A view of a construction site for a Sydney Metro station, Australia July 22, 2021. REUTERS/Sam Holmes/File Photo Acquire License Rights
SYDNEY, Aug 24 (Reuters) – Australia faces decades of slower economic growth as its population ages, which will strain the budget and increase public debt, a government report predicted on Thursday, while taxation was significantly absent from proposed reforms .
Releasing the latest Generations Report, Treasurer Jim Chalmers said digital technology, climate change, renewable energy, aging and the need for more elderly care would shape the economy over the next 40 years.
Chalmers stressed that the Labor government’s immediate focus is to ease the country’s cost-of-living crisis without boosting inflation, citing relief on household electricity bills.
Moving forward, the challenge would be to manage the transition from hydrocarbons to renewable energy; from IT to AI; from a younger to an older population and from globalization to fragmentation, Chalmers said.
All of this had to be accomplished even as the economy slowed. The report predicted annual growth would average just 2.2% through 2063, up from 3.1% over the past 40 years.
Part of that slowdown would be due to climate change, with the report estimating that rising temperatures could cost between A$135 billion and A$423 billion in lost activity over the 40-year period.
Population growth is also likely to slow down, although at an average of 1.1% it would still be well above the world average. In 2063 there would be 40.5 million Australians, up from 26 million now, but they would also be older.
The number of Australians aged 65 and over has been projected to more than double and the number of Australians aged 85 and over to more than triple.
Previous reports have had a mixed track record in terms of demographics. The very first report from 2002 projected that by 2042 the population would be just over 25 million. In 2018, this milestone was actually reached.
Longer lifespans and a larger proportion of people in retirement will eat away at tax revenues and increase healthcare costs. By 2063, government spending is thus projected to increase by 3.8 percentage points of GDP, with aging accounting for 40 percent.
It’s one of the reasons why the government is forecasting a return to budget deficits after posting a rare surplus in the past fiscal year 2022/23.
Despite the pressure on the budget, the report made little mention of taxation. In a series of media interviews this week, Chalmers made it clear that sweeping tax reform is not on the agenda, although business leaders have called for a review of sales and corporate taxes.
($1 = 1.5444 Australian dollars)
Reporting by Wayne Cole, edited by Shri Navaratnam
Our standards: The Thomson Reuters Trust Principles.
Comments are closed.