Talent in a Shrinking Labour Market: What Australia's 40-Year Forecast Means for Workforce Strategy

Most coverage of the latest Intergenerational Report (IGR) focuses on budgets and headline population figures. For anyone responsible for finding, keeping and developing talent, the more useful reading is this: the report describes a labour market where skilled people become the scarcest resource, and where the organisations that plan for it early will pull ahead.

The Core Problem: Demand Rises While the Talent Pool Tightens

Australia is heading toward a demographic turning point. The fertility rate is projected to fall to 1.34 by 2065–66, and deaths are expected to exceed births by the 2060s. The population is still forecast to reach 39.3 million, but only because of net overseas migration, which the report assumes at 235,000 a year over the long run.

At the same time, the workforce itself is changing shape:

• Labour force participation is projected to peak at 67.7% around 2039–40, then decline to 64.7%.
• Average weekly hours per worker are forecast to ease from 31.4 to 30.6 as part-time work grows.
• The unemployment rate is expected to settle near 4.25%, which is a tight market by historical standards.
• Long-term productivity growth is assumed at 1.2% a year, though the report calls that pathway uncertain.

For talent leaders, this means fewer available hours per worker and a smaller share of people working. Growth will have to come from productivity, skills and access to a wider pool of candidates.

Five Talent Shifts to Plan Around

1. The care workforce will compete with everyone. As Australians aged 65+ nearly double and those over 85 almost triple, health and aged care will absorb a large share of available workers. Other sectors will be recruiting from the same pool.

2. Energy transition skills are a long-term bet. If Australia becomes a renewable energy exporter, demand for engineers, technicians and project delivery talent will build steadily.

3. AI will reshape roles, not just replace them. The report is cautious, saying the outcome depends on how AI develops, who is affected and how society responds. For workforce planners, that argues for reskilling and adaptable job design rather than fixed assumptions.

4. Services growth favours skills over headcount. With the economy moving further toward services, capability in areas like technology, finance, education and professional work becomes the differentiator.

5. Capital cities will keep drawing people. Population growth is projected to be about twice as fast in capital cities as in regional areas, so regional employers may need stronger incentives and clearer career pathways.

Age and Experience: A Two-Way Story

The median age is projected to climb from 38.6 to 45 by 2062–63, so the workforce will get older overall. Recent migrants are much younger, with a median age of about 26 against 38 for residents. That mix creates an opportunity for organisations that can combine experienced staff with early-career talent through mentoring, structured onboarding and knowledge transfer.

Global Talent Is Part of the Plan, but Policy Can Shift

The IGR's migration assumption is not guaranteed. The Opposition and One Nation have both signalled much lower intakes if they form government. Workforce strategies that depend entirely on one policy setting carry risk.

A more resilient approach usually blends several levers:

• Building local pipelines through training, apprenticeships and graduate programs.
• Using overseas recruitment where local supply is short.
• Investing in retention, since keeping a skilled person is cheaper than replacing them.
• Reviewing job design and technology to make each hour of work go further.

The Takeaway

The report's own tone is optimistic. It describes Australia as well placed, with a skilled workforce, a resilient economy and a younger population than many peers. But that advantage is not automatic. It will go to the organisations that treat talent as a long-term strategic asset, not a short-term hiring problem.