Smaller population from COVID: Frydenberg

Josh Frydenberg says the major challenge facing Australia is an ageing population as the economy feels the long-term effects of the COVID-19 pandemic.

The treasurer will hand down the 2021 Intergenerational Report on Monday, a 40-year outlook for the economy and what it means for the budget.

It will show the budget will remain in deficit for the next four decades, ongoing large government debt and a smaller population than earlier envisaged.

“We do have a major challenge ahead of us, namely the ageing of the population,’ Mr Frydenberg told ABC radio.

But he pledged to fully fund the NDIS, while noting health and education spending was also at record highs.

“That’s not to say Australia doesn’t continue to make important reforms to grow our economy. That’s the key for our prosperity and that’s underlined in this report,” he said.

“We want to continue to pursue reforms that encourage more investment by business, improve the provision of skills across the country and also ensure a more flexible workplaces.”

He wants to revisit some of the government’s industrial relations reforms rejected by parliament.

The intergenerational report will be the fifth in the series, which was first introduced by former Liberal treasurer Peter Costello in 2002.

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

“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.”

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

Australia’s population is expected to grow to 38.8 million by 2060/61.

In the last intergenerational report released by Joe Hockey in 2015, the population was projected to hit almost 40 million by 2054/55.

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“This is the first time there has been a downward revision of the long-term population projections in an intergenerational report,” Mr Frydenberg said.

“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.