Where Will Our Economy be in 10 Years?

So far, 2015 has been a rollercoaster year for our economy. From making historic deals with China [1] to experiencing a slowdown in economic growth, [2] it seems that Australians will embark on their future with uncertainty. The question remains, should we be worried about our fate?

The pillar for every economy is rooted in its human capital, and Australia is no different. Based on the ABS’s projected population growth of 1.4% per annum, [3] Australia will hit 27 million people in 2025. By this time, we will start to see more and more problems associated with our ageing population. Traffic jams will become more common, and our shrinking labour force will start to feel pressure to support the increasing number of pensioners as a result of inter-generational inequity. I would not be surprised if the government introduced even tougher policies to deal with these issues, such as increasing the retirement age even further, which is likely to irritate working Australians even more. The current government is seemingly unwilling to address the population burden which threatens Australia’s future prosperity. The reality is that they will not have the funds to build the extra infrastructure needed to accommodate our burgeoning population, unless we substantially increase our government revenue.

Australia will also undergo a structural change in its economic make up. In 10 years, the mining sector will still be relevant, but it will never be the major driving force it once was back in the early 2000s. Expect sectors such as agribusiness, international education and gas to power our economy in the next decade. [4] Other important sectors include healthcare and wealth management, as our ageing population demand more and more of these services. China will still be our number one trading partner, but I suspect that we will be building much closer trade relationships with India and Indonesia, as they are projected to become economic superpowers by 2050. The changes in population and economic make up would probably result in lower overall economic growth, somewhere in the range of 1.5 to 2.5% per annum.

Technology in all forms will revolutionise much of Australia’s economy by 2025. Controversial disruptive technologies such as 3D printing and Uber will be more or less accepted and integrated into the economy. Our roads will be seeing more and more electric cars which leave a very small carbon footprint. The NBN will probably be scrapped and replaced with a better alternative to improve our connection speeds. Digital innovation will be more pervasive, increasing our productivity and efficiency in the form of further automation and simpler transactions. On the downside, the manufacturing sector will be hit the hardest with these improvements. Workers with a lack of technology know-how will find it increasingly difficult to hold, or even find, a job. The younger generations will most likely take these jobs. I would expect Australia to finally have a thriving tech start-up sector as the Australian government realises the benefit to hand out grants to the most promising entrepreneurs.

The environment is also a key point in Australia’s economy, as we live in one of the driest countries on Earth. Without any strategies put into place, forecasts suggest that Australia is likely to lose 8% in GDP due to climate change. [5] So far, the current government’s stance on dealing with climate change is questionable, given that it supports both coal production and reducing greenhouse emissions. However, Australians are more likely to adopt cleaner energy solutions, such as solar panels and wind farms, as future technological improvements will make these services a lot cheaper. In the future, Australians should minimise environmental damage and preserve as much of the ecology as possible. Natural resources such as water and minerals will be scarcer as the years go by, and it is important that Australia manages them as best as possible.

Overall, I can imagine Australia to be one of the better performing developed countries in terms of economic stability. Our technology savvy population should be well equipped to produce high quality goods and services, generating trade opportunities with our biggest partners. The biggest challenge Australia faces will all be centred on the ageing population, particularly in areas such as housing affordability, traffic congestion and health care. Of course, these projections are mere speculations, and we do not know for certain how the future will pan out. One thing is for sure: the people of Australia and the government must work together to forge a prosperous future for current and future generations to come.

Alex is a final year student studying a double degree in commerce and economics at Monash University.

[1] Australian Government, 2015. China – Australia Free Trade Agreement. http://dfat.gov.au/trade/agreements/chafta/Pages/australia-china-fta.aspx

[2] Australian Bureau of Statistics, 2015. National Income, Expenditure and Product. http://www.abs.gov.au/ausstats/[email protected]/mf/5206.0/

[3] Australian Bureau of Statistics, 2014. Australian Demographic Statistics. http://www.abs.gov.au/ausstats/[email protected]/mf/3101.0/

[4] Business Review Weekly, 2014. The 25 Best Sectors to be in 20 Years. http://www.brw.com.au/p/business/the_best_sectors_to_be_in_for_the_m02GGAX8FMvyBEEUstrNNJ

[5] Australian Government, 2015. 2015 Intergenerational Report. http://www.treasury.gov.au/~/media/Treasury/Publications%20and%20Media/Publications/2015/2015%20Intergenerational%20Report/Downloads/PDF/2015_IGR.ashx