Thanks, Rebekah, for the welcome and Mark and Paul for the invitation to give this year's Australia and the World Lecture.
I'm grateful to everyone who has joined us here from the ANU, including your new Chancellor, and from the parliamentary press gallery and further afield.
I want to make the most of this chance to take you through today's release of the 2026 Intergenerational Report.
But it's with some humility we talk about the uncertainties of the next 40 years given we meet on Ngunnawal land, part of 65,000 years of continuous culture.
I acknowledge and honour their elders, customs and traditions.
I also thank my predecessors who began then built on this Intergenerational Report, and the officials, advisers and cabinet colleagues who help us put it together.
This is the seventh time this Report has been released. Treasurer Costello did 2, one each for Treasurers Swan, Hockey and Frydenberg, and this is now my second.
Not everybody supports the way governments go about these 40‑year projections, I get that, and we know there are pressures in the here‑and‑now which remain our primary focus, but I do also think everyone can agree on this:
No previous IGR has contended with global challenges this great, with politics this fraught, or a future less certain.
Yet this IGR shows we are better placed than our peers in almost every regard.
The global and generational risks are serious, but Australia's opportunities are endless.
These are the main conclusions.
But if you read the whole thing you'll see one observation repeated more than any other.
Not just that the world is changing, of course it is, and not just that that change is affecting us here, we know it is.
But that the pace of change is accelerating.
This puts plainly the choice before us:
Keep up and succeed or lag and languish.
The word 'change' has always been a sort of Rorschach test.
People imbue it with their own ambitions and anxieties.
For that reason, it's not enough to say the world is changing, or even to say it is changing more quickly.
So let's be specific.
The world is becoming more dangerous -
More unpredictable -
More unequal -
And more divided.
These are not just individual threads but part of a bigger fraying of that intergenerational promise of better times.
The writer and activist James Baldwin said of the American Dream that if people are denied participation in it, 'by their very presence they will wreck it.'
I know this was the 1960s, not the 2060s, the US not Australia, but it still speaks to a truth on every page of this analysis and in every corner of the Commonwealth.
If people are unmoored economically, generationally, they feel disconnected from, and disregarded in, our politics.
At worst that's what we're seeing now, at best it's what's at stake.
Accelerating change is putting more pressure on people.
It's eroding trust in the institutions of our democracy.
It's exacerbating the strain felt by younger generations in particular.
The division in politics now is not between those who accept this and those who don't.
But between those who prey on it and pick at it and politicise it and catastrophise it - and those who seek to alleviate it.
The responsibility that we embrace today and every day is to respond to the pressures of the here and now -
And plan so that the accelerating pace of change is accompanied by the accelerating pace of opportunity.
This Intergenerational Report shows we face very serious risks and pressures.
But that we are better placed and better prepared for them.
Better positioned to benefit from the AI revolution -
To succeed in a fragmenting world -
To make the most of cleaner and cheaper energy -
To manage our changing population -
And to thrive in an era of new industries.
This report also shows we have a better plan.
To maximise our opportunities and minimise the risks.
To grow our economy, lift living standards, embrace new technologies and share the benefits.
Key takeouts
There's a lot in this report.
It shows an Australia in 2066 where:
People live longer, healthier lives, families have fewer kids, and that will make the population grow more slowly, to less than 40 million in 40 years.
Living standards will be higher and people will retire with much more super, meaning much more security.
Our economy will be more than twice its current size and the budget will be strained, but still stronger than in the last update.
Our industrial base will be dominated by services, powered by cleaner energy, completely transformed by technology.
In a much more fragmented and uncertain world.
Five shifts
This future will depend on how we respond to the 5 accelerating shifts in AI, energy, demography, industry and geopolitics.
AI
The AI revolution is the most consequential new emphasis since the 2023 Report, and the biggest economic transformation of our lifetime.
The productivity, investment and labour market impacts of AI will be dramatic.
AI will play a pivotal role in reaching long‑term productivity growth of 1.2 per cent -
And higher if productivity gains accelerate over time.
The IGR shows from 2030 onwards, each extra 0.1 per cent of productivity growth from AI could improve the bottom line by 0.07 percentage points -
And reduce gross debt by 0.3 percentage points within a decade.
We're well positioned, with Australians adopting AI at a higher rate than almost every G20 country -
But the productivity boost from AI depends on translating that uptake into better ways of working.
Two‑thirds of our businesses have adopted AI in some form, but fewer than 10 per cent describe it as significant.
This IGR shows how the AI investment boom is reshaping the global economy.
Capital expenditure by the 5 largest hyperscalers in 2023 was $230 billion.
In 2026 it will be 4 times that, over $1.1 trillion.
That investment pushes AI token prices down, and demand for computing infrastructure up - and this explains the massive data centre boom here and abroad.
Australia has positioned itself early and well.
We have over $150 billion of AI infrastructure projects scheduled over the next 5 years - about 5 per cent of GDP.
New capital expenditure has already almost doubled since the last IGR, reaching $11.6 billion in 2025-26.
The skills in demand are changing too - but human judgement, coordination, accountability and relationships will remain essential.
So far there's more augmentation than automation -
79 per cent of the current workforce has low automation exposure compared to 4 per cent with high exposure.
But we don't take this for granted.
AI offers a lot of upside, but also very serious risks to minimise and manage.
We already see dangerous proliferation of misinformation, scams and malicious cyber operations.
We are vigilant about managing the infrastructure build's impacts on our resources and communities -
And risks of market concentration, social harm and economic disruption.
Energy transition
This AI revolution will have major implications for the energy transition -
It will add to demand for electricity and the infrastructure that supports it.
In 2023, renewables made up around a third of the grid.
Our efforts in cheap and clean energy mean they now account for nearly half.
Over 60 per cent of coal‑fired power generation will retire over the next decade -
Meaning renewables will play a bigger role.
Generation is up and costs are continuing to fall.
Families and businesses have seen costs for renewables fall 80 per cent in a decade.
If current electrification rates continue, average household energy costs could decline 40 per cent between 2030 and 2050 in real terms.
The changes for industry will be just as dramatic.
Australian green exports could exceed $100 billion annually by 2050.
Around 80 per cent of global GDP is tied to net zero commitments -
So demand for coal and LNG will decrease over the century.
While demand for upstream commodities, including critical minerals, will climb dramatically.
Lithium demand is expected to triple -
Nickel, graphite and rare earths to increase by 50 to 90 per cent.
The IGR shows a disorderly energy transition would be disastrous for our economy and also our environment.
Greater damage from rising sea levels, flooding and erosion -
Lower productivity from higher temperatures -
Smaller crop yields -
And tragedy for our tourism industry.
Inaction also means disaster recovery spending around 25 percentage points higher in 2066 if temperatures exceed 3 degrees of warming.
Ageing population
Our population will change in shape and size, and faster than we previously thought.
Australians living longer and healthier lives is overwhelmingly a good thing.
It's welcome recognition of the quality of our universal healthcare and the contribution that older people make.
And it's worth every dollar of extra pressure it puts on budgets.
The higher life expectancies and fewer children this IGR forecasts are familiar.
What is new is that for the first time, deaths are projected to outnumber births by the 2060s.
That's later than most OECD countries, but fewer births mean much lower increases in Australians aged under 20 -
Growing just 10.4 per cent to the early 2060s, compared to almost 28 per cent forecast in 2023.
This will contribute to slower population growth, averaging 0.9 per cent annually -
0.2 percentage points lower than 2023, and a third lower than the last 40 years.
The number of Australians over 85 will triple by 2066 -
Putting further demand on health services.
Health and social assistance employment has already grown 13 per cent in 3 years -
And will grow 23 per cent more over a decade.
This means one‑third of new healthcare spending over the next 40 years will be because of ageing.
Despite these pressures, we're better placed than many others.
Our working‑age population will continue growing, supporting economic growth.
Migration will play a role here too, an important source of skills that complements our domestic workforce.
And our healthcare system is the envy of the world, its future safeguarded by our actions to make the NDIS and aged care more sustainable.
Industrial transformation
These forces are all shifting and shaping our industrial base.
The IGR shows our advantages of the 2010s - Chinese commodity demand, education and tourism -
Will shift towards new advantages in renewables and critical minerals, strong institutions and strategic partnerships, and AI‑enabled services.
An ageing population will increase demand for the care economy and AI will unlock new business models, accelerating the shift towards services -
Spurred further by rising household incomes.
Commodities will remain crucial to our prosperity -
With demand for critical minerals and rare earths growing as global demand for fossil fuels declines.
Geopolitical fragmentation
These domestic shifts are playing out against a more fragmented world.
Conflicts between countries have risen since the last IGR from 2 to 8 -
The most since the Second World War.
These conflicts are hitting the global economy harder, with the war in the Middle East demonstrating just how much the world relies on the precarious transit of foreign fuels.
Global trade is changing rapidly too.
American tariffs are the highest they've been since the 1940s.
Over 18,000 discriminatory trade measures have been introduced since 2020 -
And two‑thirds of global trade is now subject to regulations.
Foreign investment is not just a matter of economic advantage, but geopolitical interest.
Nations are imposing more export controls and restrictions on AI technologies, semiconductors and critical minerals.
But while trade is restructuring, it's still growing.
Global trade as a percentage of GDP reached 68 per cent in 2025, an all‑time high.
This does not mean we can be complacent about rising protectionism - there will be long‑term costs and consequences from the rise in trade barriers we've seen.
But the changing shape of trade does provide opportunities for Australia to set ourselves apart as a more trusted partner and more reliable exporter.
The budget
There's no separating these 5 accelerating shifts from each other or from their consequences for our budget and economy.
Here the challenges are most stark.
An ageing population means a proportionately smaller workforce -
But broader demand for health and aged care.
A smaller workforce means a proportionately smaller income tax base -
At a time when pressures on social services and tools of statecraft, including defence, will be growing, not easing, along with the fiscal risks of climate change and more frequent disasters.
It is remarkable and exceptional that our budget is strengthening even as these pressures are intensifying.
Government spending over the next 40 years is expected to increase by much less than previously thought.
Spending will grow by less than a third of what was forecast in 2023, just 1.1 per cent.
The cash balance has improved too - ending 1.2 percentage points better than in 2023.
Gross debt is a massive 7.2 percentage points lower, reducing interest payments even as borrowing costs go up, and giving us more headroom to fund the biggest pressures.
The IMF expects US debt to rise 13 percentage points of GDP by the 2030s, while ours falls.
Australia's strengths like super will pay dividends in the decades ahead.
By the mid‑2060s, the Age Pension will cost $31 billion less supported by higher super balances.
The IMF projects our overall public spending to fall over 5 years.
By the 2030s it will be lower as a per cent of GDP than all the G7 and revenue lower than 5 of them until at least the 2030s.
The economy
Our economy is already growing faster than almost every G7 economy, and the IMF expects this to continue for 5 more years.
No G7 country is forecast to grow above 2 per cent into the 2030s like we are.
This is a stable foundation to build the next 40 years on.
Our economy will grow more slowly, but still average 2 per cent a year until it's double its current size.
Incomes will be 55 per cent higher, living standards will be better, and life expectancy longer.
Participation is still expected to grow every year until 2040, and remain higher than previously thought, supported by more women in the workforce.
Participation finishes 1.4 percentage points higher than the 2023 IGR and 10 percentage points higher than the first IGR.
That's equivalent to around 300,000 more workers in 2060 than forecast 3 years ago.
Productivity has been too low for 2 decades, here and abroad.
But global technological progress has increased Treasury's confidence in its long‑term productivity assumption of 1.2 per cent.
We lowered this in our first budget, to be more realistic than the 1.5 our predecessors assumed.
Budgets have maintained it since then to reflect the balance of upside and downside risks, and the range of assumptions used by similar economies.
Australia and the world
This puts us in the middle range of comparable countries, but in other welcome ways we are an outlier.
The fiscal position is the starkest example.
We have lower debt than every G7 country and it will peak lower too.
The US has 12 times more people than Australia, but 40 times more debt and higher interest payments.
Australian births will outpace deaths for much longer than most comparable countries.
We'll spend less on pensions than any OECD economy by the 2060s even as retirement incomes go up not down.
While average spending on public pensions in those countries will rise to over 10 per cent of GDP -
Ours will fall to just 1.8 per cent.
And our workforce participation will continue growing while most OECD economies' decline.
Our plan
Now, every generation is confronted with unique choices about the kind of economy they build in the face of these kinds of pressures.
Previous generations of Australians built an agrarian economy, then an industrial economy, then a more open services‑based economy, in roughly forty‑year cycles.
Each of those economies responded to the challenges and opportunities of their era.
But the solutions of the future do not reside in the past.
The economy of the next 40 years will be built with AI‑enabled services, smarter technologies, new clean industries powered by cheaper energy, and more secure partnerships in the world.
Whether those 40 years benefit our people, grow our economy and strengthen our sovereignty -
Or whether they fracture and fray our social compact -
Is up to all of us, not just governments.
But we take responsibility for getting policies and planning right.
We know economies aren't built on forecasts but on actions.
Our primary focus is on the pressures people are feeling today, and the global and domestic circumstances intensifying them.
At the same time as the pressures in this report make all of our longer term reforms even more important.
1. We've made productivity a whole of government priority.
We're rolling out the broadest productivity package in 25 years, to ensure the IGR's warnings of lower growth don't translate into lower living standards for the next generation.
To reverse the long‑term decline in dynamism, we're revitalising national competition policy and creating a single national market to improve labour mobility, help resources flow where they're most productive and boost long‑run GDP by $13 billion annually.
To compete in the growing contest for capital, we're cutting business taxes, accelerating approvals and reducing compliance costs, which will get projects off the ground faster and lower the regulatory burden by $10 billion per year.
2. We're harnessing AI in our national interests.
To maximise the productivity dividend of AI, we're making adoption easier for workers and businesses, which will boost innovation and encourage labour augmentation over automation.
To move us closer to the global technology frontier, we're working to attract the right kind of AI training, to give us more control and capture more value in the AI supply chain.
To manage the growth in data centres and digital infrastructure and keep Australians safe, we're legislating world‑leading national standards that protect our resources and communities.
3. We're building an adaptable, well‑trained workforce.
To help offset the projected decline of workers as a share of population, we're making participation easier through expanded paid parental leave, super on PPL, more access to early education and care and tax cuts -
Which will increase total hours worked by about 1.3 million per week compared to previous tax settings - equivalent to over 30,000 full‑time jobs.
To respond to rapid changes in our economy, we're making our skills and education systems more dynamic and integrated, to help workers gain and retain skills over their lifetime.
To build the homes and infrastructure we need and take care of more older Australians, we're training more workers in construction, energy, AI and the care economy, addressing skill shortages in areas of growing demand.
4. We're attracting talent through skilled migration.
We're complementing these investments in skills with a robust and well‑managed migration program, to shore up our labour supply as our population ages and fertility rates decline.
And we're boosting productivity and workforce capacity by reforming the migration points test, which will select better‑educated, higher‑skilled and younger migrants.
5. We're rebalancing the tax system to support workers.
To address a heavier tax burden on proportionately fewer workers, we're better aligning the tax treatment of income from work and income from assets, reducing workers' share of the personal income tax burden by 2 percentage points.
This will help level the playing field for younger Australians and future generations, and our combined tax cuts will benefit the average worker by up to $2,800.
We're increasing our capacity to cut workers' taxes again in the future, by strengthening the budget and establishing the Working Australians Tax Offset as a new feature of the system.
6. We're helping more Australians into housing.
To address one of the biggest drivers of intergenerational wealth inequality, we're reforming the tax system to reduce distortions in the housing market.
We're changing arrangements for capital gains and negative gearing to deal with plummeting home ownership rates among young people.
At the same time, we're rolling out a comprehensive plan and making record investments to boost housing supply.
7. We're making retirement more secure.
As our population ages more rapidly, we're strengthening the super system to lift retirement incomes, boost economic security, improve standards and take pressure off the pension.
Our reforms to payday super, super on parental leave and low‑income super will help more Australians secure tens of thousands of dollars more in retirement.
The IGR shows the median retirement balance is set to more than double to approach $450,000 by the end of the medium term, and our reforms will help the system grow and mature over the next 40 years as well.
And as more Australians move out of accumulation, we're ensuring they have more information and better products to make the most of their super.
8. We're delivering cleaner and cheaper energy.
To capitalise on shifts in global demand, we're developing new industries worth up to $100 billion in green exports by 2050.
To ensure families and businesses benefit we're incentivising electrification through solar and batteries, which could reduce household costs by thousands of dollars a year.
To replace the energy from retiring coal‑fired power stations, we're providing certainty to investors through the Capacity Investment Scheme, unlocking $73 billion in new private sector investment in renewable generation and storage.
9. We're boosting national resilience.
To shield us from global energy market volatility and more frequent shocks, we're reducing our reliance on foreign fuels and reforming our gas market -
With our first‑term gas reforms already lowering gas prices by 26 per cent over the year to June, at a time when prices were escalating in Asia and Europe -
And our gas reservation will strengthen the domestic market further.
As demand for critical minerals soars, we're growing our capacity to mine, refine and trade with trusted partners, helping diversify our exports and global supply chains.
We're investing in our broader industrial capacity through Future Made in Australia, to take advantage of new export markets, boost resilience and help our industries make the most of the clean energy opportunities.
Against the tide of rising protectionism, we're cutting nuisance tariffs and forming new international partnerships, to reduce costs for Australians and expand access to new markets.
10. We're improving budget sustainability.
In response to rising structural budget pressures, we're delivering the single largest savings package in Commonwealth history, which will reduce our debt and interest servicing costs.
To meet growing demand for services, we're reforming and securing programs like the NDIS and aged care, to ensure future costs don't overwhelm the budget.
To alleviate structural pressures on our revenue base, we're making tax concessions more sustainable, including in housing and superannuation.
We are taking this responsible approach so we can manage fiscal pressures that emerge -
And improve budget sustainability as global uncertainty and upheaval forces up borrowing costs.
Conclusion
No other country has a plan more comprehensive than this -
To modernise the economy and find opportunity and security in uncertainty.
Of course the findings and forecasts in this Report will challenge us and some of them in confronting ways.
And of course much of it will be weaponised by those who always see things through a more pessimistic and often more political lens.
We are not complacent, on the contrary.
Never before have the risks been more serious or the opportunities more substantial.
Australia's advantages make us more optimistic about the future of our country, our people and our economy.
Not despite all this accelerating change, but because of it.
