The Australian Government has released the 2021 Intergenerational Report (IGR) which projects an outlook for the economy and the Australian Government’s budget over the next 40 years and provides the government’s assessment of the changing demography in Australia over the long term.
The report draws in parts on projections and research conducted by senior researchers in the ARC Centre of Excellence in Population Ageing Research (CEPAR), highlighting the importance and implications of population ageing.
The role of CEPAR researchers
Chief Investigator Warwick McKibbin, Professor of Public Policy in the ANU Crawford School of Public Policy, provided advice on climate policy responses on the macro-economy. The environment chapter of the IGR discusses the impacts of climate change and other environmental challenges that Australia is likely to face over the next 40 years, and how these will affect the economy and the budget.
The lifetime economic and fiscal impacts of different groups of permanent migrants have been estimated using Treasury’s OverLapping Generations model of the Australian economy (OLGA) which is a lifecycle dynamic general equilibrium model that has been calibrated to Australian data. Dr George Kudrna, CEPAR Senior Research Fellow at the UNSW Business School, and Associate Professor Chung Tran, a CEPAR Associate Investigator at ANU’s College of Business & Economics, have been involved in advising on the OLGA model development.
The projections of fertility rates, on which the report draws on, were made by Chief Investigator Peter McDonald, Professor of Demography at the University of Melbourne’s School of Population and Global Health.
Interpreting the intergenerational report
Professor Peter McDonald and CEPAR Associate Professor of Economic Demography Jeromey Temple have published an op-ed in the Australian Financial Review this week which provides an assessment of the IGR. They explain it is the first IGR to project a lower total population and an older population than the immediately previous report. According to the researchers, in its explanations (not in the projections themselves), the report understated the impact of immigration on future population by ignoring the fact that immigration has a large positive impact on natural increase because immigration augments the population of childbearing age.
Rafal Chomik, CEPAR Senior Research Fellow at UNSW Business School, has provided an analysis of the report findings in The Conversation and says the report findings are sobering, but the reality may be worse. In particular, the report was optimistic about the rebound to migration, about increases in labour force participation, and about average productivity growth, and if any one of these generous assumptions didn’t come to pass it would be more difficult than projected to balance the budget as the population ages.
CEPAR Director John Piggott, Scientia Professor of Economics at UNSW Sydney, has discussed the report findings on the ABC’s The Economists show and breaks down what they might mean for policies and public finances over the long term.
The intergenerational report was sobering, but the reality may be worse – by Rafal Chomik, The Conversation, 29 June 2021
IGR’s population forecasts rest on ‘brave’ migration assumptions – by Peter McDonald and Jeromey Temple, The Australian Financial Review, 29 June 2021
Australia 2061: older, smaller and more in debt – featuring John Piggott, ABC Radio National, 1 July 2021