Australia’s fertility rate has just fallen to a record low, underscoring a seismic demographic shift. This analysis examines the historical trends in fertility since 1970, the macro-economic consequences of a shrinking birth rate on GDP growth, aging and the dependency ratio, housing demand, superannuation sustainability, and the tax base. We also explore policy responses – both Australia’s own and international comparisons (Japan, South Korea, Germany, Nordic nations) – and the trade-offs policymakers face between boosting population via immigration, increasing workforce participation (especially female labor), or incentivising families through bonuses and childcare support. Finally, we consider forecasts and modeling from the ABS, Treasury’s Intergenerational Report, the RBA and OECD, and discuss what these trends mean for young Australians planning for retirement or real estate investment.
1. Historical Fertility Trends in Australia Since 1970
Australia experienced a fertility boom in the post-war decades, with the total fertility rate (TFR) peaking at 3.55 in 1961. By 1970 the TFR was around 2.9, but the “baby bust” of the 1970s saw birth rates fall sharply. The introduction of the contraceptive pill, rising female workforce participation, and later marriage ages all contributed to a rapid decline in the 1970s. Australia’s TFR fell below the replacement rate of 2.1 in 1976 and has remained below replacement ever since. In the 1980s and 1990s, fertility stabilised around 1.8–1.9 children per woman. The early 2000s brought a brief uptick – TFR nearly reached 2.0 in 2007–2008 – helped in part by economic prosperity and pro-natal policies like the “Baby Bonus” cash payments introduced in 2004. However, this bump proved temporary. After the Global Financial Crisis, the decline resumed: by 2019 TFR was 1.66 and it plunged further during the pandemic (1.59 in 2020).
In 2024, Australia’s TFR hit 1.48 births per woman – the lowest on record. Births have been trending downward even as women delay motherhood – the median age of mothers is now 32.1 (and 33.9 for fathers). For context, the fertility rate was 1.80 a decade earlier in 2014. This sustained decline means that Australians today are having roughly half as many children as in the early 1960s. The long-term trend reflects major social shifts: women pursuing higher education and careers, improved contraception giving more control over family size, and changing norms around if and when to have children. In short, Australia has transitioned from the big families of the Baby Boom era to an era of small families and often delayed childbearing – a trend common across advanced economies.
2. Economic Consequences of Falling Fertility Rates
Demographers often warn that “demographics is destiny”, and Australia’s new baby bust has far-reaching economic implications. A persistently low fertility rate means slower population growth absent high immigration. Fewer births today translate into a smaller workforce 20 years down the line, directly affecting the economy’s growth potential. The 3Ps framework – population, participation, productivity – used in Treasury forecasts highlights that population growth has been a key driver of Australia’s GDP growth historically. With a shrinking native-born cohort of young people, headline GDP growth will likely moderate, putting more onus on productivity gains to drive living standards. Indeed, the Treasury’s 2023 Intergenerational Report projects annual real GDP per capita growth slowing from about 2.1% over the past 40 years to around 1.5–1.6% over the next 40 years. Over decades, that seemingly small difference compounds to a ~20% lower level of output (and income) per person than would have occurred without the demographic drag. In other words, a grayer, slower-growing Australia implies a significant opportunity cost to national prosperity if not offset.
Population aging is the flip side of low fertility. When fewer children are born, the population’s age structure skews older (especially as life expectancy rises). Australia’s median age has already risen to around 38.5 (up by 8 years since the early 1980s), and is projected to exceed 43 years by 2063. The share of seniors explodes: by 2063 almost 25% of Australians will be 65+ (up from ~17% today), and the cohort aged 85+ will triple in size. This drives up the old-age dependency ratio – the proportion of elderly to working-age adults. In 2022, Australia’s old-age dependency was about 26%, but by 2060 it could exceed 40%. Put differently, where there were roughly 4 working-age people per retiree in 2000, there may be barely 2 workers per retiree by 2050. A shrinking tax base supporting a growing pool of pensioners and health-care recipients creates fiscal strains. Government revenues (especially income tax and GST) grow more slowly when the workforce stagnates, even as age-related spending (healthcare, aged care, pensions) soars. It is no surprise that the Intergenerational Report foresees budget deficits every year to 2063 on current settings – essentially, the costs of aging (and other forces like healthcare advances) outpace the capacity of a smaller workforce to pay for them.
An older population with low growth also has implications for interest rates and investment. Research by the RBA finds that aging societies tend to accumulate more savings relative to investment, contributing to lower equilibrium (or “neutral”) interest rates. In Australia’s case, modeling suggests demographic changes from 1950 to 2050 have already lowered the neutral interest rate by several percentage points. This environment of structurally lower interest rates can inflate asset values but also signals lower returns on capital, making it harder for savers to build wealth. At the same time, labor shortages may become more common as large cohorts retire – unless counteracted by immigration or higher participation – putting upward pressure on wages and inflation in certain sectors (notably healthcare). The economy will need to adapt to a “care economy” footing: with a doubling of demand for aged care and health services by 2050, many new jobs will be in these sectors, even as industries like education and childcare face stagnation due to fewer children.
Housing and real estate form another critical piece of the puzzle. Australia’s property market has long been buoyed by steady population growth (through both natural increase and migration). What happens when natural increase dwindles? The ABS projects that by the mid-2050s, deaths will outnumber births in Australia. At that point, net overseas migration would be the only source of population growth. If immigration were not maintained at high levels, overall population could plateau or decline, removing a fundamental underpinning of housing demand. In a scenario of low migration and low fertility, one could envision Japan-style housing market dynamics where an excess of dwellings emerges in some regions as the population contracts. Even with continued immigration, an aging population means fewer young families forming households in future decades. Housing demand growth may therefore shift downward in the long term compared to the breakneck increases of the past.
However, it’s important to note some nuances. In the near to medium term, Australia is still experiencing rapid population growth via migration, which is offsetting low birth rates. In fact, the post-pandemic immigration surge in 2022–2024 led to record net migration gains that far outpaced new housing construction, exacerbating the housing supply crunch. This highlights a key trade-off: to support economic growth, Australia leans on immigration, but doing so without addressing housing supply pushes property prices and rents higher, worsening affordability for young Australians. Over time, if high immigration continues, it can partially compensate for fewer births in sustaining housing demand (especially in major cities). But immigrants, too, eventually age and tend to have slightly lower fertility rates on average than locally born Australians, meaning migration is not a one-time fix but an ongoing necessity to stabilize demographics.
Another subtle factor is household size. With smaller families and more people remaining single or child-free, average household size declines, which can actually increase the number of dwellings needed per 1,000 people. More one- or two-person households (vs. four- or five-person households in the baby boom era) mean a given population requires more housing units. This could sustain demand for apartments or smaller homes even as total population growth slows. Meanwhile, the aging of the large Baby Boomer generation may boost housing turnover as older Australians downsize or move into retirement living, potentially freeing up larger homes for younger families – but also concentrating senior housing demand in other segments. Overall, property markets may see a rebalancing: the relentless price growth seen in past decades might temper as the demographic tailwinds weaken, but particular segments (inner-city apartments, retirement communities, etc.) could see new patterns of demand. Investors and homebuyers would be wise to monitor these shifts rather than assume the past is prologue.
Superannuation and retirement incomes are also directly impacted by fertility and aging trends. Australia’s compulsory superannuation system means most workers accumulate retirement savings over their careers, reducing reliance on the public Age Pension. As more of the population enters retirement and begins drawing down super, there could be net capital outflows from super funds (more money paid out to retirees than contributions coming in from workers) unless contributions from the smaller working cohort are increased. The good news is that Australia’s retirement income system is relatively sustainable so far – the Intergenerational Report projects the combined cost of Age Pension and super tax concessions will remain roughly stable at just over 4% of GDP for coming decades. This stability is largely thanks to superannuation balances reducing pension reliance, demonstrating the foresight of the super system. However, if fewer young workers are supporting more retirees, there may be pressure to adjust policy levers: for example, raising the superannuation guarantee rate further, tightening pension means tests, or encouraging longer working lives to lessen the strain. A shrinking workforce could also mean labor shortages in certain industries and upward pressure on wages, which in turn affects super contributions and ultimately retirement outcomes.
On the tax base, falling fertility creates a smaller pipeline of future taxpayers. Without policy changes, a higher tax burden may fall on a relatively narrower working-age population to fund public services. We may see debates about tax reform intensify – whether through higher GST, new wealth or inheritance taxes (as trillions in assets pass from the baby boomers to fewer heirs), or innovative funding of health and aged care (such as insurance schemes or co-contributions). Simply put, fewer kids today equals fewer taxpayers tomorrow, so maintaining Australia’s social contract in areas like healthcare and pensions will require either higher productivity, higher labor force participation, or more immigration (or all three). Governments that ignore these demographic realities risk unsustainable debt or difficult cuts to services in the future.
In summary, Australia’s record-low fertility rate sets off a chain reaction of economic challenges: structurally lower GDP growth, a rapidly aging population with a higher dependency ratio, potential changes in housing market dynamics, and fiscal pressures on pensions, healthcare, and the tax base. These are not insurmountable challenges – but they do require proactive policy responses to mitigate the downsides.
3. Policy Responses: Australia’s Approach and International Comparisons
Faced with a fertility slump, what can a country do? Broadly, policy responses fall into a few categories: encourage people to have more children (through incentives or support), bolster the workforce through immigration or higher participation, or simply adapt to an older population (e.g. via pension reforms). Australia has experimented with several fertility-related policies over the years. Perhaps the most famous was the mid-2000s “Baby Bonus”, a cash payment to new parents (initially around $3,000, later $5,000) intended to offset the costs of a newborn. The Baby Bonus was credited with a short-lived bump in births around 2004–2008, as reflected in the temporarily higher TFR in those years. However, detailed analysis has found little evidence of a lasting impact on completed fertility – many families may have just timed births to coincide with the payment or had children slightly earlier, rather than having more children than they otherwise would. In fact, an Australian National University study using HILDA survey data concluded there was no convincing causal link between the introduction of policies like the Baby Bonus or Paid Parental Leave and a sustained increase in birth rates. This aligns with international experience: one-off financial incentives tend to bring forward planned births but rarely alter the total number of children a couple has.
More recently, Australia has shifted toward policies that reduce the opportunity costs of having children, rather than direct “bribes” per baby. For example, the government is extending paid parental leave to 26 weeks for parents (up from 18 weeks previously), and significantly increasing childcare subsidies to reduce out-of-pocket costs for families. The logic is that by making it easier for parents – especially mothers – to combine work and family, couples might be more inclined to have children without derailing their careers or financial stability. Treasurer Jim Chalmers explicitly rejected calls for a new Baby Bonus in 2023, arguing that cheaper childcare and more generous parental leave are “a better way” to support families and boost fertility than lump-sum payments. This approach draws on evidence from countries like France and the Nordics, where extensive support for working parents correlates with higher fertility relative to countries that lack such supports. Indeed, research shows that policies providing stability and support for raising children – such as parental leave, flexible work arrangements, and affordable childcare – are critical to enable women (and men) to have the number of children they desire while pursuing careers. When those supports are absent, fertility often falls not because people don’t want children, but because the perceived trade-offs and costs are too high.
Australia’s historical policy mix also includes substantial family tax benefits (ongoing payments to help with child-rearing costs) and targeted programs like paid partner (paternity) leave to encourage shared parenting roles. The ANU study noted that greater gender equality in caregiving and workplace flexibility can make a real difference – if fathers share more of the childcare burden and employers accommodate family needs, women don’t have to choose as starkly between career and kids. Culturally, Australia has room to improve on this front, as women still do the majority of unpaid care. Reforms such as “use it or lose it” dedicated paternity leave (which nudges dads to take time off) could further normalize shared parenting and help lift fertility over time by reducing the motherhood penalty in careers.
Housing affordability and economic security are also key domestic factors. As demographer Liz Allen points out, many young Australians feel they “can’t afford to have kids” due to high housing costs and insecure work. Policies that address housing affordability – for instance, incentives for affordable family-sized housing, or better regional development to take pressure off big-city housing – could indirectly support higher fertility. If starting a family did not so often entail financial sacrifice (like moving to far suburbs or one parent quitting work because childcare is unaffordable), more couples might have the number of children they ideally want. Surveys consistently show Australians’ ideal family size is higher than their actual fertility, suggesting unmet desire due to economic barriers. In this sense, tackling the structural issues (housing, job security, gender pay gap) might be as important as any “fertility policy” per se in nudging the birth rate up. There is a strong argument that empowering people to achieve their desired fertility (rather than coercing or bribing them) should be the goal. As Dr. Allen notes, if low fertility is driven by choice and empowerment it’s not inherently bad – it’s problematic if people are having fewer kids than they want because of obstacles.
Looking overseas, Australia can glean lessons from both successes and failures in boosting fertility. The Nordic countries (Sweden, Norway, Denmark, Finland) have managed to sustain relatively higher fertility rates (around 1.6–1.9) compared to other advanced economies. They have done so by implementing comprehensive family-friendly policies: lengthy paid parental leaves (including for fathers), high-quality subsidised childcare, flexible work hours, and protections for parents returning to work. For example, Sweden offers about 16 months of paid parental leave per child, and daycare costs are capped as a share of income. These measures support both high female workforce participation and near-replacement fertility – showing that women don’t have to choose between career and children if society provides support. While even Nordic fertility has trended down somewhat in recent years (no OECD country is at replacement level fertility anymore), they still outperform peers on this metric. Importantly, norms in those countries also encourage men to take parental leave and be actively involved in child-rearing, which reduces the burden on women.
Contrast this with East Asian countries like South Korea and Japan, which have some of the lowest fertility rates in the world (South Korea’s TFR has shockingly dropped to ~0.7 in 2023, and Japan’s is around 1.3). Both countries have attempted a plethora of pro-natalist policies – from cash bonuses for births, to monthly child allowances, to subsidised housing for families, and even matchmaking programs – with limited success. South Korea, for instance, poured an estimated ~$200 billion over 15 years into programs to raise birth rates, yet its fertility continued to hit record lows annually. The reasons are deeply rooted: extremely long work hours, intense academic competition and costs for children’s education, high housing prices, and traditional gender roles that place most childcare burden on women. These factors create a “perfect storm” of disincentives for young couples to have babies, and no single policy incentive can overcome them without broader social change. Japan faces a similar story: despite offering “Angel Plan” support programs, expanded daycare, and incentives for third children, the societal expectations (long work hours, lack of female career support, small living spaces in cities) keep fertility low. The lesson for Australia is that financial incentives alone are not enough if fundamental issues like work-life balance and affordability aren’t addressed. Culturally, Australia is somewhere between Nordic and East Asian models – we have a fairly liberal, individualistic society with improving work-family policies, but also high housing costs and childcare expenses that can discourage bigger families.
Continental Europe provides other case studies. Germany had very low fertility (around 1.3) in the early 2000s, partly due to policies and norms that made it hard for women to work if they had children (school days ending at noon, limited childcare, and a tax system discouraging dual-income families). Recognizing this, Germany undertook reforms: introducing generous earnings-related parental leave (Elterngeld) in 2007, expanding childcare availability, and promoting paternal involvement. Over the next decade, Germany’s TFR rose modestly to about 1.5–1.6, showing the biggest improvement in Western Europe. While still below replacement, it suggests that policy can make a difference at the margin. France has long been a standout in Europe with TFR around 1.8, attributed to extensive family benefits, tax breaks for larger families, and childcare infrastructure – indicating a pro-family culture supported by policy. On the other hand, Italy and Spain languish around 1.2, hampered by high youth unemployment, scarce childcare, and entrenched gender norms (women in Southern Europe often must choose between career or motherhood, and many choose career or delay childbearing until it’s biologically harder to have multiple kids). These international comparisons underscore that Australia should craft its own mix of policies that fit our context, but generally the evidence favors enabling policies (childcare, flexible work, parental leave) over one-off payments.
Finally, beyond fertility-specific measures, many countries are reforming immigration and retirement policies in response to aging. For instance, Canada and Australia have been increasing immigration targets to bring in younger workers (Canada explicitly set high targets to counteract low fertility). Japan has slowly opened up to more foreign workers and is investing in automation/robots to mitigate labor shortages in elder care. Retirement ages are creeping up in many nations – Australia’s pension age is 67 and likely to rise further in the long term (though the government currently says no further increase is planned). Countries like Denmark even index retirement age to life expectancy. These moves acknowledge that with longer lives and fewer babies, working lives may need to extend and talent from abroad may be needed to support economies. Australia’s relatively healthy immigration intake and well-funded pension (superannuation) system put it in a better starting position than some. But maintaining public acceptance of immigration at high levels will depend on managing the side effects (infrastructure, housing, social cohesion). As noted, many advanced countries are in the same boat regarding fertility decline – the OECD average TFR was just 1.5 in 2022 (half the level of 60 years ago). Even global population projections now anticipate a peak and eventual decline later this century as fertility falls almost everywhere. In that sense, Australia’s challenge is part of a global demographic transition, and our policy response will need to balance our economic needs with those broader trends.
4. Population Growth vs Workforce Participation vs Family Incentives: The Trade-offs
When confronting an aging, low-fertility future, Australian policymakers essentially have three levers to pull, each with its own trade-offs:
Boost Population Growth via Immigration: This has been Australia’s go-to strategy historically. Increasing net overseas migration can rapidly add young workers and would-be parents to the population. Indeed, current projections to reach 40.5 million Australians by 2063 rely heavily on continued migration inflows. The benefit of high immigration is immediate: it props up workforce numbers, fills skill shortages, and can even modestly lift fertility (since migrants in their 20s and 30s may have children after arriving, though often at rates slightly lower than Australian-born peers). However, there are significant trade-offs. Rapid immigration without commensurate investment in infrastructure and housing leads to strains – a reality evident in the crowded rental markets and transport networks of Sydney and Melbourne after record migration in recent years. Voters may become resistant if they perceive immigration is eroding living standards via congestion and housing affordability problems. There’s also a demographic catch: immigrants, too, grow old. They essentially “buy time” for a country – deferring the aging problem by a generation – but unless fertility among immigrants is higher (often it isn’t, as migrant families tend to adopt the norms of their new country) or immigration is perpetually increased, the aging issue re-emerges later. Furthermore, as the whole world ages, the global competition for young migrants could become intense, and source countries may have fewer surplus youth to send abroad. Relying on immigration as the sole solution is therefore unsustainable long-term, but in the medium term it is a powerful tool. The challenge is calibrating it: how much migration is enough to offset low fertility without overshooting society’s capacity to absorb and support the population? This involves value judgments as well as economic calculus. Australia will likely continue a high-immigration policy (with skilled migrants filling workforce gaps and younger international students transitioning to permanent residency) – but it must be accompanied by robust planning in housing, transport, and services. Otherwise, we risk a backlash that could jeopardize the social license for using immigration to manage demographics.
Increase Workforce Participation (Especially Female and Older Workers): Another lever is to make better use of the people we already have. Australia’s female labor force participation has risen substantially over the past few decades – the gap between male and female participation rates is narrowing – but there is still room to improve, particularly in full-time participation and in the child-rearing years. Many women work part-time or drop out of the workforce when children are young, often due to the cost or availability of childcare and cultural expectations around caregiving. By making child care more affordable (as current reforms aim to do) and encouraging more equitable parental leave, the government hopes to lift women’s workforce participation further. Even a few percentage points increase in the participation rate can add billions to GDP and enlarge the tax base. Crucially, higher female workforce participation does not have to come at the expense of fertility – in fact, countries with very high female employment (Nordics) tend to have higher fertility than countries where women often leave work upon motherhood (East Asia), because support systems allow “doing both.” So, improving participation and maintaining fertility can be complementary if handled right.
Another target is older workers. As Australians live longer and healthier lives, many may choose or need to work into their late 60s or 70s. Removing barriers for seniors who want to work – such as earnings tests on pensions, or age discrimination in hiring – could help alleviate labor shortages and reduce the dependency ratio. The government has indicated interest in giving older people “more choices and chances if they want to work” rather than raising the pension age by mandate. Already, participation rates for 55–64 year-olds have been climbing in Australia (especially for women), but they still lag behind top performers like New Zealand in older age brackets. By enabling willing older Australians to remain economically active (through part-time or flexible roles), we effectively increase the working population without new births or immigrants. The trade-off here is that not everyone can or wants to work longer – some in manual jobs physically cannot, and many feel they’ve earned a rest after decades of work. There’s also a question of job opportunities: will keeping boomers in the workforce longer reduce openings for young people? Ideally, a growing economy can accommodate both, especially in sectors that need experience. But it’s a balance – we shouldn’t force longer work, but we can incentivize and facilitate it (for example, by raising the pension income test threshold, which was recently done to let age pensioners earn a bit more without losing benefits).
In sum, higher participation is a key mitigant to population aging. It doesn’t stop the aging, but it eases the economic impact by increasing the effective labor supply. The trade-off is largely about distribution of work and the social contract: policies must support workers with families and seniors in a way that is fair and does not reduce quality of life. If we ask people to work more years or more hours, we need to ensure they are healthy and supported enough to do so. That ties back to investments in healthcare, lifelong learning, and flexible workplaces.
Family Incentives and Support: The third lever is directly trying to lift the birth rate or at least prevent it from falling further. As discussed, Australia has moved away from crude incentives (like cash bonuses) toward systemic support (childcare, parental leave). Still, we classify all these under the umbrella of “family incentives” – policies to make family life easier or more attractive. Enhanced childcare subsidies that kicked in from July 2023, for instance, drastically reduce child care costs for most households, effectively putting money back into parents’ pockets and making it financially viable for both parents to return to work. While the primary rationale for such subsidies is often to raise participation, they likely have a second-order effect on fertility: couples might be less hesitant to have a second or third child if they know childcare will be affordable and available. Another example is First Home Buyer schemes or affordable housing initiatives targeting young families – if housing insecurity is a fertility deterrent, then helping people into stable housing could remove that barrier. Australia has experimented with baby grants, parental leave pay, family tax benefits, and child care support; finding the right mix that is cost-effective is the challenge. These measures cost money (subsidies, leaves, payments all come from the public purse), so a trade-off exists with fiscal constraints. However, one can argue that the cost of inaction on fertility could be higher in the long run (in terms of lost productive capacity and higher aging costs). Policymakers thus must weigh the short-term fiscal cost of family support versus the long-term economic benefit of a larger, younger population.
Another trade-off involves fairness and personal choice. In democratic societies, governments can encourage but not dictate reproductive choices. Some taxpayers without children object to subsidizing those with children, for instance. There’s a balance between collective interest (society needs new generations) and individual freedom (it’s not the state’s role to tell people how many kids to have). The policies that tend to get public support are those framed as supporting families’ choices (e.g. “we’ll help you have kids if and when you want them, by removing obstacles”) rather than coercive or overly lavish pronatalist schemes. Australia’s current suite of measures largely follows this ethos – it’s about enabling choice, not forcing hands.
In reality, Australia will likely pursue all three strategies in some measure: maintain robust immigration, boost workforce participation, and continue refining family supports. The optimal balance is up for debate. Heavy reliance on immigration can fix labor supply issues quickly but may be socially and politically constrained if it outpaces our capacity to provide infrastructure. Maximizing workforce participation is economically efficient but has natural limits (people can’t work 100% of time at 100% of life). And lifting fertility is arguably the toughest lever – it’s slow (today’s baby is 20+ years from entering workforce) and uncertain in outcome. Therefore, a blend is prudent. The Intergenerational Report explicitly notes that a combination of higher migration, later retirement, and modestly higher fertility could significantly ameliorate the fiscal and economic impacts of aging. Governments will thus continually make trade-off decisions: for example, if fertility continues to languish or fall, do we raise immigration even more? If economic growth is stalling due to labor shortages, do we incentivize older workers to stay employed longer, or make a big push on skilled migration, or both? There are also environmental and infrastructure trade-offs with a bigger population that can’t be ignored (water resources, urban density, emissions targets, etc.).
Ultimately, the trade-offs boil down to different visions of Australia’s future. A “bigger Australia” via immigration can keep the economy youthful and dynamic, but needs planning and public buy-in. A “productive Australia” via higher workforce engagement tries to do more with our existing population but may require social shifts (like greater gender equity in work and care). And a “family-friendly Australia” via supporting child-rearing seeks to nudge the birth rate up, but success is uncertain and results take decades to manifest. Navigating these trade-offs is one of the defining policy challenges of our era, and it will require adaptability as conditions change.
5. Forecasts and Demographic Modeling from ABS, Treasury, RBA, and OECD
To chart the path forward, we turn to forecasts from authoritative sources. The Australian Bureau of Statistics (ABS) in its population projections (and as referenced in the latest Births report) foresees a pivotal moment around 2055 where annual deaths exceed births. This crossover to natural decrease (more coffins than cradles) would be an unprecedented event in Australia’s modern history – a clear signal that without immigration, the population would start to decline. The ABS projects that with medium-level assumptions for fertility (around 1.6) and continuing immigration, Australia’s population will keep growing but at a slower rate, aging significantly in the process. By the mid-2060s, as noted earlier, we reach ~40 million people, with growth increasingly reliant on migration.
The Federal Treasury’s Intergenerational Report (IGR) 2023 provides a comprehensive look at the next 40 years. It assumes Australia’s TFR will stabilize at about 1.62 from 2030 onward, slightly below current levels (essentially expecting the fertility rate not to rebound much). Under those assumptions, and an annual net migration of around 235,000 (which the 2023 IGR uses as a base, though recent migration is higher), the population reaches 40 million by 2063. Key takeaways from the IGR include: the population will age markedly, with the dependency ratio deteriorating; labor force participation will decline from 66% to around 60% by 2063 due to aging, despite improvements in female and older-worker participation; and as a result, GDP growth will rely more heavily on productivity gains than in the past. The IGR famously highlighted five forces shaping the future, with population aging being number one. It projects the number of Australians aged 85+ will more than triple by 2063, and those over 65 will be nearly a quarter of the populace. The median age of 43 in 2063 (up from 38 today) implies a fundamentally older society.
Economically, Treasury’s models suggest per-capita economic growth will be slower in the coming decades due to demographic headwinds. Annual real GDP growth is projected at ~2.2% over the next 40 years, down from 3%+ historically – with almost all of that slowdown attributable to slower population and labor force growth (productivity is assumed to tick along at 1.2% a year). On the fiscal side, the IGR warns that without policy change, the federal budget will see chronic deficits (on the order of 2-3% of GDP) as spending on health, aged care, NDIS, and interest costs outpaces revenue. Importantly, no doomsday scenario is assumed – rather, these are challenges that can be managed with prudent reforms (e.g., tax changes, spending restraint, productivity measures) taken early.
The Reserve Bank of Australia (RBA) has also analyzed demographic impacts. A notable RBA research piece (2018) modeled how changes in fertility, longevity, and participation affect the economy’s steady-state. It found that from 2015 to 2050, demographic change could reduce the neutral real interest rate by a further ~1 percentage point (on top of past declines), due to higher saving and lower investment. The same modeling noted that later retirement and higher participation mitigate some impacts – for instance, if people retire 2 years later on average, it significantly offsets pressures on pension systems and boosts GDP. The RBA’s work aligns with Treasury’s in highlighting that the shrinking share of working-age people will act as a drag on growth (they estimated that labor force participation for 15+ population could fall from ~65% to ~57% by mid-century without offsetting factors). For context, that means a smaller proportion of the population contributing to production, which is arithmetically why GDP per person grows slower. The RBA also keeps an eye on housing: as an aside, some analysts inside and outside the Bank have pondered whether an eventual population plateau could soften housing demand and thus house price growth – though this is likely beyond the policy horizon for now.
Internationally, organizations like the OECD and UN provide comparative forecasts. The OECD’s recent report on fertility trends notes the average fertility in advanced economies is expected to remain around 1.5–1.6 for the foreseeable future. Virtually all OECD countries are aging; even traditionally younger nations (like those in Latin America) are seeing fertility drop fast. Global population is still growing now (driven by Africa and South Asia), but projections such as those by the UN predict a global peak around 10.4 billion in the 2080s, with many countries entering population decline earlier. For Australia specifically, the OECD and IMF have periodically cautioned that aging could reduce Australia’s annual GDP growth by around 0.4–0.8 percentage points in coming decades, absent reforms – consistent with our domestic IGR findings. The Productivity Commission in 2021 also published an inquiry (“Migrants and Population”) affirming that migration will continue to be vital for Australia’s workforce growth, but emphasized the need to improve productivity to counteract a falling working-age share.
All these forecasts carry uncertainty. Fertility might decline more than expected (for example, some demographers worry that after shocks like COVID and ongoing economic uncertainty, birth rates could fall further to the low 1s). Alternatively, a future societal shift or policy success (or even advances in fertility technology) could bump fertility up beyond 1.6. Immigration levels can and will be set by policy and global conditions – they could be higher or lower than assumed, which would directly impact population size and age structure. And of course, productivity growth is the big wild card: if we somehow unleash a new era of innovation (say, through AI or other technological leaps), it could compensate for demographic drag by increasing output per worker dramatically. Conversely, if productivity remains sluggish, the smaller workforce could spell much slower growth in living standards.
In crafting an economic strategy, Treasury and policymakers use the central forecasts (like those in the IGR) as a guide, but ideally build in resilience for a range of outcomes. The prudent course is to expect an older Australia that grows a bit slower, and take steps now that can improve that trajectory – encouraging either a slightly higher fertility, a more dynamic workforce, or stronger productivity (ideally all three). To that end, the 2023 IGR offered an optimistic note that Australia can “be optimistic, but not complacent” about this future. The coming decades will indeed be very different from the demographic dividend years we’re leaving behind.
6. Implications for Young Australians: Retirement Planning and Real Estate Investment
For young Australians, say those in their 20s and 30s today, the demographic shifts underway will shape the environment in which they build wealth, plan families, and eventually retire. Retirement planning, in particular, takes on even greater importance. By the time Millennials and Gen Z hit retirement age (circa 2050s–2060s), they will be part of a much larger retiree cohort supported by a relatively smaller working generation behind them. This raises questions about the sustainability of the Age Pension and public health systems and whether benefits will be as generous (or eligibility as broad) as they are now. It is reasonable to expect that governments will make gradual adjustments – for example, increasing the pension age (as has already been done incrementally), tightening means tests, or leveraging superannuation more – to ensure the system remains viable. The onus will likely be on younger Australians to be more self-sufficient in retirement, which means maximizing superannuation savings and other investments during their working lives. Relying on a comfortable government pension is unlikely to be a safe bet for today’s youth, as fiscal pressures mount. The good news is Australia’s super system, if you contribute consistently, is designed to provide a substantial private nest egg, and the shift to super-funded retirement incomes is already reducing pressure on the public purse. Young workers should take advantage of this by contributing extra when possible (to benefit from compounding) and ensuring their super is optimally invested, knowing that each generation may need to shoulder more responsibility for its own retirement.
Another implication is the prospect of longer working lives for today’s young. With life expectancy likely to reach the late 80s by 2060, a person who is 25 today could easily live to 90. It’s plausible that by the 2050s, the typical retirement age could organically shift into the 70s (not through legislated pension age, but through personal choice or economic necessity). Young Australians should thus plan for careers that might have multiple stages, including re-skilling mid-career and perhaps transitioning to less physically demanding roles in later years. The concept of working 40 years and retiring for 30 years may evolve into working 45-50 years and retiring for 20-25 years, for instance. This isn’t necessarily bleak – if health spans increase alongside lifespans, people in their 60s may be as active and productive as those in their 50s were in generations past. But it does mean that investing in one’s skills and health is crucial for the long haul. Keeping mentally and physically fit will determine whether one can take advantage of opportunities to work longer or not.
When it comes to real estate investment and home ownership, young Australians face a very different landscape than their parents did. Over the past 50 years, housing was a one-way escalator of rising prices fueled by population growth, credit expansion, and periods of falling interest rates. The next 50 years might not repeat that performance. With population growth set to moderate (even with immigration, it may not reach the same percentage increases) and with the likelihood of an eventually plateauing population late in the century, capital appreciation on property may slow in the long term. This doesn’t mean house prices will fall – more that the era of 7-10% annual house price growth might give way to more subdued gains tracking inflation and income growth. Already, younger generations are questioning whether housing will deliver the same real returns it gave Boomers.
That said, over at least the next couple of decades, Australia’s housing demand is still projected to be strong, thanks largely to immigration and chronic undersupply issues. In the 2020s, we are seeing record-high migration alongside insufficient home building, which is actually intensifying housing shortages and keeping prices high. So young people in the market for a first home might not see relief imminently from demographics – in fact, the short-run effect of low fertility (fewer Aussies born) is overwhelmed by immigration-driven population growth in their housing competition. However, as the massive Baby Boomer generation ages, there could be a significant intergenerational wealth and housing turnover. In the 2030s–2040s, many Boomers will downsize or pass away, potentially releasing a large number of family homes onto the market. If the smaller Gen X and Millennial cohorts behind them do not fully offset that selling pressure (i.e. there aren’t enough younger buyers for all those homes at current values), some areas could see relative softening in prices. Young investors may want to be strategic about real estate – location and type of property will matter. Properties in regions with growing populations (major capitals with strong migration inflows, or amenity-rich regional cities) may hold value better than those in “tombstone suburbs” (areas with rapidly aging populations and youth exodus).
For those planning property investments as a retirement strategy, it would be prudent to model more conservative growth and rental yield assumptions. Rental demand should remain solid nationally as long as immigration continues and new construction lags (which it often does). But in an aging society, consumption patterns shift – for instance, older households tend to spend less and often eventually exit the private rental market (either by owning outright or moving into aged care). If fewer young families are around in future, the competition for large suburban houses might ease relative to today. By contrast, there might be increased demand for smaller, low-maintenance homes and apartments suitable for empty nesters or singles. Investors should keep an eye on these demographic consumer shifts.
Another consideration for young Australians is how the macroeconomic environment might evolve. An aging, slower-growing economy could mean lower inflation and lower interest rates on average (as the RBA research suggests). This could be a double-edged sword: low interest rates make mortgages cheaper to service – good for homebuyers – but they also often coincide with lower wage growth, making it harder to save for a deposit. It also means the stellar equity market returns of the past (fueled by expanding workforces and rapid globalization) may moderate. So, the classic 60/40 portfolio or a property-centric strategy might deliver a bit less in the future, putting more emphasis on active financial planning and diversification. Young people will need to be savvy in managing their superannuation investments, perhaps be open to working a bit longer, and consider a broader range of asset classes (such as international equities to tap growth in other regions, or alternative investments) to meet their retirement goals.
Crucially, younger Australians should take advantage of the long lead time – demographic change is a slow-burn issue. The problems of 2060 can feel remote in 2025. But actions taken now (like boosting one’s savings rate, investing in education and career skills, and making thoughtful housing choices) will yield huge benefits decades down the line when the demographic context becomes reality. For example, buying a home in a location that will remain in demand (e.g. inner/middle ring suburbs of thriving cities) can provide stability and a hedge against both rent inflation and uncertain future housing markets. Likewise, starting retirement contributions early and not depending on a future government to pick up the slack is a sound strategy given the writing on the wall with the dependency ratio. Using tools and calculators to project different scenarios – for instance, “What if I retire at 70 instead of 67?” or “What if long-term investment returns are 1% lower than historical averages?” – can help young people plan for a range of outcomes. The earlier one identifies a potential shortfall in retirement income under conservative assumptions, the more time one has to adjust (by saving more or altering plans).
In terms of real estate investment for wealth (beyond owning one’s home), young investors might also weigh the property vs equities question in light of demographics. Australian property has historically been a star performer, but much of that was during a demographic tailwind period. The stock market, on the other hand, gives exposure to global growth and sectors that can thrive even in aging societies (e.g. technology, healthcare). Diversification between property and other asset classes could become even more important if the local property market’s dynamics change with population trends.
Lastly, it’s worth noting that while the big picture trends seem daunting, young Australians are also inheriting some advantages. They are better educated on average than any previous generation, have access to technology and global markets for opportunities, and will benefit from the assets and infrastructure built by previous generations. For instance, a massive transfer of wealth is expected as Baby Boomers pass on inheritances – albeit concentrated among those whose parents accumulated property and super. This could help some younger Australians mitigate their own retirement or housing challenges, though it will widen inequalities for others who don’t receive such windfalls. Policymakers might eventually look at this and consider things like inheritance taxes or policies to ensure intergenerational equity (a topic beyond our scope, but increasingly discussed as populations age).
In summary, young Australians should approach their financial future with eyes wide open to demographic reality: plan to be more self-reliant in retirement savings, be flexible about potentially working longer, and be strategic in housing decisions and investments. By doing so, they can turn what could be headwinds into manageable aspects of their long-term plan.
Conclusion: Navigating a Low-Fertility Future
Australia’s record-low fertility rate is more than just a demographic curiosity – it is an economic inflection point that will reverberate through every facet of society. A smaller generation of children today means a different Australia tomorrow: one that is older, with slower growth, but not necessarily poorer if the right choices are made. The challenge and opportunity for Australia is to adapt to this new reality proactively. We must find a sustainable balance between population, participation, and productivity.
In our view, a balanced strategy is essential. Australia should continue to welcome immigrants – not just to plug workforce gaps, but to enrich the nation and maintain a dynamic age structure. However, growth for growth’s sake is not the goal; we need to invest in the cities and towns that absorb new people, so that infrastructure, housing, and services keep pace. Otherwise, we simply trade one problem for another. At the same time, it’s imperative to unlock the potential of our existing population. This means enabling more women to pursue careers and have children without an either/or trade-off – a goal that hinges on childcare affordability, workplace flexibility, and cultural change in sharing care responsibilities. It also means rethinking retirement and careers so that those who want to remain productive later in life can do so, benefitting both themselves and the economy.
When it comes to boosting fertility, Australia should focus on removing the barriers that prevent people from fulfilling their family aspirations. Policies that alleviate the high cost of raising children (such as childcare support, parental leave, and housing affordability measures) are likely to be more effective and equitable than blunt instruments like cash bonuses. As other nations have learned, you can’t bribe your way out of a baby bust – you must create an environment where starting or growing a family doesn’t feel like a financial risk or an undue burden on one parent. The payoff of even a modest uptick in fertility (say from 1.6 to 1.8) would be significant over time in easing aging pressures. But even if we remain a low-fertility society, that’s not doom and gloom; it just means we have to adjust our economic settings.
Crucially, Australia’s response must be holistic. There is no single silver bullet for the demographic challenges, but a suite of coherent policies can collectively make a difference. For example, higher immigration can help keep the population pyramid broader at the base, but it should be accompanied by strategies to train and employ young Australians in the high-demand sectors (like care jobs) that an older population needs. Similarly, encouraging later retirement is sensible, but it should go hand in hand with lifelong learning initiatives and age-friendly workplace practices to make extended careers feasible.
The choices made today will shape the Australia that young people inherit in the coming decades. The country can either slide into the demographic slow lane – with all the fiscal strains and growth challenges that entails – or innovate its way to a new equilibrium where a stable, older population can still enjoy rising prosperity. This requires forward-thinking leadership and frankly, public acceptance that some changes (like a gradually rising retirement age or higher taxes in some areas) might be necessary. The encouraging news is that Australia has time and relative prosperity on its side right now to make these adjustments before the demographic crunch truly hits. We are better positioned than many nations, but we also have less excuse to be complacent.
In conclusion, Australia’s record-low fertility rate is a wake-up call. It calls us to reimagine growth not just in terms of more people, but smarter economic participation and improved productivity. It calls us to support families in new ways and to value the contributions of all age groups. It challenges long-held assumptions that each generation will be larger and richer than the last – instead, it urges us to craft policies so that a smaller future population can be as prosperous and vibrant as a bigger one. By acknowledging the trends and acting with foresight, Australia can navigate this low-fertility future and turn what could be a crisis into an opportunity for innovation and inclusive growth.
Run Your Numbers: Plan for Your Future with Tepuy Solutions
Demographic shifts will undoubtedly influence your long-term financial decisions. Whether you’re planning for retirement in an aging Australia or debating if and when to buy a home in a changing property market, it’s crucial to model different scenarios and make informed choices. Tepuy Solutions offers interactive calculators to help you stress-test your assumptions and chart a path forward:
Retirement Planner — Model your retirement goals by inputting your target retirement age, desired income, super balance, and other factors. See how changing variables – like investment returns or life expectancy – could affect the sustainability of your nest egg. In a future with potentially lower growth and longer lifespans, this tool helps you answer “Will I have enough?” and what adjustments to make now for a comfortable retirement.
Property vs Shares Calculator — Thinking about investing in property versus the stock market? This calculator lets you compare side-by-side cashflows and returns for a property investment (with options to include leverage, rental income, capital growth rates) versus an equivalent portfolio of shares. Given the uncertainty about long-term property growth in a low population-growth environment, it’s wise to weigh your options. See how outcomes change under different growth rates, tax settings (including capital gains tax impacts), and holding periods – so you can decide where to deploy your money for the best outcome.
Mortgage Calculator — Planning to buy a home? Use our mortgage tool to project your loan repayments, total interest costs, and payoff timeline. You can simulate interest rate changes, add extra repayments, or test various loan sizes. With interest rates and housing demand in flux, understanding your mortgage trajectory is vital. This calculator will show you the impact of rates returning to historic lows (which could happen in an aging, low-inflation economy) or alternatively, how paying off a bit faster can save you thousands.
Each of these Tepuy calculators empowers you to make data-driven decisions. The economic environment is shifting – but with foresight and the right tools, you can adapt your strategy. Don’t leave your future to chance. Try these calculators to map out scenarios, identify risks, and take control of your financial journey in Australia’s evolving demographic landscape. Planning ahead is the best investment you can make to ensure that no matter what demographic curveballs come, you and your family can thrive.
Sources
Australian Bureau of Statistics – Births, Australia, 2024: Fertility data and historical trends.
ABC News – Australia's baby recession deepens, new ABS data says (Oct 2025): Record-low fertility of 1.48 in 2024 and expert commentary.
Centre for Population – Australia’s future fertility (Mar 2022): Projection scenarios for fertility and impacts on population size and age structure.
Treasury Intergenerational Report 2023 – Overview of long-term demographic and economic projections.
Actuaries Institute – 2023 Intergenerational Report analysis: Notes on retirement income sustainability and intergenerational equity.
RBA Research – Modelling the Effects of Demographic Changes (2018): Findings on dependency ratio, participation, and neutral interest rates.
OECD – Society at a Glance 2024: Fertility trends across OECD countries, drivers, and policy effects.
ANU / Centre for Population – Impacts of policies on fertility rates (2022): Study indicating limited impact of baby bonus and importance of childcare, gender equality.
CEDA – The economic impact of Australia’s ageing population: Discussion of participation decline and per-capita GDP growth slowdown due to aging.
Tepuy Solutions – Australian Property vs S&P 500 (1975–2025): Data on migration and housing supply imbalance, illustrating current housing pressures.