The new Intergenerational Report's population projection and the uncertainty of Australia's demographic future.

Author:Wilson, Tom
Position:Report
 
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Recently it was announced that the population projection to be included as part of the next Intergenerational Report places Australia's population at a little over 35 million by 2049. Much media discussion has followed this announcement, a great deal of it concentrating on how the nation should plan for this coming population growth. A number of commentators, at least implicitly, appear to accept the projection as the true population of Australia at mid-century. This paper argues that the size of Australia's population in 40 years time is in fact subject to considerable uncertainty. It provides some indications of the magnitude of this uncertainty, outlines reasons why it exists, and recommends the use of probabilistic methods for future projections.

INTRODUCTION

In a recent speech on population ageing the federal Treasurer, Wayne Swan, released some details of the population projection to be included as part of the forthcoming third Intergenerational Report. (1) The part of the speech given considerable prominence in media reports was the projected population of a little over 35 million for Australia by 2049. This represents a significant upward revision from the 2007 Intergenerational Report's projection of 28.5 million by 2047 and an approximate doubling of projected population growth. It follows a similarly considerable upward revision to projections of Australia's population produced by the Australian Bureau of Statistics (ABS) last year. (2)

The 35 million figure generated a significant amount of media commentary and debate. (3) Questions asked included:

* How will the transport infrastructure of our capital cities cope with much larger populations?

* How will we supply homes and industry with enough water and power?

* Will there be severe housing shortages and an affordability crisis?

* Will our living standards decline?

* Do we need to plan new cities?

* Is Australia over-populated?

* What will be the environmental implications of a much larger population?

These are all important issues. But one important question seems to have been given little attention: how likely is this new projection? Many commentators--perhaps inadvertently--gave the impression that a population of 35 million by 2049 is a foregone conclusion, and that Australia is somehow locked into a demographic trajectory towards this figure. It is not. There is a great deal of uncertainty about the demographic future, especially 40 years out. In the next two sections this paper provides some indication of the magnitude of this uncertainty and outlines reasons why it exists. The purpose is not to criticise the Intergenerational Report's population projection per se, nor the interpretation of it by commentators. Instead, the paper argues for demographers to re-think the way population projections are prepared and presented in order to communicate their inherent uncertainty clearly. As the paper explains, high and low variant projections are unhelpful; the best approach is to switch to probabilistic population forecasting.

Before proceeding, a brief note on terminology is required. Many demographers are careful to emphasise that they produce population projections, not forecasts. A population projection may be defined as a quantitative statement about the future based on certain assumptions about the drivers of population change. Strictly, projections are always correct unless there are calculation errors. A forecast is a projection which is deemed to describe the most likely future. However, because projections are generally interpreted as forecasts this paper uses the term 'projection error' to describe how good (or bad) a projection was at forecasting the future. It is defined as the value of a middle-variant projection minus the Estimated Resident Population (ERP).

HOW MUCH UNCERTAINTY IS THERE?

As an introduction to demographic uncertainty it is instructive to examine how population futures predicted for Australia over the last decade or so have changed over time. Figure 1 shows the total population of Australia as predicted for the first half of this century by the three Intergenerational Reports and the five most recent ABS projections. Views of Australia's demographic future have clearly changed quite dramatically, and appear to be strongly influenced by demographic trends over the years immediately prior to the...

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