The Transitions Shaping Australia’s Future

Por Grant Wyeth — The Diplomat

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In its latest Intergenerational Report, the Australian Treasury lays out five transitions shaping the coming decades.

Every five years, the Australian Treasury releases its Intergenerational Report (IGR). The report is designed to look at the major structural changes and challenges the country faces to understand how Australia can best navigate the world in the coming decades. This week, the Treasury released its latest report. It argued that despite significant global changes, Australia remains relatively well placed to maintain its prosperity, but its major advantages cannot be taken for granted. 

The report highlighted five transitions that will shape the coming decades: artificial intelligence, geopolitical fragmentation, the energy transition, an aging population, and the transformation of Australia’s industrial base. A sixth, overarching, issue is a continuation of intergenerational inequality, with older generations remaining better off than younger Australians. This affects the major structural components of people’s lives – affordable housing, what taxation younger generations will have to pay, and their overall access to opportunity. 

The most significant new development to arise since the previous IGR is the ascent of AI. Here, the actual real world outcomes remain unknown, but the Treasury treats AI as a general-purpose technology capable of shifting the economic realities of a wide range of industries. AI is expected to automate some tasks while – hopefully – increasing demand for other forms of work, particularly where human judgment and relationships remain important. The question remains whether Australian businesses and institutions can adjust quickly enough to capture its potential gains, while being aware of and adaptable to any potential negative side effects. 

The other major change since the last report has been the acceleration of change in the international environment. Australia’s primary security partner, the United States, is seemingly working hard to dismantle the network of allies that has maintained relative peace and stability over the past 80 years, and it cannot be assumed that this tendency in Washington will subside when President Donald Trump leaves office. China’s massive military build-up and flouting of international law in the South China Sea remains a potential major disruptive force in the Indo-Pacific, while Russia’s invasion of Ukraine has shifted Europe’s focus away from opportunity in the Indo-Pacific to security at home. 

The 2026 IGR expects geopolitical fragmentation to make economic relationships increasingly dependent on security considerations, rather than efficiency alone. This creates significant tension for Australia as it has benefited from the openness of international trade, and in particular from trade with China. The report highlighted that Australia is a resource-rich country that has commodities that other countries need, but cannot simply rely on market demand to maintain this advantage in a world where other considerations need to be balanced. 

This demand and geopolitical complexity, however, is also affected by the energy transition . Australia may lose advantages in coal and LNG exports, but gain greater energy security through renewables – with Australia currently being heavily dependent on foreign oil. The energy transition requires an enormous investment in generation, storage, and transmission, as well as a shift in consumer habits toward electric vehicles (and the charging infrastructure to support this shift). The growth in data centers – an issue highly controversial in Australia at present – adds another layer of complexity to how the country will manage its energy requirements. 

Yet the potentially most consequential issue that the report addressed is Australia’s aging population. Lower fertility combined with an increasing public suspicion of immigration means that the country will grow more slowly, and by the 2060s deaths are projected to exceed births. Longer lives means that the number of Australians over 85 years old will triple in this period, creating increased demand for health care, aged care, and pensions, but with less working-age people to pay for these services.

These demographic changes feed directly into the report’s concerns about productivity. The Treasury projected that average annual economic growth will be about two-thirds of what it has been over the previous four decades. Therefore there is a need to focus on investment, greater skills acquisition, innovation, and regulatory reform to maintain the country’s prosperity. AI may help or hinder this.

It is here where intergenerational inequality becomes more pronounced. House prices have risen faster than incomes for the past two decades, substantially lowering rates of home ownership. Slower economic growth compounds this problem with less opportunity for younger people, less wage growth, and higher tax burdens to pay for government services for older generations. Each of those trends makes it more difficult to have more children. 

Taken together, the Intergenerational Report is less a forecast than an account of the pressures Australia will have to manage simultaneously. Australia starts from a strong position as a wealthy, well-educated country, but the test of these assets will be how the population adapts to change. 

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Every five years, the Australian Treasury releases its Intergenerational Report (IGR). The report is designed to look at the major structural changes and challenges the country faces to understand how Australia can best navigate the world in the coming decades. This week, the Treasury released its latest report. It argued that despite significant global changes, Australia remains relatively well placed to maintain its prosperity, but its major advantages cannot be taken for granted. 

The report highlighted five transitions that will shape the coming decades: artificial intelligence, geopolitical fragmentation, the energy transition, an aging population, and the transformation of Australia’s industrial base. A sixth, overarching, issue is a continuation of intergenerational inequality, with older generations remaining better off than younger Australians. This affects the major structural components of people’s lives – affordable housing, what taxation younger generations will have to pay, and their overall access to opportunity. 

The most significant new development to arise since the previous IGR is the ascent of AI. Here, the actual real world outcomes remain unknown, but the Treasury treats AI as a general-purpose technology capable of shifting the economic realities of a wide range of industries. AI is expected to automate some tasks while – hopefully – increasing demand for other forms of work, particularly where human judgment and relationships remain important. The question remains whether Australian businesses and institutions can adjust quickly enough to capture its potential gains, while being aware of and adaptable to any potential negative side effects. 

The other major change since the last report has been the acceleration of change in the international environment. Australia’s primary security partner, the United States, is seemingly working hard to dismantle the network of allies that has maintained relative peace and stability over the past 80 years, and it cannot be assumed that this tendency in Washington will subside when President Donald Trump leaves office. China’s massive military build-up and flouting of international law in the South China Sea remains a potential major disruptive force in the Indo-Pacific, while Russia’s invasion of Ukraine has shifted Europe’s focus away from opportunity in the Indo-Pacific to security at home. 

The 2026 IGR expects geopolitical fragmentation to make economic relationships increasingly dependent on security considerations, rather than efficiency alone. This creates significant tension for Australia as it has benefited from the openness of international trade, and in particular from trade with China. The report highlighted that Australia is a resource-rich country that has commodities that other countries need, but cannot simply rely on market demand to maintain this advantage in a world where other considerations need to be balanced. 

This demand and geopolitical complexity, however, is also affected by the energy transition . Australia may lose advantages in coal and LNG exports, but gain greater energy security through renewables – with Australia currently being heavily dependent on foreign oil. The energy transition requires an enormous investment in generation, storage, and transmission, as well as a shift in consumer habits toward electric vehicles (and the charging infrastructure to support this shift). The growth in data centers – an issue highly controversial in Australia at present – adds another layer of complexity to how the country will manage its energy requirements. 

Yet the potentially most consequential issue that the report addressed is Australia’s aging population. Lower fertility combined with an increasing public suspicion of immigration means that the country will grow more slowly, and by the 2060s deaths are projected to exceed births. Longer lives means that the number of Australians over 85 years old will triple in this period, creating increased demand for health care, aged care, and pensions, but with less working-age people to pay for these services.

These demographic changes feed directly into the report’s concerns about productivity. The Treasury projected that average annual economic growth will be about two-thirds of what it has been over the previous four decades. Therefore there is a need to focus on investment, greater skills acquisition, innovation, and regulatory reform to maintain the country’s prosperity. AI may help or hinder this.

It is here where intergenerational inequality becomes more pronounced. House prices have risen faster than incomes for the past two decades, substantially lowering rates of home ownership. Slower economic growth compounds this problem with less opportunity for younger people, less wage growth, and higher tax burdens to pay for government services for older generations. Each of those trends makes it more difficult to have more children. 

Taken together, the Intergenerational Report is less a forecast than an account of the pressures Australia will have to manage simultaneously. Australia starts from a strong position as a wealthy, well-educated country, but the test of these assets will be how the population adapts to change. 

Grant Wyeth is a Melbourne-based political analyst specializing in Australia and the Pacific, India and Canada.

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Fonte: The Diplomat