Australia Experiences Significant Increase in Care Spending Over the Next 40 Years, According to Reuters

SYDNEY (Reuters) – The Australian federal government is projected to allocate approximately half of its total budget to health, aged care, defence, disability support, and debt repayments by 2063, an increase from roughly one-third currently, according to official forecasts released on Monday.

The forthcoming “Intergenerational Report 2023” estimates that spending in these five areas could rise by around A$140 billion (USD 90 billion), accounting for 5.6% of the current GDP over the next 40 years, as outlined in excerpts of the report obtained by Reuters.

Ahead of the report’s official launch on Thursday, Treasurer Jim Chalmers expressed cautious optimism about the future but stressed the need for Australia to adapt to forthcoming economic challenges.

“Our population will grow more slowly, our citizens will enjoy longer and healthier lives, and the care economy will become increasingly important in the coming decades,” Chalmers stated during a media briefing on Monday.

Health spending is expected to escalate the most as a proportion of GDP over the next 40 years, with the care economy projected to rise from approximately 8% of GDP currently to around 15% by 2062-63, the report indicated.

The document emphasized that rising healthcare and aged care costs are being driven by an aging population and overall population growth.

Over the next four decades, Australia’s population growth is anticipated to decelerate to an average of 1.1%, down from the 1.4% observed in the previous 40 years. The total population is expected to reach 40.5 million by 2062-63, consistent with projections from the 2021 report, rising from about 26 million today.

The report, however, cautioned that the costs associated with servicing government debt will have a long-lasting impact on the national budget, as significant stimulus measures implemented during the COVID-19 pandemic will necessitate larger repayments due to inflation and increased interest rates.

Although Australia achieved its first budget surplus in 15 years for the 2022/23 period, forecasts indicate a return to deficits starting this year, attributed to an economic slowdown and rising interest rates.