Golden age 'will stretch to 2050'

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Australian Treasury chief Ken Henry has outlined a golden age for the Australian economy lasting to 2050 and beyond, as rapid population growth and Asian demand for resources bring a sustained surge of global investment.

Dr Henry said the period ahead would impose great challenges on the government to pursue economic reform but "with the right decisions, one can envisage a period of unprecedented prosperity".

Directly rebutting the views of leading economist Ross Garnaut, Dr Henry said Australia would comfortably manage the big and sustained current account deficits that would be caused by the investment boom.

Dr Henry told a business forum at Queensland University of Technology that the rapid growth in the population, caused by much higher migration and a rise in the fertility rate, had transformed thinking about the impact of population ageing on the economy, and would require large-scale economic and social infrastructure.

He said that the projected population would rise to more than 35 million people by 2050.

Sydney's population would rise by 54 per cent, Melbourne by 74 per cent and Brisbane by 106 per cent. This would impose challenges for planners, as the cities could not expand simply by increasing their geographic footprints.

Dr Henry said Australia would not have been able to manage the investment boom and the challenges of population growth and climate change with the inflexible economy of the 1960s, 1970s and 1980s.

"But these forces are hitting now, at a time when we have implemented 25 years of economic reforms; when the Australian economy has just demonstrated to the rest of the world that, for some time now, it has quite possibly been the best governed, most flexible, most resilient of all industrialized economies; when there is unprecedented global interest in us; and when there is, domestically, a strong appetite for further policy change," he said.