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The surprising prediction for Australia in 40 years · The Morning Edition

0:04
S1: What will our future look like 40 years from now? How,
0:08
S1: amid a world growing in complexity, will we be faring
0:11
S1: economically and otherwise? Treasurer Jim Chalmers admits some of the
0:16
S1: findings of the government's latest intergenerational report are confronting.
0:21
S2: No previous Iugr has contended with challenges. This great. Or politics.
0:27
S2: This fraught. Or a future less certain.
0:31
S1: I'm Samantha Salinger, Morris, and you're listening to The Morning
0:34
S1: Edition from The Age and the Sydney Morning Herald. Today,
0:38
S1: senior economics writer Matt Wade on what bearing a declining
0:42
S1: population bigger than previously expected might have on our culture.
0:47
S1: It's September 22nd. Welcome, Matt, to the podcast.
0:54
S3: Thanks for having me.
0:55
S1: Okay, let's get into it. What is this report and
0:58
S1: why is it such a big deal?
1:00
S3: Well, every three years, the federal government puts out what
1:03
S3: it calls the intergenerational report. And it's basically imagine our
1:09
S3: economic guardians peering into the future like it's actually 40
1:13
S3: years into the future. And they kind of want to
1:16
S3: assess what big economic and social and even international trends
1:22
S3: are affecting kind of society, but especially our finances, the
1:26
S3: public finances. I think it's a useful exercise, notwithstanding the
1:30
S3: fact that it's forecasting so long into the future, because
1:33
S3: it does sort of like flag some of the problems
1:36
S3: that might be heading our way.
1:38
S1: Okay, well, that brings me to my next question, because
1:40
S1: the report's top line does flag for decades of pretty
1:44
S1: remarkable change. So walk us through this. How so? Like
1:48
S1: paint a picture of what life could look like.
1:51
S3: Well, it's interesting. It is saying that we're at a
1:53
S3: pretty significant moment. It's not as though I mean, I
1:56
S3: guess you could have said that every time, because this
1:58
S3: is the seventh in intergenerational report that's been put out
2:01
S3: by the federal government. And there's always big issues. But
2:04
S3: it does seem, at least according to this report, that
2:07
S3: we're at a pretty critical juncture. The first one is AI,
2:13
S3: and it actually points out these 4 or 5 issues,
2:15
S3: like AI is one and trying to work out what
2:19
S3: that might mean for Australia into the future. The second
2:22
S3: one is, I guess, what you'd call what they call
2:24
S3: geopolitical fragmentation. We talk about this a lot in in
2:29
S3: international politics, you know, the, the sort of like the
2:32
S3: changes that are happening in the global scene, changes to trade,
2:36
S3: the emergence of more tariffs and trade barriers and so forth.
2:41
S3: This apparent kind of sequence of conflicts we've had in
2:45
S3: the past few years. These are all kind of contributing
2:48
S3: to more uncertainty at that sort of geopolitical level, which
2:51
S3: I think is probably a very important factor for us
2:55
S3: as Australians. The third thing they talk about is the
3:01
S3: Renewable energy transition. Now, again, this has been underway for
3:06
S3: a while, but it's gathering pace. And they argue that
3:09
S3: it's becoming more and more important, um, as that transition continues.
3:14
S3: And it will definitely change a lot of things. You know,
3:17
S3: the way that we live in a way. Um, and it's,
3:21
S3: it links, of course, then to climate change and these
3:23
S3: other big issues that we face. The fourth big transition
3:28
S3: is what it calls it is the, the aging of
3:32
S3: the economy, so, or the aging of the population and
3:35
S3: the care economy. So it's interesting, this intergenerational report says
3:39
S3: that the aging of the population is perhaps going to
3:42
S3: be a bit faster than they expected three years ago,
3:45
S3: when they did their previous report. And one of the
3:47
S3: statistics it put in there, which I thought was very striking,
3:50
S3: was that the number of people aged 85 and over
3:54
S3: is going to treble between now and 2066, and the
3:58
S3: big reason for that is that our fertility rate is declining.
4:03
S3: That is the number of births that can be expected
4:06
S3: per woman. And so this report is saying that because
4:10
S3: that fertility rate is edging lower and in fact is
4:13
S3: at record lows now and predicted to fall further, that's
4:17
S3: going to have implications for the rate at which we
4:19
S3: get older. And of course that has massive implications for
4:23
S3: not just the way the economy works and society looks,
4:27
S3: but also, of course, for government budgets, especially the federal
4:31
S3: budget with costs like aged care and health and so forth.
4:37
S1: Now, there's a bunch of things I want to ask
4:38
S1: you about from what you've just said, Matt. But one
4:41
S1: other thing is, of course, touched on a massive issue,
4:44
S1: which is globally the case, of course. And this is
4:47
S1: aging populations, right? We know Japan's grappling with a rapidly
4:50
S1: aging population, as are other countries. And for the first time,
4:54
S1: this report predicts that the number of deaths in Australia
4:56
S1: is going to outweigh the number of births. So walk
5:00
S1: us through that a little bit because that really sounds
5:02
S1: like a consequential milestone. Is it?
5:05
S3: I think so, yeah. I mean, this is a global trend.
5:09
S3: And that is, you know, fertility rates have been falling
5:12
S3: across the world really for a number of decades. And
5:16
S3: it's actually gathering pace in the last decade as far
5:19
S3: as we can tell. And there's a lot of interest
5:21
S3: and concern about that by economists and demographers and so forth.
5:26
S3: In Australia, this is the seventh one of these intergenerational reports,
5:29
S3: and the others have all been predicting what's going on
5:32
S3: in 40 years. And we're still going to have more
5:35
S3: births than deaths. But this one, for the first time,
5:38
S3: has said at the end of this 40 year outlook,
5:41
S3: that's going to change and there's going to actually be
5:43
S3: more deaths than there are births now for Australia. That's
5:48
S3: that's a big it's going to be a big inflection point.
5:50
S3: You know, we haven't been there for decades and decades.
5:52
S3: That hasn't that hasn't been an issue for us. So
5:56
S3: that's going to be a massive shift. But by the
5:58
S3: same token, in Australia we have another dynamic at work
6:03
S3: and that is migration. So it's not as though our
6:06
S3: population will immediately start to decline, but it will mean that, um,
6:12
S3: you know, that natural increase the increase from, if you like,
6:15
S3: within our own population will start to change. And that
6:18
S3: that's predicted to happen in 40 years.
6:21
S1: But Australians, they're also predicted to be wealthier and healthier. Right?
6:24
S1: Aren't they moving into the 2060s.
6:27
S3: Yeah. No. Well that's right. I mean, one of one
6:29
S3: of the things often those of us like journos like
6:33
S3: you and me, we tend to focus on all the,
6:36
S3: the alarming negatives that are in a report like this.
6:39
S3: And there are plenty. But by the same token, there's
6:43
S3: actually some very good news in this report because our
6:46
S3: productivity um, is is forecast to improve. That means we
6:51
S3: will get better standards of living in future. Um, there's
6:54
S3: debate about how quick that productivity growth will be, but
6:58
S3: there's no doubt it will happen. And with that will
7:01
S3: come rising standards of living. The other thing I think
7:04
S3: is really important that's often forgotten in these reports is
7:08
S3: our life expectancy here in Australia continues to rise. This
7:12
S3: this report predicts that by 2066, the end of the
7:16
S3: forecast period, a woman in Australia can expect to live
7:20
S3: to nearly 90 89.5 years and men a bit lower.
7:26
S3: I think men are about 86 or so. It's a
7:28
S3: really striking finding. So these are indicators that because we
7:33
S3: have improving health technologies, because we have expectations, because that
7:40
S3: will help us and benefit us in future. The report
7:43
S3: does two things. It not only predicts that we will
7:46
S3: have longer lifespans, but it predicts that we'll have a
7:49
S3: longer period of healthy living. They're both really positive and
7:53
S3: findings that we should we should, should celebrate.
7:55
S1: I mean, that is really positive. It should be noted, though,
7:58
S1: that the life expectancies for First Nations men and women
8:01
S1: is much lower right than the rest of the population.
8:04
S1: So maybe just walk us through that.
8:06
S3: Yeah. I mean, that's absolutely true. Um, and that's the
8:10
S3: sad reality is that while those numbers like that, what
8:14
S3: I just said that a woman can expect to live
8:16
S3: to 89.5 by 2066, that's just the median across the
8:22
S3: whole population. Obviously, some people will live longer than that.
8:26
S3: I think we'll probably by that time be getting many
8:28
S3: people who are living over 100. However, the sad reality
8:32
S3: is that there are many groups, indigenous population as one,
8:35
S3: but they're not the only one for whom the life
8:38
S3: expectancies are much shorter. And it's actually disturbing reading to
8:43
S3: look at how how different the outcomes are depending on
8:48
S3: where you're born, depending on your postcode. And indeed, that's
8:52
S3: another issue that the intergenerational report does take up. And
8:56
S3: that is it says some of these big factors, these
8:59
S3: big forces that work in our society, in our economy,
9:03
S3: indeed in the global economy are perhaps putting more pressure
9:06
S3: on equity issues. So these things are sort of driving inequalities. Um,
9:13
S3: and indeed life expectancy is, is one of the outcome
9:15
S3: of that inequality story where we can have big contrasts
9:20
S3: depending on your social and economic circumstances.
9:24
S1: After the break.
9:25
S3: The assumptions that have been used by the government, by
9:28
S3: the treasurer to come up with these long term forecasts.
9:38
S1: And in terms of, you know, what, we've been speaking
9:40
S1: about Australia as being wealthier. You know, amidst that conversation,
9:43
S1: there are some pretty stark warnings right in this report
9:46
S1: about our debt and economy. What were they?
9:49
S3: Yeah. I mean, what perhaps the reason these reports started
9:53
S3: was to sort of give the government an idea of
9:57
S3: what its long term financial situation was going to be.
10:01
S3: And from the start, I remember actually reporting on the
10:04
S3: very first Intergenerational Report, which was released by Peter Costello.
10:08
S3: And one of the points that they were raising even
10:11
S3: back in 2002, when the first one came out, was
10:15
S3: this long term trend of pressure on the budget. And
10:19
S3: this is caused mostly by the ageing of the population. Now,
10:23
S3: if you can imagine that, you know, as the population ages,
10:27
S3: it means that more people move into those older years.
10:30
S3: They might stop working and therefore they become more dependent on, say,
10:34
S3: public spending or pensions or whatever. So they are receiving
10:39
S3: money out of the public purse and perhaps not paying
10:42
S3: as much in tax as they used to earlier in
10:44
S3: their life. And so that over time does become a
10:47
S3: challenge because you have a dwindling share of working age
10:52
S3: people and a rising share of older people who are more, uh,
10:57
S3: likely to cost the budget more. And so this intergenerational
11:01
S3: report continues the theme. It predicts that the federal budget
11:05
S3: is going to be persistently in deficit for the next
11:08
S3: 40 years. Now, there's a lot could go wrong or right.
11:12
S3: That mean those predictions aren't accurate or don't actually come
11:16
S3: to pass. But it does underscore the point that there are,
11:22
S3: you know, sort of these long term budget pressures that
11:25
S3: have been there for a while and they remain there.
11:28
S1: And in terms of how the government and Treasurer Jim Chalmers,
11:32
S1: you know, have been spinning this report on Monday, and
11:34
S1: critics like the opposition, you know, they would say that
11:37
S1: Chalmers in particular is painting an overly rosy picture. But
11:41
S1: let's just talk about this number of deaths outweighing the
11:44
S1: number of births in the future. Like wouldn't this make
11:46
S1: the case for increased migration and perhaps some measures around
11:50
S1: housing being pushed for by the government?
11:53
S3: Yeah. I think, um, like every report like this, um,
11:59
S3: critics can ask questions about the assumptions that have been
12:04
S3: used by the government, by the treasurer to come up
12:07
S3: with these long term forecasts. Perhaps one of the most
12:11
S3: controversial is the assumptions it makes about productivity growth. I
12:15
S3: mentioned that earlier, but it is a fundamental driver of
12:22
S3: especially living standards. Anyway, so Jim Chalmers has chosen a
12:27
S3: productivity growth assumption of 1.2%. That's growth over, you know,
12:32
S3: every year over time. That's a fair bit higher than
12:35
S3: it's been for a while, although it's a bit lower
12:38
S3: than it has been in the past 40 years. So
12:41
S3: there's a lot of debate about that, whether that's the
12:43
S3: right productivity assumption to use. Should it have been lower?
12:47
S3: There's people who are making the case that perhaps it
12:49
S3: should have. They've got a pretty good argument, I'd say.
12:52
S3: But by the same token, it's not as though the
12:54
S3: people at Treasury who have actually done this report don't
12:57
S3: have good reasons for why they've decided on this 1.2%.
13:01
S1: So overall, I guess help us here, Matt. How should
13:05
S1: we interpret all of this information, all these predictions? How
13:08
S1: should we feel about the future, Matt?
13:10
S3: Well, I think it's true. I like the I. One
13:13
S3: of the things I liked about the report is that it,
13:16
S3: if you like putting the foreground. These five big transitions AI,
13:22
S3: the aging of the population, um, and the fact that
13:25
S3: all those things together are definitely going to change the
13:27
S3: way our economy works and indeed our society works. I
13:31
S3: liked how it drew attention to those big themes, and
13:35
S3: some of them are pretty scary. Like, you know, the, the,
13:38
S3: the effect of AI, hopefully it will be beneficial. And
13:43
S3: there are good a lot of very credible predictions that
13:45
S3: it will improve our productivity, um, in such a way
13:49
S3: that does boost our standard of living. And that's a,
13:52
S3: that'll be a very good thing. So, you know, notwithstanding
13:55
S3: those warnings and the challenges, I think there are some
13:58
S3: very positive things in the intergenerational report about our rising lifespans. Um,
14:04
S3: rising standard of living. Um and look at Chalmers and
14:09
S3: indeed the report point out or they make the claim
14:13
S3: that Australia is well positioned relative to other countries to
14:17
S3: deal with some of these big challenges that are out there.
14:20
S3: And I think that's right. It often gets lost in
14:25
S3: debate and conversation about politics and economics. But we are very,
14:30
S3: very fortunate here in Australia. We're at the I like
14:34
S3: to put it we're at the at the vanguard of
14:36
S3: human development. Not many societies in the world have been
14:40
S3: able to enjoy such healthy, long lives as us. And
14:43
S3: I think that's one of the ultimate indicators of economic success.
14:48
S3: So if if you look at that indicator alone, things
14:52
S3: aren't going too badly.
14:54
S1: Well, thank you so much, Matt, for your time.
14:57
S3: Very welcome.
15:01
S1: In other news today, a new analysis has found that
15:04
S1: the vast majority of fuel arriving in Australia from a
15:07
S1: key Asian refinery originated in Russia, sparking fresh warnings that
15:12
S1: the Albanese government's efforts to lock in fuel supplies is
15:16
S1: inadvertently funding Vladimir Putin's war on Ukraine. Telstra says Australia
15:21
S1: has a natural advantage in the global race to build
15:24
S1: artificial intelligence data centres, and wants to see more of
15:28
S1: them built here. Despite growing community backlash and the prescription
15:32
S1: of 10,000 steps a day for good health means we
15:35
S1: tend to focus on quantity. But researchers from Monash University
15:39
S1: and the University of Sydney have found that the speed
15:42
S1: of those steps may matter just as much as the
15:44
S1: number of steps. You can read more at the age.com.au
15:49
S1: or smh.com.au. Today's episode was produced by Tammy Mills, and
15:56
S1: our podcasts are overseen by Lisa Muxworthy and Tom McKendrick.
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16:06
S1: for listening.