Migration will be crucial to Australia’s future economic and demographic viability, according to the federal Treasury’s recent ‘Intergenerational Report’.

The five-yearly report, which maps economic and social changes likely to emerge over four decades, predicts that population growth will rely more heavily on migration as fertility rates drop in line with those of many developed economies.

It says Australia faces rising national debt and a heavier tax burden for younger generations unless the current productivity crisis is fixed. And the report forecasts significant economic disruption as deaths start to outpace births.

The population aged 85 and over is projected to treble to 1.9 million by 2066, putting additional pressure on the budget, the report says.

By the 2060s, deaths are expected to exceed births in Australia, as they already do in Japan and Germany. Australia’s population growth is expected to slow from a nearly world-leading 1.5 per cent to about 0.9 per cent, much of which will continue to come from migration.

But the report says Australia is well-placed to face global turmoil over the coming decades because the renewable energy will make power cheaper, Australia is an attractive base for the AI data centre boom, and demographic issues are not as problematic as in other western countries.

It says Australia will remain an attractive destination for younger migrants bringing skills and investment with them.

Treasurer Jim Chalmers said that accelerating change was putting more pressure on people and eroding trust in the institutions of democracy.

“It’s exacerbating the strain felt by younger generations in particular. The division in politics now is not between those who accept this and those who don’t, but between those who prey on it and pick at it and politicise it and catastrophise it – and those who seek to alleviate it,” he said.

The report says living standards will still improve, but not as quickly as in the past.

Real Gross Domestic Product (GDP) on a per person basis will expand by about 1.2 per cent over the next 40 years, down from 1.5 per cent in the previous four decades, the report predicts.

This depends on productivity picking back up from virtually zero in recent years to the historical average of 1.2 per cent – an assumption that relies heavily on AI, or what Mr Chalmers described as “the biggest economic transformation of our lifetime”.

“The rise and adoption of AI is likely to support the achievement of Treasury’s long-term labour productivity growth assumption over time,” the report says.

“As a medium-sized economy, Australia’s productivity performance will depend on adopting innovation, supporting investment, developing skills and delivering regulatory reforms that improve the efficient operation of the economy,” it says.

The forecasts highlight the balancing act the government must deliver between protecting Australians from the worst aspects of the new technology and not hampering a technology that could potentially almost single-handedly drive future prosperity.

The report comes as the latest population data from the ABS shows Australia’s population growth and migration rate is slowing.

And it comes as the federal government has committed to reducing net overseas migration from about 300,000 to 225,000 people by 2028.

Australia’s population was 27,921,150 people on March 31, 2026, representing a quarterly growth of 130,887 people, or 0.5 per cent, and an annual growth of 392,700 people , or 1.4 per cent. The figure is down from 1.5 per cent in the year to March 2025.

Annual natural increase was 100,600 and net overseas migration was 292,100.

See the full population statistics: National, state and territory population, March 2026 | Australian Bureau of Statistics