"We have to give tax breaks to Australians otherwise, if we don't give them those tax breaks, then it starts to constrain the wealth production in the nation," he said. Tax cuts off the table: Treasurer Joe Hockey, with his frontbench team, at the release of the 2015 Intergenerational Report. Credit:Andrew Meares Mr Hockey pledged the federal government would bring serious economic reform policies including in taxation and industrial relations to the 2016 election while also admitting his first budget "did bite off too much". He said the report was a "call to arms in relation to reform" and that older Australians and women were the twin keys to ensure future prosperity. "The grey army is going to deliver prosperity in Australia's future and we need older Australians, we want older Australians, if they choose to do so, to remain in the work force and to come back into the work force," he said.

"The second major army that we have of potential workers is women coming back into the work force, particularly after having children." The report finds the national population will reach nearly 39.7 million by 2054-55, even as the rate of growth slows, while net overseas migration is expected to remain around 215,000 people annually and the number of people aged over 65 will double. The average life expectancy of an Australian woman born in 2055 will reach 96.6 years, up from 93.6 in 2015, while a man born in 2055 will on average live until he is 95.1 years, up from 91.5 years. The number of Australians over the age of 100 is projected to be 40,000 in 2055, up from roughly 5000 today.

The federal government's fourth Intergenerational Report predicts the Australian economy will settle on a slightly lower growth path, easing to 2.8 per cent from an average 3.1 per cent over the last 40 years. The report outlines three long-run drivers of economic growth - participation, productivity and population growth. It sets out a doomsday scenario of ballooning debt that would have reached 122 per cent of GDP under Labor's policy settings, and warns that under current policy settings, net debt will instead reach 60 per cent of GDP - $2609 billion in today's dollars. Net debt is projected to reach 60 per cent of GDP by 2054-55 under current policy settings while spending will rise to 31.2 per cent of GDP. Labor's treasury spokesman Chris Bowen accused Mr Hockey of using the report for political purposes, rather than lifting the tone of political debate in Australia.

"The government's going out of their way to talk about previous policy mentioned 45 times in this document. But even as they do so, even as they engage in this political game, they do it in a way which is dishonest and incompetent," he said. "The previous policy that this document refers to is not the policy of the previous Labor government. The previous policy in this document is from the mid year economic forecast which the Treasurer himself brought down, including $14 billion of extra spending, including $9 billion to the Reserve Bank, the doubling of the deficit." Mr Bowen said the document had also factored in the GP tax, which has been dropped, and that "both can't be right". The report holds out the prospect of income tax cuts to address bracket creep in the early 2020s under the so-called "proposed policy" scenario that models the effect of all of the proposals in the government's first budget being passed. Under the "proposed policy" scenario - elements of which remain blocked by a hostile Senate - a surplus will be reached by the early 2020s, net debt would be paid of by 2031-32 and the surplus will reach 1.4 per cent by 2039-40 and then decline to 0.5 per cent by 2054-55. Spending growth would reach 2.7 per cent growth each year and stay under 26 per cent of GDP.

The government plans to use the data in report to reframe economic and political debate over the next two months, leading into its crucial second budget in May, and beyond. On the budget repair task, Mr Hockey said the government's efforts had already made a difference but that the report made clear the government wasn't "gilding the lily about the numbers at all". "It comes down to payments and as you can see, the payments keep rising and you can see, for example, many of them have bipartisan agreement in a number of areas, like the NDIS, but it is a huge new addition to payments, makes government much bigger," he said. "We've made progress in reducing the amount of expenditure and the growth in payments over the medium term but again, there's more to be done." "Our last budget was addressing 40 years of challenges in the Australian economy and it did bite off too much."

On stalled pension reforms, Mr Hockey said "someone's going to have to move in that regard but you've got to give people notice". "We've got to get the balance right but people might want to contribute for longer to their superannuation, they might want to draw down their superannuation at various points where they have career changes. There may well be a change to the aged pension system that is actually responding to the changing demographics of Australia." Billions of dollars in savings remain blocked in the Senate, including changes to Family Tax benefit B, and pension indexation rates. The report assumes productivity growth will remain steady at around 1.5 per cent annually over the next 40 years. Mr Hockey said productivity growth was the "big if" of the document and improvements would be the biggest contributor to an increase in real GDP per person.

"That is how much we earn, how much we get, how much money we have in our pockets. And that's why labour productivity as well as capital productivity...is hugely important for our future." To drive that productivity growth, investment in new capital and infrastructure was essential, while "innovation and technology is going to completely change the way we live our lives", he said. Work participation rates will decline from 64.6 per cent in 2014-15 to 62.4 per cent for people aged over 15 years by 2054-55 - a contributor to lower economic growth. But labour force participation is expected to increase dramatically in certain sectors over the next 40 years, fuelled by higher rates of female employment and over-65s in work.

"Australians aged over 65 participating in the workforce will increase strongly from 12.9 per cent in 2014-15 to 17.3 per cent in 2054-55." In 2013, the total fertility rate was 1.9 births per woman and the report assumes that the total fertility rate will remain at that level over the next 40 years, "consistent with the observed trend in fertility in the last years". While the Australian Bureau of Statistics last year said the life expectancy for men born in Australia was now 80 and for women 84.3, the Intergenerational Report uses a different forecasting method, which it says "takes a better account of increasing life expectancy trends over time". The report cites the Irish experience of gross debt quintupling from 25.1 per cent of GDP in 2006 to 124 per cent of GDP by 2013, following the global financial crisis, as a "cautionary warning for all governments" that balance sheets can deteriorate rapidly.

Health expenditure is projected to grow from 4.2 per cent of GDP to 5.5 per cent by 2054-55. Consistent with recent warnings by the Treasurer about the burgeoning cost of Medicare, the report shows spending on Medicare to be the fastest growing component of health expenditure - jumping in real terms from $855 per person in 2014-15 to $1071 per person in 2027-28. Population: 39.7 million (up from almost 24 million today) Number of people over the age of 100: Projected to be 40,000 (up from roughly 5000 today and 122 in 1975)

Male life expectancy: 95.1 years (up from 91.5 years today) Female life expectancy: 96.6 years (up from 93.6 years today) Average income, in today's dollars: $117,300 (up from $66,400 today) Productivity growth: Projected to remain at 1.5 per cent for the next 40 years (down from 2.2 per cent in the 1990s) Female employment participation: Projected to increase to 70 per cent (from 66 per cent today)

Work participation rate for those over 65: Expected to increase to 17.3 per cent (up from 12.9 per cent today) with Fergus Hunger Follow us on Twitter