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One of Australia’s most powerful civil servants has used predictions about an aging population and falling birth rates to justify record immigration.
Steven Kennedy, the Treasury Secretary who also sits on the board of the Reserve Bank, criticized the idea that rapid population aging would be temporary.
“It sometimes feels like population aging is a temporary phenomenon, particularly as the baby boomers age,” he told the Committee for Economic Development of Australia think tank on Monday .
‘However, this is not the case.’
Dr Kennedy cited the Treasury’s Intergenerational Report predicting the proportion of people aged 65 and over would rise to 23.4 per cent by 2062-63, up from 17.3 per cent in the last financial year.
The share of people aged 85 and over is expected to increase to 5 percent, from 2.9 percent previously.
One of Australia’s most powerful civil servants used predictions about an aging population and falling birth rates to justify a record immigration rate (pictured, Australia’s City Hall station Sydney).
This is happening as Australia’s fertility rate declines, where couples have on average fewer than two children, below replacement level.
“As long as the fertility rate remains below replacement rate, successive generations will be smaller,” Dr Kennedy said.
Australia’s fertility rate has been below 2.1 since the 1970s, with the 2008-09 level of 1.98 a temporary high in recent years.
Higher immigration in recent decades has failed to prevent the aging of Australia’s population, with the Treasury’s Population Center calculating that the country had a median age of 38 years and six months at mid- 2022, compared to 32 years and eight months three decades earlier.
Nonetheless, Dr Kennedy said Australia’s population would be even older without the wave of immigration over the past two decades.
“Increased migration has been the main driver of the larger and younger population,” he said.
“Our population growth has been higher than that of all G7 countries, reflecting higher migration.”
A record 454,400 migrants moved to Australia in the year to March, with the figure including both the permanent arrival of skilled migrants and long-term international students.
Australia’s net overseas migration rate, based on arrivals minus permanent departures, is four times higher than the level of 110,104 two decades ago.
A surge in immigration, intended to offset Australia’s border closures in 2020 and 2021, has also coincided with a fall in productivity, where output for each worker is falling.
Productivity, based on gross domestic product per hour, fell by 3.6 percent in 2022-23.
Over the past decade, while 200,000 migrants have settled in Australia each year, productivity growth has remained below 1 per cent.
This is a far cry from the 2 percent pace of the 1990s, when annual immigration was generally below 100,000 people.
But Dr Kennedy said the aging population would lead to lower-than-average economic growth in coming decades.
“The lower growth reflects slowing productivity and population growth, as well as reduced participation due to aging,” he said.
“The projected slowdown in productivity, population growth and declining participation is not unique to Australia.
“These results are expected for most developed countries.”
Steven Kennedy, the Treasury Secretary who also sits on the board of the Reserve Bank, criticized the idea that rapid population aging would be temporary.
Dr Kennedy cited the Treasury’s Intergenerational Report predicting the proportion of people aged 65 and over would reach 23.4 per cent by 2062-63, up from 17.3 per cent in the last financial year.
Australia’s population grew by 2.2 percent in the year to March, with immigration accounting for 80.7 percent of that increase.
But Treasury expects that figure to slow to 1.1 percent over the next 40 years, which would put it below the 1.4 percent level of the past four decades, as Australia’s population shifts from 26.5 million to 40.5 million here 2062-63.
The Treasury advocates increased immigration so that it can raise more tax revenue.
The Business Council of Australia, which represents big business, has been pushing for increased immigration since borders reopened in late 2021.
The Treasury expects population growth to slow to 1.1 percent over the next 40 years, which would put it below the 1.4 percent level of the past four decades, as Australia’s population shifts from 26.5 million to 40.5 million by 2062-63.