Judged in terms of GDP per capita, Australia’s ranking among the OECD countries has steadily improved since the beginning of the 1990s. It has now surpassed all G7 countries except the United States. This chapter reviews the main challenges that policy-makers need to address to sustain this strong performance. In framing policy responses it is important to recognise the over-arching framework of fiscal federalism which is of key importance in many areas which are crucial in determining long-run performance. In common with most other OECD countries, population ageing threatens to slow the growth in living standards over coming decades.