Population ageing occurs when the fertility rate declines. This means that for a period of time the ratio of old to young will be higher than average. It also occurs due to increasing life expectancy. Life expectancy rarely increases fast enough to have a noticeable impact.

Japan and Western Europe are the two regions that are most confronted by severe population ageing in the near future. In these countries within twenty years the largest population cohort will be those over 65 and average age will approach 50.

Australia, Canada, Hong Kong, and New Zealand all also have sub-replacement fertility levels, but have high rates of immigration that leads to a growing population. These countries will still see population ageing, but to a lesser degree, due to the Post-WWII baby boom.

The effects of an ageing population are considerable. Economically older people are far more likely to save money and less likely to spend it on consumer goods. This leads to lower interest rates and deflationary pressure.

Social welfare systems are also exposed to problems. pay-as-you-go pension systems are almost completely unsustainable in a period of population ageing, but there are other ways of running a pension. The largest area of expenditure by almost all governments is health care and these prices will increase dramatically as the population gets older requiring higher taxes or a reduced government role in providing health care.

The second largest expenditure of most governments is education and these expenses will fall with an ageing population. Crime is mostly committed by those aged 15-25 and crime rates will fall. However, older people tend to be the section of the population most concerned about crime and most insistent on more law and order.