SYDNEY, September 18, 2009 (AFP) - Australia's population will explode by almost two-thirds in the next 40 years, posing an economic threat to the nation that is as serious as climate change, the government warned on Friday.

Treasurer Wayne Swan said that as the country's average age grows, government spending will have to pick up, leading to lower real GDP per person.

He said surging birth rates as well as rising immigration will see the population jump 65 percent to 35 million by 2049, an upgrade of seven million from previous forecasts.

The number of young and working-age people would grow by 45 percent.

But the senior population would double and the number of elderly people would expand four-and-a-half-fold.

"Along with climate change, this is the most important challenge we face," Swan said.

More women of child-bearing age with the best fertility rate in almost two decades of 1.9 births per woman would underpin the larger-than-expected surge, Swan said, along with greater numbers of younger migrants.

The ratio of retirees to working-age Australians would drop to 1:2.7, from 1:5 currently, and Swan said careful environmental and infrastructure planning would be required to support the boom and ageing of the workforce.

"Population ageing will lead to slower economic growth in the form of declining of real GDP per person ... and will lead to an increase in Australian government spending per person," Swan said.

"Together these factors (pose) very substantial fiscal pressures."

Australia has already flagged raising the retirement age from 65 to 67 by 2023 and Swan said health, old-age care and pension concerns would grow as those aged 65 and over increased, accounting for 22 percent of the population.

They currently make up 13 percent, and made up just eight percent in 1969.

The world's sixth-largest country by land mass, Australia stretches across some 7.62 million square kilometers (2.94 million square miles), with more than two thirds comprising uninhabitable desert.

Most of the population is concentrated in cities along the east and west coasts, with 84 percent of people living in the most densely populated one percent of the continent.