 40 years, the overall participation rate is projected to decline gradually, from 66.6% in 2022-23 to 63.8% by 2062-63, as older people tend to work less.
The gender gap in participation is expected to continue to narrow, with men's participation predicted to be seven percentage points higher than women in 2062-63.
Care sector
The report forecasts the care and support workforce would have to double in size to meet the demand of an ageing population by 2050.
"This presents strong future job opportunities, but is a workforce planning challenge," the report says.
"Appropriate skills and training pathways, plus wages that reflect the value of care work appropriately, will be critical to encourage workers to join and stay in the care and support sector."
Climate change
Climate change will have a significant impact on the economy but will also create growth opportunities, the report says. "With abundant wind, sun and open spaces Australia also has the potential to generate green energy more cheaply than many countries".
While global demand for Australian coal exports will decline, the report outlines how Australia has some of the world's largest reserves of minerals such as lithium, cobalt and rare earth elements to export.
"These, in combination with traditional strengths such as iron and aluminium are some of the essential ingredients in global emissions reduction as inputs for electric vehicles, batteries and renewable energy generation technologies," the report says.
Please click here to read the full report.
Sources:
https://www.moneymag.com.au/intergenerational-report-what-you-need-to-know
https://www.moneymag.com.au/seven-unofficial-indictors-that-could-help-make-sense-of-the-economy
https://www.moneymag.com.au/medicare-style-levy-wrong-way-fund-aged-care
https://www.moneymag.com.au/paul-clitheroe-savings
https://www.moneymag.com.au/generation-worried-cant-afford-retirement
