Source : the age
Long-range forecasts by the NSW government show the state’s population will rise by 3.4 million between now and 2066, economic output per person will increase by 35 per cent over that period and residents will live longer, healthier lives.
The five-yearly NSW Intergenerational Report, which gauges how demographic change will affect the state over the next 40 years, says population growth will slow from its current rate of 1.1 per cent a year on average to 0.8 per cent. That will result in NSW reaching 12 million people by 2066, up from 8.6 million.
Overseas migration will be the main driver of population growth. But the contribution of natural increase (births minus deaths) will decline – it will account for 10 per cent of annual population growth in 2065-66, compared with 26 per cent in 2024-25.
People in the state will have fewer children and have them later in life. The NSW fertility rate – the expected number of births per woman – is expected to drop to 1.35, far below the “replacement rate” of 2.1 needed for a stable population.
During the past 40 years, life expectancy at birth in NSW has climbed from 76 years to 83 years on average.
That trend will continue, albeit at a slower rate; the report predicts life expectancy to reach 89 years by 2066 (over 90 years for women).
The ageing of the population will exert increasing influence on society and economy. The share of people aged 65 will rise from 18 per cent today to 25 per cent by 2066.
Economic output per person in NSW, now about $97,000, is forecast to rise to $131,000 by 2066 (when measured in 2023-24 dollars).
The 2026-27 intergenerational report, prepared by NSW Treasury, says climate change will reshape economic activity and affect the way people live and work.
“More extreme weather and harsher environmental conditions will affect industries unevenly, requiring adaptation across sectors – from infrastructure and land use to health and productivity,” the report says.
Artificial intelligence is expected to boost productivity over the medium to long run, allowing companies “to generate higher profits, offer higher wages and reduce prices for customers”. It is also likely to “transform” labour markets.
“However, the magnitude and timing of these effects are uncertain,” the report says.
Labour productivity is forecast to grow by 0.8 per cent per year in NSW over the next 40 years, well below the rate forecast in previous intergenerational reports (1.2 per cent in 2021 and 1.5 per cent in 2016).
This downgrade follows more than a decade of sluggish productivity improvement in NSW and Australia.
The workforce will increase as a share of the population over the next 15 years because of longer working lives and stronger participation by women. But during the 2040s participation will begin to decline.
“By the 2040s, population ageing is likely to become the most important structural force affecting participation and average hours worked per person,” the report says.
Previous intergenerational reports have projected a long-term fiscal gap as government spending outstripped revenue due to the demands caused by a rapidly ageing population. But this report shows that fiscal gap has been almost entirely closed, narrowing from 2.6 per cent of gross state product in 2021-22 to 0.1 per cent.
Even so, the report warns government finances in NSW will still face “sustainability challenges”.
Gross state debt is projected to rise from about 19 per cent of gross state product (GSP) in 2024-25 to 90 per cent after 40 years. This compares with a long-term projection of gross debt reaching 133 per cent of GSP in the previous intergenerational report.
Treasurer Daniel Mookhey said the report showed the state’s outlook is better than it was five years ago.
“While our disciplined approach of paying down debt and responsibly managing expense growth is having an impact, this report shows there’s still more work to be done,” he said.
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