Health, wealth and housing: here’s what forecasters think Australia will look like in 2066

1. How wealthy will we be?

The intergenerational report says household wealth will continue to rise into the 2060s, but younger people will experience “smaller gains” compared to previous generations.

Wages and living standards are expected to grow “sustainably”, driven by productivity growth. But several economists have said the government’s long term productivity forecast of 1.2% growth is a stretch, and lower productivity will affect overall wealth.

Households will have more super, and rely less on the aged pension in retirement. The report’s medium term expectation, i.e. within the next 10 or so years, shows the median superannuation balance will increase for 65 to 69-year-olds from $204,000 in 2024 to $450,000, not adjusted for inflation. The government projects superannuation drawdowns to rise to almost 6% of GDP by 2066, while spending on the aged pension will fall from 2.3% to 1.8% of GDP.

But an ageing population and a reliance on income tax will put more pressure on working-age Australians. The current inability of younger generations to crack into the housing market will have longer term impacts, which the government says it hopes to turn around through its tax changes.

2. Will there still be a housing crisis?

Home ownership is a key theme of the report, and while it does not predict the 2060s home ownership rate, it provides sober insight into today’s housing crisis.

Had home ownership rates remained at 1981 levels, an additional 250,000 people aged 25 to 34 would now own their own home, with or without a mortgage, according to the report.

Declining housing affordability has deepened intergenerational inequality, it notes, with tax concessions – such as negative gearing and the capital gains tax discount – contributing to the problem. Treasury estimates 80 to 90% of investor housing lending had gone towards buying existing housing stock rather than new dwellings since 2019.

3. There will be more people dying than being born

For the first time, deaths are projected to outnumber births by the 2060s, with the number of people aged over 85 tripling, and life expectancy increasing due to better health care and lifestyles. Life expectancies will increase to 89.5 years for women and 86.1 for men.

The birthrate is expected to decline considerably from 1.44 babies per female to 1.34 by 2066. The report estimates the population to be 39.3 million, 1.8 million people fewer than projected in the 2023 report.

The report expects more women and older people to be working but the ageing population will reduce the overall share of people in the workforce and the number of taxpayers, putting pressure on future budgets.

Despite this, Australia is well placed, the report says: “The working-age population is projected to continue growing, supported by ongoing migration, while many Organisation for Economic Cooperation and Development (OECD) countries are projected to experience declines”.

The changes will also require a drastic increase in health spending, with health expenditure expected to rise from 4% of GDP in 2026 to 6.2% in 2066. One-third of the projected increase is linked to ageing.

4. AI will create productivity gains

The economic and social implications of artificial intelligence are “profound”, and will have a greater impact than any other technological boom, the report says. However, its ultimate impact depend on how it develops and how broadly it is adopted. There are also concerns AI will fuel misinformation and cybersecurity risks.

“The challenge for Australia is to harness and share these benefits widely whilst mitigating its potential to generate societal harms such as misinformation, scams and malicious cyber operations,” the report says.

There’s no evidence yet of AI taking future jobs, but that it will increase productivity by making some tasks automated.

Australia will be in a good position to “capture value” from AI, due to Australia’s location, land, and energy and water resources.

5. Effects of climate crisis 'uncertain'

Australia is well placed to meet the global energy transition, with vast renewables resources, but the broader effects of climate change 40 years from now are “highly uncertain”.

Australia’s uptake of rooftop solar and batteries is the highest rate in the world and expected to increase, with the cost of solar photovoltaic (PV) modules and battery energy storage systems falling by 80% since 2015.

But the report says global heating will have the greatest impact on major cities with lower elevation, while hotter temperatures could reduce productivity of workers, affect agricultural crop yields and damage tourism.

It warns the increasing severity and changing frequency of climate-related events “will require stronger risk management approaches” from the government.

By 2066, Treasury modelling shows heat stress could reduce crop yields by 3.6% under a 3C+ scenario, or 1.2% under the Paris-aligned scenario.