Analytical note on New Zealand’s demographic trends

The Treasury has published a new analytical note on demographic transitions that New Zealand must navigate to support its long-term economic and fiscal sustainability.

Andrew Binning, Susie McKenzie, Murat Özbilgin and Christie Smith, New Zealand demographics and their role in an overlapping generations model (AN 24/08)

Key findings:

• Like many developed countries, New Zealand’s population is ageing. Its population is living longer and fertility rates have fallen, shifting the age composition towards older generations. This change in demographics is expected to continue into the future.
• This paper explores a demographic model based on three core components: fertility rates, survival probabilities, and net migration. It illustrates how varying the assumptions affects the size and age-composition of the long-run population.
• The baseline projections indicate that New Zealand’s population could reach approximately 7.5 million beyond 2100, though there is considerable uncertainty about all of the demographic assumptions that underpin such a long-run projection. Given the fertility rates that currently prevail in New Zealand, net migration is likely to play a large role in maintaining New Zealand’s population. If current sub-replacement fertility rates continue, New Zealand’s population would eventually decline to zero if there was no net migration inflow.
• These demographic trends have implications for many important areas of fiscal policy including superannuation, health, education, and taxation. Population ageing is expected to substantially increase the fiscal cost of superannuation and health care.

Disclaimer: The views, opinions, findings, and conclusions or recommendations expressed in this paper are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in papers and articles.