A new report released by Federal Treasurer Wayne Swan has suggested Australia’s economic growth will fall from an average of 3% to an average of 2.7% over the next 40 years as the ageing of the population slashes the number of workers.
The report released this afternoon by Swan, says the labour force participation rate for people aged 15 years and over is projected to fall to less than 61% by 2049–50, compared with 65% today.
This fall will be driven by a steady decline in the labour force participation rate (for those aged 15 or over) from the rate of 65% over the last 40 years to 61% over the next 40.
The report also suggests the ageing of the population will put massive pressures on government finances and health care costs skyrocket.
“Ageing and health pressures are projected to result in an increase in total government spending from 22.4% of GDP in 2015–16 to 27.1% of GDP by 2049–50,” the report states.
Governments will be forced to borrow to cover a shortfall of spending over tax revenue, with net debt emerging as a problem in the 2040s and growing to around 30% of GDP by 2049-50.
The Government has used the report as a way to bolster its calls for improved productivity.
“With the ageing of the population, and a continuation of the productivity trends of the past 30 years, growth in real GDP per person is projected to slow to 1.5% per annum. If productivity growth were increased to 2% per annum, the economy would be over 15% larger in 2049–50, GDP per person would be around $16,000 higher and fiscal pressures would be reduced as a result of an enhanced capacity to fund government services.”
The Government says improving workforce participation, skills and infrastructure are the keys to growing the economy and ensuring productivity improves.
The full report can be seen here.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
