We don’t need more babies – and not just because we have migrants

The worry around falling fertility makes sense … sort of. Deaths in Australia are projected to outnumber births by the 2060s: the first time such a turning point has been forecast in the government’s intergenerational report (a document which has been released at least every five years for the past three decades laying out what the next 40 years might look like).

One forecast in the latest report is that the country’s population growth will slow. We will, however, offset some of the drop-off through migration. But neither more babies nor higher migration are things we should be focused on.

Like most attempts at crystal-balling, exact details and timelines laid out in the intergenerational report are unlikely to play out. But we are grappling with an ageing population – and several other countries around the world have already given us glimpses of what this might look like.

There are several things that understandably might scare us about having a bigger share of older Australians. First, there will be growing demands for health and aged care that come with older bodies and minds – and a very possible shortage of working age Australians able to supply this care by working as nurses and aged care workers.

It’s also a tricky thing for the nation’s budget. While superannuation should help Australians pay for some of this care when the time comes, there will inevitably be people who, for various reasons, need extra support.

Meeting the higher demand for these services also means the government will need to spend more money on building hospitals and care facilities. At the same time, a shrinking share of the population being working-age will likely leave the government struggling to rake in enough money (through things such as income tax) to pay for everything from schools to hospitals.

The trade-off, then, would be to either ramp up taxes or cut back government spending. There are probably sensible ways to do both of these things. But both come with substantial costs.

One of the “solutions” often discussed is population growth. While increasing migration is controversial, there are fewer people opposed to “natural” population growth: that is, population growth through Australians having babies (at a high enough rate, usually 2.1 children per woman, to exceed the number of deaths, and not including migration).

Australia’s fertility rate – the expected births per woman – last peaked in 2008 at 2.02, but by 2024, it had plunged to a record low of 1.48. And the latest intergenerational report predicts it will keep dropping, hitting 1.34 by 2066 – substantially down from the 1.62 births per woman forecast around this period in the 2023 intergenerational report.

Of course, we should be paying attention to our fertility rate – but not necessarily because it is the solution to our ageing population problem.

Yes, having more children could be a relatively “immediate” fix, giving us more young people to do caring jobs and help pay the taxes to fund the services we’ll need. But of course, the unfortunate (and, in other ways: fortunate) reality is that we all age.

This means that relying on population growth indefinitely is unrealistic. As the study of economics reminds us, resources (everything we consume and use) are scarce, meaning constantly striving for more people to live on Earth will put more pressure on existing resources.

Despite our leaps forward in technologies such as renewable energy generation and recycling, Australians (and, in fact, most populations around the world) still do more damage to the environment than we can offset. Adding more people without turning this trend around risks us causing more (potentially irreversible) damage to the environment, which in turn, will hurt us.

That doesn’t mean we shouldn’t think about Australia’s fertility rate and what it tells us. Part of the reason Australians are having fewer children, for example, is almost certainly that cost of living pressures have risen for younger Australians and that they have struggled to reach a point of financial security where they feel comfortable enough to have a child (or multiple children).

One of the problems we should be trying to solve is intergenerational equity: making sure younger Australians have a fair opportunity to generate their own wealth, get into home ownership if they want to (or be able to rent securely), and earn enough to support themselves (and potentially a family).

The government’s recent changes to the capital gains tax discount and negative gearing are good starting points. Despite the outcry they’ve generated about slowing (and falling) property prices, they have helped to bring home ownership slightly closer within reach for many who have been locked out as house prices climbed faster than their wages.

It has also helped to make our tax system more efficient. Rather than unnecessarily rewarding investment spending on existing housing (which does not add to the country’s productivity), it makes it relatively more attractive to put money into things (such as new housing, or investment in businesses) that help us get more out of our people.

With or without an ageing population (although a greying population does make it more crucial), and with or without a growing population, productivity growth is the thing we need to focus on. If we can increase our productivity – our ability to make and do more with the resources we have – we have a much better shot at continuing to be able to provide the services that will be in demand over the decades to come.

The intergenerational report is optimistic – probably overly so – about Australia’s economic position.

We do have a younger population compared to many similar countries, meaning we’re not staring down the barrel of the “ageing population” gun as inescapably as some other places such as Japan, which are already struggling heavily.

We’re also lucky in that we’ve taken up technologies that can harness renewable energy sources such as solar at a rate that is among the highest in the world. That means that energy shortages and cost surges might not hit us as hard, even as geopolitical conflict and dwindling fossil fuel reserves reduce the supply of traditional power sources.

But it’s probably overly optimistic for the government to assume, as it has done in its latest intergenerational report, that our yearly productivity growth will hit 1.2 per cent given it has been 0.8 per cent over the past two decades and even lower – 0.3 per cent – over the past 10 years.

Part of that optimism is based on the assumption that Australians will take up artificial intelligence and that it will noticeably boost our ability to do our work (therefore making us more productive).

It seems risky, though, to rely on it as a driver of productivity growth. While some businesses and workers report benefits from using AI in their work, there’s undoubtedly also people who are having to deal with problems such as the uptick in “AI slop” (nonsensical or low-quality content produced by AI) which, in some cases, is slowing down our work or reducing the quality of the goods and services we produce.

Some of these problems might improve over time as we figure out the best uses for AI and the technology itself improves. But we’re also, rightly, facing ethical dilemmas about how fast we should allow the technology to progress, with some of the leaders of the biggest AI companies calling for a freeze on its development.

The government has taken some important steps in boosting the country’s productivity, but it shouldn’t pat itself on the back with its latest intergenerational report.

We should also keep in mind that population growth – whether through migration or births – is not the problem (or the solution) we should be focused on. It’s a symptom of the challenges we face, and could well ease once we fix the real problem: productivity rather than reproductivity.

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