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 Intergenerational Report, released by Treasurer Joe Hockey on Thursday, outlines three long-run drivers of economic growth - participation, productivity and population growth.

The report 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.

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.

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.

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  (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

SMH