Game changers in an ageing world

Understanding the population trends of different countries is crucial for investors taking a long-term view

- Max Riaz

The burden of an ageing demographic has far-reaching consequences. It impacts the supply of labour and inflation, and brings with it lower economic growth, fiscal instability of government budgets - leading to forever more government borrowing and risks to credit ratings and weaker geopolitical influence. These consequences need to be considered when allocating capital to different markets in investment portfolios.

The great industrial powers of Germany, Japan and China face significant demographic challenges characterised by low birth rates, declining populations and rapidly ageing societies. China's population, for example, is both ageing and decreasing, with projections of a decrease by 48 million, or around 2.7%, between 2019 and 2050. Additionally, according to the United Nations World Population Prospects, by 2050 each of these countries is projected to have a population with the median age exceeding 50 years.

In contrast, the US, Australia and India display more favourable demographic profiles. The US and Australia have relatively higher birth rates-12 per 1000 and 12.1 per 1000 respectively and younger populations compared with Germany (9.3 per 1000), Japan (7) and China (10.6). Similarly, India has a large and growing population, with 17 births per 1000 and a median age projected to be only 38 by 2050. These advantages provide these countries with larger potential workforces and a greater capacity for economic productivity.

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