Australia will see deaths outnumber births for the first time in the 2060s, according to a major government report that paints a picture of a slower-growing, rapidly ageing nation navigating profound economic and technological change. The Intergenerational Report (IGR), released Monday by Treasurer Jim Chalmers, projects the country's population will reach 39.3 million by 2065–66, up from roughly 27.9 million today, but at a significantly reduced pace — an average annual growth rate of 0.9%, down from 1.4% over the past four decades.

Falling fertility rates are a central driver of the shift. Chalmers noted that fertility is declining "faster than anticipated even three years ago," with nearly half the decline attributed to fewer people having three or more children, and mothers having children later in life. For decades, Australia offset low birth rates through immigration, but with net overseas migration now slowing and set to stabilise at lower levels, the country is following a demographic trajectory already seen in Japan, Germany, Italy and South Korea — all nations where deaths already exceed births. The projected 2065 population is 1.8 million lower than forecast in the previous IGR, published in 2023.

The demographic shift carries significant economic consequences. The report projects real GDP per person to grow at around 1.2% annually over the next 40 years, compared with 1.5% over the previous four decades — a modest but meaningful reduction in the pace of improving living standards. A shrinking share of working-age Australians supporting a growing elderly population will put structural pressure on the budget, with government payments as a share of GDP expected to rise by 1.1 percentage points to 27.4% by the mid-2060s. The report projects an ongoing structural budget deficit that narrows over the next decade before widening again. The number of Australians over 85 is expected to triple by 2066, intensifying demand for healthcare and aged care — sectors that already rely heavily on migrant workers.

A key assumption underpinning the report's relatively optimistic economic projections is that productivity growth, which has been near zero in recent years, will recover to a historical average of 1.2% annually — a recovery Chalmers described as hinging largely on artificial intelligence. The report calls AI "the biggest economic transformation of our lifetime" and places it at the top of six major transitions shaping Australia's future, alongside geopolitical fragmentation, the energy transition, the care economy, industrial transformation, and intergenerational equity. Chalmers acknowledged the difficult balance between harnessing AI's economic potential and managing its risks.

The IGR, a five-yearly exercise first introduced in 2002, is designed to show how demographic trends affect the public finances over the long term. Australia's compulsory superannuation system — mandatory employer contributions to workers' retirement savings — is credited in the report with significantly cushioning the budgetary pressures seen in comparable economies. Nevertheless, Chalmers struck a cautious note about the broader social stakes, warning that economic dislocation and generational inequality risk fuelling political disillusionment. The report was released as Prime Minister Anthony Albanese, whose approval ratings have recently declined, faces pressure from right-wing populist forces over immigration policy — a reminder that the demographic and economic choices charted in the IGR carry immediate political weight.