Treasurer Jim Chalmers says Australia’s falling fertility rate strengthens the case for well-managed migration, as the latest long-term population projections point to slower growth, an ageing population and increasing pressure on the tax base and essential services.

The comments come ahead of the 2026 Intergenerational Report, which is expected to show Australia’s population growing more slowly than previously forecast because Australians are having fewer children and having them later in life.

The report projects a materially smaller population by the middle of the 2060s than Treasury expected only a few years ago. The fertility rate is forecast to remain well below the replacement level of about 2.1 births per woman, while Australians continue to live longer.

Chalmers has argued that migration remains a “force for good” when it is well managed and aligned with the country’s economic capacity. His point is not that immigration can directly reverse the birth rate. Rather, migration affects the size and age profile of the population and can help fill labour shortages as the locally born population grows more slowly.

That distinction matters in a political environment where migration is also being blamed for pressure on housing, infrastructure and public services. A younger migrant intake can strengthen the workforce and the tax base, but new arrivals also need homes, transport, health care and education.

The demographic problem identified by Treasury is long term. Australia is expected to have a larger share of older people, meaning proportionally fewer workers will support higher spending on health, aged care and pensions. Slower population growth can also reduce the pace at which the overall economy expands.

The government says those pressures make productivity, workforce participation and migration policy increasingly important. Chalmers has emphasised that migration should be managed rather than treated as an unlimited substitute for domestic population growth.

Australia’s fertility decline is not unique. Most advanced economies have experienced lower birth rates as people delay having children, family sizes shrink, housing costs increase and women spend longer in education and the workforce.

For governments, there is no simple lever that reliably pushes fertility back to replacement level. Cash payments can produce a short-term effect, but international evidence suggests family decisions are shaped by a wider set of factors including housing security, childcare costs, paid parental leave, job stability and confidence about the future.

Chalmers has ruled out reviving the old-style baby bonus as the centrepiece of the government’s response. Instead, Labor points to cheaper early childhood education, expanded paid parental leave and superannuation on government-funded parental leave as policies intended to reduce the financial penalty associated with having children.

Independent MP Bob Katter has proposed a much larger birth payment, arguing that Australia should directly reward families for raising children. The government has rejected that approach, saying broad family supports are more sustainable and better targeted than a large one-off payment.

The migration side of the debate is just as contested. Net overseas migration surged after the pandemic as borders reopened and temporary students and workers returned. It has since fallen from that peak, and the government has tightened several visa settings while saying the intake needs to be brought to a more sustainable level.

Opposition parties argue that migration has remained too high and has worsened housing shortages. The Coalition has promised a substantially lower intake and is developing a policy that links migration more explicitly to the number of homes being built.

Labor’s response is that the country cannot treat every migrant as an identical unit of demand. Health services, construction, aged care, agriculture, universities and regional industries all rely to varying degrees on overseas workers. Cutting the intake quickly can therefore ease some demand while creating shortages elsewhere.

That trade-off is central to Chalmers’ demographic argument. If fertility remains low, Australia will have fewer young people entering the workforce relative to the number of older people leaving it. Migration can change that balance more quickly than policies designed to influence births, because children born today will not enter the full-time workforce for roughly two decades.

But migration is not a substitute for family policy. A country can support people who want children while also running a migration program. The two policies address different time horizons and different economic needs.

The Intergenerational Report is designed to make those time horizons visible. It looks decades ahead rather than focusing only on the next budget cycle and examines how demographic change affects revenue, spending and living standards.

Long-term projections are not predictions carved in stone. Fertility, migration, life expectancy and productivity can all shift. The report instead shows what could happen if current trends and policy assumptions broadly continue.

One of the most important findings is likely to be the changing ratio between working-age Australians and retirees. As that ratio falls, governments either need stronger productivity, higher workforce participation, more workers through migration, higher taxes, lower spending growth or some combination of those options.

That is why the fertility debate cannot be reduced to a cultural argument about whether Australians should have more children. The fiscal challenge is about the age structure of the whole population and the capacity of the economy to support rising demand for services.

There are also distributional questions. A migration program that targets younger skilled workers can improve the fiscal position, but the benefits and costs are not evenly spread. Employers may gain access to labour while renters face additional competition in tight housing markets. Universities may gain fee revenue while transport and infrastructure networks face extra demand.

Those effects depend heavily on where migrants live, what skills they bring and how quickly governments and industry add housing and infrastructure. Migration policy therefore works best when it is integrated with planning, construction, education and workforce policy rather than set as an isolated annual number.

Chalmers has sought to make that broader case while rejecting the idea that migration should simply be increased whenever fertility falls. The government is simultaneously trying to reduce net overseas migration from recent highs and defend migration as a long-term economic asset.

That can sound contradictory unless the distinction between level and purpose is made clear. A government can believe the current intake should fall while also believing that a continuing migration program is essential to the country’s future.

The political dispute will intensify as the Intergenerational Report is released. Critics will focus on housing, wages, infrastructure and the social capacity to absorb population growth. Supporters of migration will point to labour shortages, ageing and the fiscal advantages of attracting working-age residents.

The report itself will not determine the right migration number. That remains a policy choice for governments and voters, influenced by economic conditions that can change much faster than a 40-year projection.

What the new projections do show is that Australia’s demographic challenge is becoming harder to ignore. Fewer births and longer lives mean a slower-growing, older population unless migration or fertility trends change materially.

Productivity will be just as important as population growth. If each worker can produce more over time, Australia can support higher living standards and public services with slower growth in the number of workers. That is why Treasury’s demographic outlook is tied closely to investment, skills, technology and labour-force participation as well as migration.

For Chalmers, that strengthens the argument for a managed migration system as one part of the response. The more difficult task for the government is demonstrating that the country can capture those demographic and economic benefits while also addressing the housing and infrastructure pressures that make high migration politically contentious.