The Australian Treasury's latest intergenerational report (IGR) provides evidence that reduced migration would harm the nation's economic prospects, contradicting growing anti-migration sentiment. The report shows that lower population growth would lead to decreased GDP per person and larger budget deficits over the next four decades.
Fertility rates and demographic shifts
Australia's fertility rate has been below the replacement level of 2.1 children per woman for 50 years. Currently at approximately 1.5, the IGR projects it will decline to 1.34 over the next 40 years. Treasury predicts that by the mid-2060s, deaths will outnumber births for the first time.
Treasurer Jim Chalmers has ruled out replicating former Liberal treasurer Peter Costello's baby bonus policy. "When it comes to fertility rates, I do not and will not give people free advice about these very personal decisions that they make about whether to start a family and when to start a family," Chalmers said on Monday.
Economic implications of an ageing population
The seventh IGR highlights that Australians are getting older on average, reducing the share of workers paying taxes to fund healthcare and aged care. Migration has helped address these structural challenges by contributing to population growth, slowing ageing, and strengthening the economy through skills, innovation, and international connections.
The IGR's baseline forecast assumes a long-run net overseas migration (Nom) of 235,000 people per year. Under this scenario, real GDP per person is projected to grow from $99,200 this financial year to $157,300 in 40 years.
Lower migration scenarios show negative impacts
Treasury economists also modeled a lower population scenario with Nom reduced by 50,000 annually and a fertility rate of 1.24 instead of 1.34. Under these assumptions, real GDP per person would be $400 lower in 2065-66 than under the baseline—a modest but negative outcome.
The dependency ratio, measuring people aged 65 and over per 100 working-age Australians, is projected to rise from 27.4 in 2025-26 to 40 by the mid-2060s under baseline assumptions. With lower migration, this ratio would reach 43.
Budgetary consequences
The projected underlying cash deficit with lower population growth would be 2.4% of GDP in 2065-66, compared to 1.8% under existing assumptions. Gross debt as a share of GDP would be nearly 10 percentage points higher, reaching 32.2%.
These figures underscore the challenges facing any government navigating migration politics while ensuring fiscal sustainability and economic growth.
