Page 2 - 2023 Intergenerational Report Factsheet

Our changing industrial base Total government spending is projected to rise
by 3.8 percentage points of GDP over the next
The ageing population, adoption of new 40 years. Demographic ageing causes around
technologies, net zero transformation, growing 40 per cent of this increase.
demand for care and support services, and
geopolitical uncertainty are changing the Consistent with past IGRs, total income support
composition of our economy. and education payments are projected to
continue to grow in real terms per person but
The ageing population will reinforce the trend decline as a share of GDP as the population
towards a services-based economy, with the ages.
care and support sector and its workforce
potentially doubling over the next 40 years. Spending on age and service pensions is
projected to fall as a share of GDP despite the
Digitalisation will change how we work, raising ageing population, with superannuation
productivity, improving workplace safety and increasingly funding people’s retirement.
providing us with the agility we need to face the
challenges of the future. Changing revenue base
The net zero transformation will see global Consistent with past IGRs, tax as a share of the
demand for some exports decline, while economy is assumed to be constant over the
creating new markets and opportunities for our long run. But structural changes to the
industries. Critical minerals could become key economy will put pressure on the revenue base
exports for Australia as the world transitions to over the coming decades.
net zero. Australia is already the world’s largest Decarbonisation of the transport industry and
producer of lithium, supplying more than half of
changing consumer preferences are expected
all global production. Global demand for lithium to erode revenue from fuel and tobacco excise.
could be more than eight times higher in
Global demand for emissions-intensive
40 years time.
commodities, and reliance on them as a source
Climate change will have profound impacts on of revenue, is also likely to decline.
the economy and society. It will affect where The budget balance
and how Australians choose to live and work,
food and energy security and our environment. The Government is gradually rebuilding fiscal
The Government is taking strong action to buffers. The budget is in surplus for the first
respond to these challenges and position time in 15 years in 2022−23, and gross debt as
Australia to maximise opportunities from the a share of GDP is projected to decline over the
global net zero transformation. coming decades.

The budget in 40 years However, growing spending pressures are
projected to result in deficits remaining in
Recent actions by the Government have future years. After declining to 22.5 per cent of
improved the fiscal outlook and mean we are GDP in 2048–49, gross debt is projected to
better placed to sustain essential services and reach 32.1 per cent of GDP by 2062–63. This is
meet future challenges. But there are growing lower than projected in the 2021 IGR.
pressures on the budget. The Government has taken steps to improve
Long-term spending pressures the fiscal position and rebuild fiscal buffers,
through banking most tax revenue upgrades,
The five main spending pressures of health, finding savings and reprioritising spending, and
aged care, the National Disability Insurance making measured improvements to the tax
Scheme, defence, and debt interest payments system. These actions have supported a
are projected to rise from around one-third to stronger fiscal outlook compared to the 2021
around one-half of all government spending. IGR.

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