Treasurer Jim Chalmers released Australia’s 2026 Intergenerational Report on 21 September 2026, the first since 2023, declaring that artificial intelligence will be “a defining influence” on the economy over the next four decades. The report, prepared by the Treasury, elevates AI from a peripheral technology to a core structural driver of long-term fiscal and economic planning.
Key points
- The Productivity Commission estimates AI could increase multi-factor productivity by at least 2.3% over a decade.
- Long-term labour productivity growth assumption held at 1.2% annually, consistent with the 2023 report.
- Data centres’ energy demand projected to reach almost 10% of the National Electricity Market by 2050.
- Payments projected to rise to 27.7% of GDP by the mid-2060s — tax receipts to reach 24.2% of GDP in 2032-33.
- Population projected to age faster and grow more slowly than in 2023, with deaths outnumbering births by the 2060s.
Productivity Commission quantifies AI gains
The report cites Productivity Commission modelling that AI could lift multi-factor productivity by at least 2.3% over ten years. Treasury says the rise and adoption of AI is “likely to support the achievement of Treasury’s long-term labour productivity growth assumption over time”. That assumption remains at 1.2% a year, unchanged from the 2023 Intergenerational Report and in line with the long-term assumptions of many peer economies. The report notes that as a medium-sized economy, Australia’s productivity performance will depend on adopting innovation, supporting investment, developing skills and delivering regulatory reforms that improve the efficient operation of the economy.
Energy demand from data centres reaches National Electricity Market scale
The Intergenerational Report projects that data centres’ demand for energy will reach almost 10% of the National Electricity Market by 2050. The document links this directly to the AI revolution, stating that “Australia’s energy transition will be more important and urgent as global energy supply chains face disruption”. The projection places infrastructure and energy policy at the centre of the government’s AI adoption strategy, with the report arguing Australia is well positioned to benefit from the global AI revolution given its “abundant renewable energy potential and well-developed international connectivity, including in the Indo-Pacific region”.
Chalmers sets ten priorities including harnessing AI in the national interest
Launching the report, Chalmers listed ten key government priorities. Two directly address AI and productivity: “making productivity a whole-of-government priority” and “harnessing AI in the national interest”. The others cover building an adaptable workforce, attracting talent through skilled migration, rebalancing the tax system, housing, retirement security, cleaner energy, national resilience and budget sustainability. Chalmers said the government took responsibility for getting “policy and planning right” and that “the pressures in this report make all of our longer-term reforms even more important”. The report also states that “ensuring AI investment and adoption is aligned with Australia’s national interests will improve Australia’s competitiveness, resilience and wellbeing in the decades ahead”.
Fiscal and demographic pressures frame the AI opportunity
The report projects the Australian economy will be more than twice its current size in real terms by the mid-2060s, with per capita income 55% higher. Yet economic growth is projected at 2% annually over the coming 40 years, weaker than the 3% of the previous four decades. Payments are expected to rise to 27.7% of GDP by the mid-2060s driven by an ageing population and rising service expectations, while tax receipts reach a historical high of 24.2% of GDP in 2032-33 before plateauing. The report warns that “additional pressures such as further spending on defence, the impacts of climate change and the rise of AI are more difficult to quantify and present risks to the fiscal outlook”. On demographics, the population is now expected to age faster and grow more slowly than projected in 2023, with deaths outnumbering births by the 2060s for the first time in an Intergenerational Report forecast. Life expectancy for women is projected at 89.5 years and for men at 86.1 years by the mid-2060s. Labour force participation is “substantially upgraded” and projected to rise until 2039-40, particularly among women and older people, though ageing will weigh on participation over the long term.
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