What do you expect would be on the list of future challenges for businesses in Australia? We reviewed the takeaways from the 2023 Intergenerational Report to gain an insight on the Government’s projections for coming decades. This report raised many thoughts on what future challenges there may be for Australian businesses.

What is the Intergenerational Report?
The Intergenerational Report is an assessment on the long-term sustainability of current Australian government policies. Under the Charter of Budget Honesty Act 1998 it is a requirement to produce this report every five years. The purpose of the report is to provide transparency on the pressures the Government budget will face in the long term. It is produced by the Government in power and provides an insight into policy areas that may need to be addressed in order to meet demographic, economic, technological and other developments projected to occur within the next 40 years.

Here, we explore six challenges we see for Australian businesses across the coming decades.

Challenge 1: A greater percentage of the population will be retired
Life expectancy has significantly increased over the decades, yet overall population growth is slowing. This means the percentage of people at retirement age is constantly increasing. For example, within the next 40 years, it is projected that the number of people aged 65 and above will double, and that the number of people aged 85 and above will more than triple.

The following two charts demonstrate the trends for life expectancy and population growth. The population pyramid chart available on the Australian Bureau of Statistics website is also very interesting as it demonstrates the projected age structure for each year for the next four decades, as well as providing historical data.

The challenges of an aging population for businesses include:

• 1. Fewer working-age people – a reduced national workforce
  2. Continued and potentially increasing shortage of workers with specialist skills or qualifications
  3. Having to train up workers for specialist roles rather than being able to source employees who already have those skills
  4. Increasing reliance on immigration to fill skilled worker roles
  5. Issues integrating skilled worker immigrants, for example with regards to English skills and recognition of qualifications
  6. Maintaining productivity and quality with a reduced and lesser skilled workforce
  7. Adapting the workplace environment to meet needs of an older employees
  8. Increasing labour costs due to high demand.

Challenge 2: An ageing population leads to an increased need for care and support services
Australia is already facing challenges meeting the needs for care and support services by people of all ages. The need for these services would reasonably be expected to increase in future decades in parallel with an increase to the aged population. There seems to be two obvious pathways:

• 1. Either care and support services will develop to meet the increasing need, or
  2. Family and friends will shoulder an increasing responsibility for meeting these needs.

Care and support services do not come without a cost somewhere, to someone. With an increasing aged population, the Government will need to collect more revenue, potentially from a smaller workforce, just to continue the current level of services. With this in mind, it’s possible that individual taxpayers may face a rise in their overall taxation rate, or, that some services may be no longer funded and instead need to be paid for privately.

How an increased need for care and support services may affect your business:

• 1. Staff may be spending significantly more time in a caring and support role, so need flexible hours or a part time role – similarly, business owners with these roles may find they are less able to commit the time they want to the business
  2. Staff may be more financially stressed in maintaining the level of healthcare they experience now – they may need to privately fund more of their health needs and potentially also those of aged family and friends they may be caring for.

Challenge 3: The potential for market change driven by goods and services linked to an older population
While not specifically flagged in the 2023 Intergenerational Report, this is an important consideration for businesses. As demographics change, so too will markets related to those demographics. For example, if you are in the business of aged care equipment, demand for your products will likely rise over the next few decades as the percentage of the population above the age of 65 increases. However, for someone running a boxing club, demand for training may fall.

Businesses may wish to consider how an aging population would affect demand for their products or services offering:

• 1. Whether products and services are targeted to a specific age bracket
  2. Whether sales are limited by location, or may be affected by demographic changes locally or regionally
  3. What would be required to appeal to a broader age bracket, or to be able to serve a greater geographic area, in order to retain or increase your market share.

Challenge 4: Managing technological disruption – in development, failure or attack
Technological developments seem to almost be coming at the speed of light. With each further development, change is required to remain competitive. Also, risk increases, as system outages and failures or the like can hold our businesses to ransom until resolved – did anyone say Optus? Don’t forget the bombardment of malicious cyber activity occuring daily either.

To summarise just some of the impacts of technological disruption that businesses are already facing and can expect to continue:

• 1. Requirement for significant changes in business systems and operations to remain competitive
  2. Increased reliance on technology, leading to an increasing range of external factors able to shutdown business activities
  3. Products and services becoming redundant or outdated
  4. Increased complexity of operations, reliant on multiple external technological resources
  5. Increased risk of business activity being maliciously intercepted and interfered with
  6. Constant training to keep up with new systems
  7. Potential for significant impact to business activities from events happening around the world in areas producing, maintaining or developing technology.

Challenge 5: The green out for climate and sustainability
Climate change and the net zero transformation form rising challenges for businesses. Many industries will be undergoing significant changes to reduce emissions and transfer across to ‘green’ energy sources, as the Government is “taking strong action to respond to these challenges and position Australia to maximise opportunities from the global net zero transformation“.

How strong action towards climate change and the global net zero transformation may impact businesses:

• 1. Businesses in the industry of supplying fossil fuels may become redundant – impacting those servicing those industries and supplying to populations who traditionally worked in this industry
  2. The availability of fossil fuels may be restricted
  3. Machinery and vehicles powered by fossil fuels may need to be adapted to use renewable energy
  4. New manufacturing techniques may need to be developed where old techniques are no longer allowed or viable
  5. Some industries may be particularly targeted to reduce emissions – e.g. agriculture
  6. Transport may become more expensive and take longer
  7. Local production or industry may increase.

Challenge 6: Fallout from increasing geopolitical risks
Geopolitical risks rise as a result of international relations and conflict. These risks can include blockades, sanctions, lockdowns, cyber attack, war (or threat of war), amongst others. Where these risks emerge, it can lead to the following issues for businesses:

• 1. Restrictions on trade
  2. Product shortages
  3. Inability to access normal suppliers or markets
  4. Insecurity of supply and/or demand
  5. Increased costs
  6. Extended transport times.

In closing: It’s important to be aware of what is going on around us and have a strategy to meet rising challenges. We suggest you regularly review local, regional, national and global factors that could impact your business and develop an approach that will ensure your business will be able to adapt to the marketplace as it changes, while maintaining profitability.

If you have any questions or concerns about planning to meet future challenges for your business, you can call us on 03 5339 3200 or contact us here.

Thanks for reading.

The information contained on this website has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

Thanks for reading.

The information contained on this website has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.