With change come new challenges, however. The report paints a picture of not only economic opportunities NSW can expect, but also the hurdles to overcome.
NSW Treasurer Dominic Perrottet said the IGR projects a very different state by 2061 to what we are currently living in, and is designed to help policymakers and communities plan for the future.
“The way things will look for the people of NSW in 40 years will be vastly different to the world today,” Mr Perrottet said.
“We are very lucky to live in one of the greatest places on the planet, but if we are to ensure the next generation enjoys the same levels of prosperity and opportunity that we have today, it is vital we identify future challenges and work to overcome them.”
NSW Treasury produces the IGR once every five years to collate key demographic, housing, workforce and economic forecasts.
Key findings of the 2021–22 NSW Intergenerational Report include:
- Productivity projected to become the biggest driver of economic growth, increasing at 1.2 per cent per year over the next 40 years.
- By 2060–61, the fiscal gap is projected to be 2.6 per cent of gross state product (GSP). While this is an improvement on the 3.4 per cent fiscal gap (by 2055–56) predicted in the previous 2016 IGR, this largely reflects modelling refinements and updated economic and demographic projections. This gap still indicates further action will be needed to avoid the state’s gross debt growing beyond sustainable levels over time.
- The NSW population will expand by around 40 per cent to 11.5 million people in 2061, up from 8.2 million.
- Life expectancy is projected to increase to almost 92 years for women and just over 89 years for men for people born in 2061, with the median age expected to be 44 years compared with 38 today.
- NSW will need up to 1.7 million additional homes by 2061.
- The jobs of the future will require a more highly skilled workforce and will be increasingly concentrated in the social services and business services sectors.
- Average full-time wages will be around $139,000 per year in today’s dollars (compared with $86,000 in 2018–19), with job growth fastest in business services and social services. Healthcare jobs will also increase in line with the ageing population.
Mr Perrottet said NSW had already started preparing for the future with key initiatives like the NSW Generations Fund (NGF), a sovereign wealth fund which was created in 2018 to help keep debt at sustainable levels.
“The fund is projected to reach $430 billion in today’s dollars by 2060–61 or equivalent to 31 per cent of gross state product,” Mr Perrottet said.
“We have already taken steps such as setting up the NGF to help secure the future for generations to follow, but there is still much more work to be done. The IGR will help ensure we make the right decisions at the right time.”
Business NSW says Intergenerational Report shows need for reform
The state’s peak business organisation, Business NSW, said the IGR is a timely reminder of the ever-present need to support productivity and vigilant fiscal management.
Business NSW chief executive Daniel Hunter said the report further reinforces the need for urgent reform of the state’s tax system, and lays the right foundation for a modern economy.
“The report shows recurrent spending — especially on health — is projected to grow by around 80 per cent per person by 2061, meaning NSW needs to become less reliant on inefficient taxes such as stamp duty,” Mr Hunter said.
“Business NSW has been a longstanding advocate of reform to stamp duty — an outdated tax on transactions that creates a roadblock for the efficient use of land and property.
“That’s why our pre-budget submission called for the development of a property tax replacement for stamp duty in consultation with commercial property owners.”
Mr Hunter said the state also needs to work with the Commonwealth to develop a solution for replacing payroll tax and modernising the GST system to be serious about boosting long-term business productivity across the state.
“The report also emphasises the importance of migration to the NSW economy as a key moderator to our ageing population, especially as life expectancy gets longer,” Mr Hunter continued.
“It shows skilled migrants will help meet the costs of providing health services to our ageing population, with health expenditure forecast to become 38 per cent of total recurrent government expenditure in 2060–61.
“This focus on the need for migration also highlights the urgent need for a roadmap to safely reopen our international borders.
“The report also reiterates the importance of a flexible, relevant and effective vocational education and training (VET) sector to allow people to adapt to job changes and new workforce requirements.”