Australia is overconfidently approaching a tough age

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

Australian Prime Minister Scott Morrison arrives at Haneda Airport in Tokyo, Japan on November 17, 2020. REUTERS / Issei Kato

MELBOURNE (Reuters Breakingviews) – Depressing trends lurk under Australia’s impressive economic rebound. Sharply reduced migration and declining fertility during the pandemic have exacerbated the demographic challenges of an aging population, according to the government’s first intergenerational report here in six years. The study, released Monday, attempts to forecast long-term budget trends; it predicts that the ratio of people of working age to those over 65 will drop from 4 to 2.7 over the next 40 years.

While recognizing that immigration contributes to economic growth, Prime Minister Scott Morrison’s administration has also lowered the ceiling for new arrivals before Covid-19. It appears to be partly relying on labor productivity growth to make up the difference, which the analysis shows will rebound to a 30-year average of 1.5% per year after growing only 1.2% per year. over the past decade. Other developed economies have downgraded their productivity estimates, and in fact Australia’s latest intergenerational report has exceeded fertility and population here. This one might be overly optimistic too. (By Jeffrey Goldfarb)

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