The baby bust could dent Australia’s lucky streak

Highlighting the challenges early could allow the public and private sectors to make adjustments before drastic measures are needed

• By Daniel Moss / Bloomberg Opinion

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The past four decades have been good for Australia. It rode a resources boom, enjoyed the glory days of China’s expansion and benefitted from the dismantling of trade barriers.

Yet population growth, a vital contributor, has been downplayed, despite its crucial role in the record 29-year stretch without a recession until the COVID-19 pandemic. Now, the government is flagging a change in the demographic picture that could help Canberra get ahead of a shift that is buffeting every major economy. Low fertility — and restrained immigration — would be a big feature over the next 40 years, the government said in an intergenerational report that attempts to sketch the world of 2060. The studies, published every few years, act as a kind of road map for where the country is going.

The latest edition, released last week, touched on some familiar themes: greater competition among the world powers and the perils and promise of artificial intelligence. However, more importantly, it also paid heed to falling birthrates and the expanding ranks of elderly people.

To its credit, Canberra is trying to get ahead of this really big shift. The hope is that by highlighting the changes early, businesses, consumers and officials across a range of institutions can make adjustments before drastic measures have to be implemented. There is already much anxiety around the world about the transition to much smaller families or households with no children. The baby bust that is already challenging growth models in China, South Korea and Western Europe is coming for Australia.

If anything, the changes would be more pronounced than leaders are prepared to countenance. That has been the experience of countries that thought the real impact of the baby bust was still a way off — and are now scrambling to steady the slide in fertility. Behind the sober analysis in the Australian report lurks a confronting question: Does a world where deaths outnumber births and a tight rein on new arrivals mean the best of times would be left behind?

The economy would grow more slowly, as would the labor force. The drivers of expansion would evolve. The healthcare industry would continue its ascent and services would become more dominant.

Whatever the nation looks like mid-century, there would be fewer Australians than previously forecast to experience it — and those who are there would be more elderly. Caps on immigration would play a role, but lower fertility is the main feature of the demographic transition. The fertility rate would probably drop to 1.34 by 2065, less than the 1.62 that the prior paper in 2023 anticipated. (A reading of 2.1 in the total fertility rate, a measure of the average number of children a woman has during childbearing years, is widely regarded as the level at which society can replenish itself.)

Could these predictions be off? If so, they are likely to lowball the outlook. The UN caused waves a few years ago when it projected that the number of Earth’s inhabitants would peak in the 2080s and then retreat. A recent paper put it in the mid-2050s.

Australia is still a long way from panicking. Officials rightly point out that even at that diminished level, fertility is still comfortably above the levels of South Korea, Singapore, China and Taiwan. There is also no effort to curry support for steps such as creating a ministry for low birthrates, as Seoul proposed a few years ago. The report puts Australia’s population at about 39 million by the mid-2060s. It is about 28 million now.

The assessment chimes with the center-left Labor government’s political priorities. Canberra wants to reduce the number of new arrivals, which surged in the aftermath of the pandemic, without indulging in the anti-foreigner rhetoric that has propelled the far-right One Nation party in opinion polls. Earlier this month, the government announced it would clamp down on people who have overstayed visas, as well restrict most student-visa holders from bringing family members.

The passing of high rates of fertility is not to be mourned. Women are more educated and seek fulfilling careers — often without males stepping up at home. Children risk becoming prohibitively expensive. Research from the US National Bureau of Economic Research attributed at least part of the accelerated birth decline to the iPhone. Banning smartphones is not a practical approach. Nor can any single policy lever alter the course we are on.

Australia has managed wrenching transitions before. Paul Keating, Australia’s treasurer and prime minister in the 1980s and 1990s, embarked on a modernization that earlier leaders had thought out of reach. Current Treasurer Jim Chalmers, who was in charge of the report, wrote his doctoral thesis on Keating. Now that he has put the issue on the agenda, Chalmers should show conviction in tackling the challenges to an economy long considered the envy of the world.

Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor for economics at Bloomberg News. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.