The Federal Government’s Intergenerational Report 2026 identifies many big-picture challenges facing Australia over the next 40 years but is strangely silent on a critical concern: the impact of the climate crisis on Australians’ health and healthcare.
This comes as the World Health Organization is urged to formally declare climate change a Public Health Emergency of International Concern (PHEIC), its highest level of alert for a health emergency.
Marie McInerney writes:
Australia faces worsening climate disasters, ongoing geopolitical shocks, unaffordable housing, unfair tax and the yet unknown social, economic and environment impacts of artificial intelligence (AI) over the next 40 years, according to the Federal Government’s Intergenerational Report 2026.
In a stark warning, the five-yearly national report says that the outlook on housing unaffordability for younger generations, tax inequity, and the pressures of an ageing population “will intensify concerns about intergenerational equity and risk eroding Australia’s strong democratic and social cohesion as well as economic security”.
That’s on top of a possible $2 trillion hit to the economy by 2050 from the climate crisis if Australia has a “disorderly approach” to net zero transition, the societal harms that can come from “misinformation, scams and malicious cyber operations”, and other major issues outlined in the report.
The 2026 Intergenerational Report (IGR) is the seventh such report. It projects the outlook for the Australian economy and the Government’s budget to 2065-66. (The release of the previous IGR was delayed, due to COVID, until 2023).
This year’s report includes a new section on the major transitions shaping Australia’s economy and a chapter on intergenerational equity.
It also says that over the next decade, the demographic profile of First Nations people – who are younger on average than the broader population – is projected to change differently from that of the broader population.
Released today by Treasurer Dr Jim Chalmers, the report details five major transitions underway in the global economy “and their profound implications for our economy, our budget and our society”. These are that:
- AI is developing rapidly and will be a defining influence on the economy over the next 40 years
- Geopolitical fragmentation is increasing as conflict and competition have flared and broadened
- The energy transition is becoming more important and urgent
- The population is ageing more quickly, accelerated by falling fertility rates
- Australia’s industrial base is evolving further towards services, influenced by AI and the other major transitions.
In a statement, Chalmers said the report “makes the case” for the Federal Government’s reforms to boost productivity and resilience, cut taxes for workers, help more Australians into home ownership, strengthen superannuation and improve the budget, as well as cost of living relief and investments in better services.
Bolder action needed
But some observers believe it also makes a definitive case for much bolder action than what is outlined by the Government: on climate change, international peace, our reliance on migration in a rapidly ageing society, an increase in desperately low-income support, and more complex policies that can address the juggernaut impact of AI on the economy, environment and democracy.
The Australian Council of Social Service (ACOSS) said it was clear Australia will need significant investment in the care economy, income supports, energy transition, and disaster resilience in light of significant global and domestic challenges outlined in the report.
ACOSS said the current projections for spending on vital social supports are “unrealistically low”, given the inadequacy of income support payments and the clear need for high-quality aged care, health, disability, childcare services, and disaster resilience.
For example, the report says expenditure on the Age and Service Pension is projected to fall from 2.3 percent to 1.8 percent of GDP in 2065-66 despite the ageing population, due to the growing maturity of the superannuation system, which will increasingly fund retirements.
But it notes also that income support and family payments are projected to grow slower than GDP, reflecting a lower share of young and working age cohorts and “indexation settings”.
ACOSS CEO Dr Cassandra Goldie said the assumption in the report that unemployment and family payments will not be increased in real terms for 40 years will consign people to “ever-deepening poverty and growing inequality”.
Goldie said the report also sets out the serious economic and human costs of inaction on climate change, and called on the Government to raise revenue from exports by multinational gas companies and closing the tax loopholes that let some of the wealthiest in the community minimise the tax they pay.
ACOSS also called on the Government to prioritise the following:
- Guarantee the essential care and community services people need and move away from market-based provision that costs more and undermines quality.
- Lift income support for those in the deepest poverty including Jobseeker and Youth Allowances, and index payments to growth in wages so they keep up with community living standards in future.
- Fully legislate and implement the tax reforms announced at Budget, including curbing the capital gains tax discount and negative gearing, closing loopholes used by discretionary trusts, and fringe benefits tax changes for electric vehicles, estimated to raise $93 billion over a decade.
- Introduce a 25 percent tax on gas export revenue ($17 billion annually) and roll back the generous diesel fuel tax credit for mining companies ($4.6 billion annually).
- Further wind back excessively generous superannuation tax concessions, including tax-free investment income after retirement ($10 billion annually)
- Resist further income tax cuts that would erode the revenue needed to fund essential services
Climate silences
Worryingly, the snapshot of the report doesn’t even use the word ‘climate’ but talks only about the importance and urgency of “the energy transition”.
The full report urges coordinated global action on climate change, but only focuses on four areas of economic impact, and nothing on the implications for health and healthcare.
For example, the report mentions the impact of heat upon workers’ productivity – but not that it might kill them, harm their health or undermine their access to healthcare.
It says:
- Climate change is expected to cause sea levels to rise, with an increase in flooding, erosion and inundation risks for coastal and low-lying areas. Damages are projected to vary by region, with economic damages highest in major cities with lower elevation.
- Higher temperatures can reduce the productivity of workers through reducing the pace of work and requiring more breaks. Impacts would be felt most in industries with a higher proportion of workers in physically demanding jobs or who work outside.
- Agricultural crop yields could be lower with higher temperatures. Treasury modelling shows that by 2066, heat stress could reduce crop yields in Australia by 3.6 percent under the Exceeding 3°C scenario, or 1.2 percent under the Paris-aligned scenario, compared to no temperature change. Impacts are uncertain and could be offset by adaptation investment, other climate conditions, or higher export demand from other affected countries.
- Tourism could also be affected by climate change as tourists adjust where, and when, they decide to travel. Australia has many natural attractions at risk of environmental degradation which may attract fewer tourists in a world of higher global temperatures. However, there is significant uncertainty around the total impact on the sector given the wide range of factors that affect tourism demand.
The report says major financial institutions are exposed to the financial risks of climate damages, prompting more than 250 asset managers globally to commit to net zero and quietly notes that, “without effective intervention, the rising cost of disasters will place additional fiscal pressure on the budget over time”.
Associate Professor Ben Neville, Deputy Director of Melbourne Climate Futures at the University of Melbourne, said the report ignored the economic damage already being caused by the changing climate, which will only increase over the next 40 years.
“The IGR does include a small paragraph on Treasury’s modelling of a Disorderly Transition Scenario that finds a $2 trillion hit to the economy by 2050,” he said. “As the geopolitics show, we are clearly on this disorderly pathway.”
Neville said the Government’s own National Climate Risk Assessment has said that current macroeconomic methodologies “significantly underestimate” the complexity of the economic effects” of climate change.
“Not integrating this perspective when forecasting the next 40 years is a very disappointing miss, illustrating a government that just doesn’t seem to get it on climate change, all while it co-leads the world towards the next global COP negotiations in Türkiye,” he said.
Ageing and healthcare
The report forecasts the birthrate to drop from 1.5 to 1.34 children per woman while the number of Australians aged 65 and over is projected to continue growing, with the fastest growth occurring for the 85-plus cohort – expected to triple by 2065-66.
Life expectancy at birth is forecast to reach almost 90 for women by 2065-66, up from 86 currently. For men it will be 86 years, up from 82 years.
It notes that Australia’s migration program “has helped moderate the pace of ageing and provided an important source of labour supply”.
Also behind the ageing trends, the report says, is higher quality healthcare treatment and prevention, which are expected to see further long-run declines in mortality rates, which have also contributed to a shift in Australia’s disease profile.
However, while people have longer and healthier lives, many spend more years managing chronic conditions, which now account for around 90 percent of all deaths, placing increasing pressure on the health and care systems.
The Herald Sun described this demographic shift as “grim”, noting it will impose sustained pressure on the care economy. Croakey notes that the newspaper, like other News Limited media outlets, has campaigned heavily for migration cuts.
Since 2023, employment in the healthcare and social assistance sectors has grown by 13 percent and is projected to grow a further 23 percent by 2035, the report says.
Health expenditure is expected to reach 6.2 percent of GDP by 2065-66, 2.2 percentage points higher than in 2025-26.
Ageing is estimated to account for around one-third of the projected increase in health spending.
Housing and tax inequities
At the heart of concerns about intergenerational inequity is housing unaffordability for young people, which the report says, has occurred “against the backdrop of increasing democratic disruption, political polarisation and a declining trust in institutions”.
Chalmers told media that he hopes that “every page” of the IGR in “justifies, validates and I hope one day vindicate” the decision to scale back the capital gains tax and negative gearing.
The report says people born in the 1980s and 1990s are not seeing the levels and growth of real household wealth as have previous generations, due to lack of access to housing.
Home ownership for households aged 25-34 has fallen by a massive 17 percentage points in the four decades from 1981 to 2021. In 2021, only half of households aged 30-34 and about one-third of those aged 25-29 owned their own home – about a quarter of a million fewer that if home ownership rates had remained at their 1981 levels.
While headlines have been screaming ‘shock horror’ about house prices in the wake of the Government’s housing tax changes, the report notes that lack of supply and investor tax concessions have combined to see housing prices rise by 400 percent between May 1999 and May 2026 – more than twice as fast as average incomes.
The report’s chapter on intergenerational equity also makes the argument for bold tax reform, saying tax arrangements for income earned from assets are inconsistent and often result in lower tax rates than the tax rates paid by workers.
“Compared to people who earn most of their incomes from salary and wages, people who earn a larger share of their income from non-wage sources (excluding benefits) generally pay significantly lower tax rates for the same level of gross income,” it says.
Access though to a “maturing” superannuation system offers some solace to younger generations once they finish working, as well as to the nation’s bottom line.
The report says spending on the age pension is projected to decline as a share of GDP “despite an ageing population and in contrast to most other advanced economies”.
Artificial intelligence
The report says AI will be a “defining influence” on the economy over the next 40 years, and represents the “biggest observable shift” since the 2023 Intergenerational Report.
It says the economic and social implications of AI are expected to be profound but the specific impacts will depend on the evolution of the technology, how deeply and broadly AI is adopted, and how it will be used.
It says AI has the potential to drive productivity and economic growth, to make essential services more accessible, affordable and responsive to individual needs, and to play a big role in health and healthcare. It highlights progress accelerating in areas beyond generative language models, including robotics, and being applied in areas such as biotechnology and drug discovery, as well as energy management.
“The challenge for Australia is to harness and share these benefits widely whilst mitigating its potential to generate societal harms such as misinformation, scams and malicious cyber operations,” it says.
The report also highlights the costs of driving AI, with the Australian Energy Market Operator (AEMO) projecting that data centre electricity consumption will rise by 32 percent per annum to reach 15 terawatt-hours by 2029–30.6
This is equivalent to seven pe cent of National Electricity Market (NEM) demand, and expected to reach 44 terawatt-hours or 10 per cent of NEM demand by 2049–50
It warns that investment in data centres will also impact water resources with one report suggesting annual demand could rise from 5.5 gigalitres – less than half a percent of current water use – to 17 gigalitres by 2030.
ADD WMO Post on water
Global instability
The report warns of growing geopolitical “fragmentation”, where armed confrontation between governments increased from two in 2023, to four in 2024, then to eight in 2025, the highest level since World War II.
But it doesn’t say much about certain tumultuous changes in the past few years – such as observing simply that the United States’ appetite for trade liberalisation and support for some global economic institutions “has waned” – without digging into the cost of decisions by the Trump Administration across a whole range of areas affecting Australians.
While mostly focused on the trade impacts of current instability, and costs of fuel, it reports more than 1,700 instances of potentially malicious cyber activity, an 83 percent increase over the previous year. This poses risks for connected vehicles, industrial control systems, logistics platforms and digital infrastructure, which are increasingly embedded in households, businesses and critical infrastructure, it says.
See Croakey’s archive of articles on the social determinants of health
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