A view of the construction site of the Sydney metro station, Australia, July 22, 2021.Reuters/Sam Holmes/File Photo Acquisition of license rights
SYDNEY, Aug 24 (Reuters) – Australia faces decades of slowing economic growth as its population ages, putting pressure on budgets and increasing national debt, the government said on Thursday. As expected in the report, the proposed reforms do not specifically include the tax system.
Treasurer Jim Chalmers, who released the latest intergenerational report, said digital technology, climate change, renewable energy, an aging population and the need for more elderly care will shape the economy over the next 40 years.
Chalmers stressed that the immediate focus of the Labor government is to ease the domestic cost of living crisis without exacerbating inflation, citing lower household electricity bills.
A further challenge is managing the transition from hydrocarbons to renewable energy. From IT to AI. From young to old, from globalization to fragmentation, Mr. Chalmers.
All of this had to be achieved even in a slowing economy. The report projected annual growth to average just 2.2% through 2063, down from 3.1% over the past 40 years.
Part of this slowdown is due to climate change, with the report estimating that rising temperatures could result in a loss of A$135 billion ($87.41 billion) to A$423 billion in activity over 40 years. there is
Population growth was also expected to slow, but at an average of 1.1% it would still be well above the global average. There will be 40.5 million Australians by 2063, up from 26 million today, but they will also age.
The number of Australians aged 65 and over is expected to more than double and the number of Australians aged 85 and over to more than triple.
Past reports have had mixed results on demographics. In the first report in 2002, the population was projected to grow to just over 25 million by 2042. In fact, we reached that milestone in 2018.
Longer life expectancies and higher retirement rates will squeeze tax revenues and increase health care costs. Government spending was therefore projected to increase by 3.8 percentage points of GDP by 2063, with aging accounting for 40 percent of that.
This is one reason why the government, which just posted a rare surplus in fiscal year 2022/23, is forecasting a return to deficits.
Despite pressure on the budget, taxes are barely mentioned in the report. In a series of media interviews this week, Mr. Chalmers made it clear that large-scale tax reform was not on the agenda, despite calls from business leaders to overhaul sales and corporate taxes.
(1 dollar = 1.5444 Australian dollar)
Reporting by Wayne Cole, Editing by Shri Navaratnam
Our criteria: Thomson Reuters Trust Principles.