That population bulge called the baby boomers has been getting more attention than usual over the past year or so.

There have been conferences, government reports and academic musings on what it might all mean for the future.

Attention in Australia has centred mostly on the expected strain on government resources to fund the health and old age pension schemes. But the effects may be more profound than this. There will be economic and social consequences that will radically change the world, probably in ways that we cannot yet foresee.

Of course Australia is not alone. The effects of an ageing population are now being felt in many developed countries, particularly Japan and Italy where populations are already starting to decline. Here the net reproduction rate (the excess of births over deaths) is already negative.

According to low variant population projections from the United Nations, other western countries will soon follow, probably by 2010. Less developed countries, according to this assumption, are on the same demographic track that will see their populations peak by the middle of this century and then start to decline.

These projections are based on the well-known observation that as societies become richer, birth rates tend to fall, often dramatically and quickly. For example in Thailand the number of births per woman dropped from six to less than two between 1960 and today. Other less developed countries are showing a similar trend.

According to this UN scenario the world’s population will peak around 2050 at 7.6 billion from around 5.8 billion today and then start to decline. At that time the net reproduction rate is expected to be around 0.7 which means that the world’s population will decline by around 25 per cent each generation.

If these projections are true, the world will be a very different place to what it is today. For example at the present time, the populations of Africa and Europe are almost equal.

By 2050 Africans will outnumber Europeans by three to one. Nigeria will be the fourth largest country in terms of population and Ethiopia, Zaire and Iran will be in the top 12. The Philippines will have a bigger population than any country in Europe.

By 2050 the median age of the world’s population will be 42 and as high as 58 in developed countries. In countries like Italy that are leading this population change, more than 40 per cent of the population will be over 65. The number of people aged between 75 and 85 will outnumber those aged between zero and ten.

So what will this give us? Will we be in a global nursing home where the predominant form of transport is the wheelchair?

The American social commentator Nicholas Eberstadt reckons that while there will be big challenges facing the health system, they may not be as bad as some predict. Advances in medical care will mean that while people live longer they may also be able to stay healthier longer. However he points out that we need to define what we mean by healthy.

Some studies have shown that as people become wealthier and more educated they tend to complain more about the state of their health despite objective evidence suggesting otherwise.

In Australia as we know, the most dramatic health impact will be on the Pharmaceutical Benefits Scheme and changes will have to be made. The Federal budget will find it hard to meet pension requirements and this will mean a tighter eligibility test (including the value of the home?). Fortunately our situation is not as bad as in US and many European countries where the unfunded liability of more generous schemes is enormous and needs urgent overhaul. But there will also be financial effects.

With less people entering the workforce, growth will slow, real wages will rise and returns on capital will fall. In other words labour will receive a larger portion of the pie. It will mean lower returns on savings that will delay the retirement plans of many older people.

This effect may be delayed if there is a big increase in labour productivity, we work longer or we decide to invest more overseas in countries where population growth is still occurring.

According to Dr M Edey, Assistant Governor of Australia’s Reserve Bank, investing overseas where returns on capital may be higher will spread the cost of an ageing population. He says developed countries should be investing in less developed countries to develop assets that give higher returns. Unfortunately the capital flows are currently going in the wrong direction.

The social effects of this population tsunami have not been fully addressed but they are likely to be profound. Families as we know them will become rare.

Children will grow up without siblings, cousins, aunts or uncles and their only blood relatives will be their ancestors.

What will this social atomisation mean? The question remains unanswered.

Of course the UN projections may be wrong. There can be rapid changes in demographics and net reproduction rates may not fall as much as predicted.

Demographers in the 1930s for example failed to predict the post-war baby boom. But if they are right, expect higher taxes, lower government benefits, a longer working life, lower investment returns at home and maybe higher ones offshore (for a while).

David Tomlinson is a freelance finance journalist.