Ageing population costs to exceed Medicare

Australia's ageing population will cost the federal budget more than Medicare in a decade.

But the baby boomers growing older is already detracting from economic growth, according to a new report.

Fresh forecasts from the Parliamentary Budget Office show the ageing population will subtract 0.4 percentage points from annual real growth in the Australian government's revenue over the next decade.

At the same time, they will add 0.3 percentage points to real growth in spending.

That will mean an annual cost to the budget of about $36 billion by 2028/29, which is larger than the expected cost of Medicare that year.

But the PBO has stressed the trend is not just a future issue.

"This change has already begun to detract from economic growth, after decades of providing a boost to growth."

In the coming decade, in which many baby boomers will be retiring, these costs will come through changes to workforce participation and more people receiving pensions.

Beyond that, as baby boomers move into their 70s and 80s, health and aged care spending will be more affected.

But the Parliamentary Budget Office has stressed there will be a range of factors driving the future budget position.

For instance, ageing will reduce revenue by $20 billion in 2028/29, but population and income growth are expected to add $187 billion.

Although the government will be spending about $16 billion more that year due to ageing, other factors are expected to increase spending by $104 billion.