Federal Treasurer Peter Costello says Australia's population is now at a sweet point, but he warns beyond 2010 a growing number of people will be retiring from the work force.
Mr Costello has released the second Intergenerational Report, which shows the ageing of the population remains the greatest threat to Australia's economy over the next 40 years.
He says the Government needs to be prudent in spending, increase work force participation and improve skills and education.
Mr Costello says while the birth rate has increased slightly in the five years since the last Intergenerational Report, Australia's fertility rate must increase further.
"It also means developing policies, making it easier for families to have children and to have more children," he said.
"It means workplace flexibility, support for families, and as I've said before, making Australia the most female-friendly country for the work force in the world."
