Smaller population from COVID: Frydenberg

Treasurer Josh Frydenberg is set to hand down the 2021 Intergenerational Report, warning the most enduring economic effect from the COVID-19 pandemic is likely to be a smaller population.

It means the economy will be smaller and Australia’s population will be older than it would have been, which will have a flow-on effect for future economic and fiscal outcomes.

But the treasurer will tell the Committee for Economic Development of Australia on Monday when he releases the five-yearly IGR that the coalition remains committed to funding essential services, while maintaining a sustainable tax burden.

Mr Frydenberg’s 2021 IGR will be the fifth in the series, which was first introduced by former Liberal treasurer Peter Costello to provide a 40-year outlook for the economy and what it might mean for the budget.

“The IGR does not give us a fixed picture of our fate,” Mr Frydenberg will say.

“Instead it provides us with guard rails to help guide for future government decisions. To set us up for tomorrow, as we tackle the challenges of today.”

Despite the challenges of the coronavirus, Mr Frydenberg expects economic growth to remain close to its historic performance – growing at an average annual pace of 1.5 per cent per person compared with 1.6 per cent over the past 40 years.

The latest IGR will forecast the population to grow to 38.8 million by 2060/61.

In the 2015 version under former Liberal treasurer Joe Hockey, it predicted a population of almost 40 million by 2054/55.

“This is the first time there has been a downward revision of the long-term population projections in an intergenerational report,” Mr Frydenberg says in extracts from his speech obtained by AAP.

“This means the economy will be smaller and Australia’s population will be older that it otherwise would have been, with flow-on implications for our economic and fiscal outcomes.”

By 2060/61, for each person aged over 65, there will be only 2.7 people working, compared with four people now and 6.6 people in 1981/82.

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“Ageing will remain a key source of pressure on our economy and on our budget over time,” Mr Frydenberg says.

“The taxes of each working-age person will need to support the essential services for a growing number of older Australians.”

A larger share of the population will be reliant on healthcare and aged care services.

“We are committed to funding these essential services while maintaining a sustainable tax burden,’ the treasurer says.