The 2021 Intergenerational Report projects an outlook for the economy and the Australian government’s budget over the next 40 years. This outlook has been profoundly affected by the COVID-19 pandemic, which has caused the most severe global economic shock since the Great Depression.

While Australia’s economic recovery is well advanced, some effects from this shock will persist for years to come. At the same time, pre-existing structural trends – such as population ageing – remain ongoing challenges for the economy and the budget.

The economic and fiscal projections highlight some of the long-term risks and opportunities Australia faces, assuming policies remain similar to current settings. However, government policies do not stand still and can be expected to change over time in response to the challenges presented in this report. Successive intergenerational reports have taken more optimistic views about the future as governments have responded to long-term challenges.

Australia remains very well placed to overcome these challenges and to take advantage of opportunities in the future. Australia has a strong economy that is growing. The Australian government also has a responsible and sustainable fiscal position which means it can fund essential services and invest for the future.

Key points:

• COVID-19 will have lasting effects on the economy and the budget.
• Economic growth is projected to slow, largely reflecting slower population growth.
• The budget will improve as the economy recovers, but is projected to remain in deficit.