Australia in 2066: Smaller, Older and Paying More for Health

Treasury's 2026 Intergenerational Report projects Australia will have 39.3 million people by 2066, 1.8 million fewer than projected in the 2023 report. Guardian

The document projects the outlook for the Australian economy and the budget to 2065-66. Treasury It is described as a fiscal and economic update that assesses the long-term sustainability of current government policies. Treasurer Jim Chalmers was expected to launch the report, billed as a snapshot of what Australia will look like 40 years from now. ABC

Population growth averages 0.9% a year over the next four decades, down from 1.4% a year over the past 40 years. Conversation

The practical point here is that the downgrade changes planning maths. School catchments, transport patronage and the tax base all move with headcount.

Natural increase, the gap between births and deaths, fades across the projection period. Deaths will outnumber births for the first time by the 2060s. The birth rate falls from 1.44 to 1.34 babies per female by 2066. Life expectancy rises to 89.5 years for women and 86.1 years for men by 2066. The number of people aged over 85 will triple by the 2060s.

The report says Australia's ageing population can be kept in check through skilled migration. It notes younger generations are working longer.

What this helps explain is participation and revenue. Participation rates, the share of people working or looking for work, hold up better when migrants are younger and when people retire later. The age structure is moderated, not reversed.

The report uses a long-term productivity growth forecast, output per hour worked, of 1.2%. It says artificial intelligence will have a greater impact than any other technological boom.

The sceptical note here is that the big technology claim sits beside a modest number. Treasury is pointing to transformation without counting extra revenue before it arrives.

The report projects health expenditure will rise from 4% of GDP, the size of the economy, in 2026 to 6.2% of GDP in 2066. It attributes one-third of the projected increase in health spending to ageing. The rest reflects prices, technology, expectations and use.

The detail worth keeping in mind is that split. Demography alone does not explain the bill.

The report projects the median superannuation balance for 65 to 69-year-olds will rise from $204,000 in 2024 to $450,000, not adjusted for inflation, within the next 10 years. Superannuation drawdowns, payments taken in retirement, will rise to almost 6% of GDP by 2066. Spending on the aged pension will fall from 2.3% to 1.8% of GDP by 2066.

In my view, that is the system maturing. Private balances carry more weight while the pension share shrinks.

The report finds that had home ownership rates stayed at 1981 levels, an additional 250,000 people aged 25 to 34 would now own their home with or without a mortgage. Treasury estimates 80 to 90% of investor housing lending since 2019 went toward buying existing housing stock rather than new dwellings. Household wealth will continue to rise into the 2060s but younger people will see smaller gains than previous generations.

The broader context here is that this report trims headcount and puts more weight on distribution. A smaller population eases some infrastructure pressure. It also means fewer workers to support each retiree and to fund health outlays that rise by more than two points of GDP. Skilled migration and longer working lives cushion the shift. The numbers say they do not erase it.

Looking at what this means for policy, the trade-offs are familiar but sharper. Health funding cannot be stabilised by demography policy alone if only a third of the growth is ageing-driven. Superannuation policy is doing heavy lifting as pension costs fall as a share of GDP while drawdowns climb. Housing policy looks central to wealth outcomes if most investor credit chases existing stock and ownership among the young keeps slipping. Productivity is the residual that decides whether those pressures feel manageable or grinding.

Stepping back, Canberra loves a 40-year forecast. It rarely has to wear one. The value is not the 2066 point estimate. It is the direction and the discipline. Fewer births. Longer lives. Slower growth. Higher health costs. Larger private retirement balances. Tighter housing access for the young. The politics will be argued year to year. The arithmetic will not move much.