Slower overall economic growth doesn’t have to be a bad thing.
P oliticians are often accused of short-termism, so Australia’s intergenerational report is unusual in projecting the big trends affecting the economy, and in particular the federal budget, over a 40-year horizon.
The former treasurer Peter Costello introduced the concept of the IGR, now in its seventh edition, shortly after the millennium. The idea was to garner support for budget reforms given the challenges that were coming with an ageing population and a shrinking number of workers needed to support them.
With each new IGR, the challenges have been mounting – not just for Australia, but for the whole world.
In one respect in particular, the 2026 IGR’s projections represent a watershed moment. Women are projected to continue to have fewer babies over the next 40 years such that population growth is expected to slow to just 0.9% over four decades, compared with 1.4% over the past four.
As the latest IGR lays out, economic growth is driven by the “three Ps” – population, participation and productivity. Of these three, it is only the latter two that deliver growth with better living standards.
To keep the culinary analogy, it is an empty sugar hit.
Participation and productivity, on the other hand, can deliver a bigger serve that is also a high-protein meal – one that has economic, social and environmental benefits, if well managed.
Better, then, that the government spends its scarce revenues and political capital on supporting technology uplift, rather than pointless policies of the “baby bonus” type.