"There's no doubt that over the coming decades our state's coal-powered generators will reach the end of their useful life," Dominic Perrottet said on Monday.

"Those jurisdictions that can get out of the climate wars and actually have a sensible approach and get ahead of the curve will be the ones who are in a much better position than others."

Mr Perrottet was speaking at the launch of a landmark NSW Treasury report predicting where NSW will be in 40 years, using demographics, housing statistics, workforce trends and key economic forecasts.

Climate change is one of the potential economic shocks that are hard to predict but could rock the economy, according to Treasury's forecasters.

More frequent and severe natural disasters could cost the state between $15.8 billion and $17.2 billion per year on average by 2061, the Intergenerational Report says.

Those disasters will have a significant impact on the livelihoods in communities and on the state's productivity growth.

Between 39,000 and 46,000 properties will be exposed to coastal erosion or inundation in the next 40 years.

And between $750 million and $1.5 billion in agricultural production could be lost every year by then.

Much depends on the extent of global warming, with Treasury predicting an extra yearly hit to the state economy to the tune of $4.5 billion if temperatures rise by 2.8 degrees compared to the pre-industrial average by 2061, instead of a more moderate prediction of 2.0.degrees.

Mr Perrottet said it was important to develop alternative sources of energy but not to demonise coal on the way through.

Other key risks adding to the uncertainty of the future include geopolitical shifts and technological advances.

The 120-page report also raises housing as a key issue.

The state needs to build 1.7 million more homes to accommodate a growing population - or one new home for every two existing homes.

Those houses will need to be built bearing in mind climate risks like flooding.

The state's population will grow to 11.5 million by 2061, up from 8.2 million currently.

That's four per cent smaller than would have been expected had the COVID-19 pandemic not occurred.

"The report shows very clearly that the average age for a millennial to get into the property market is much higher than it was for Boomers," the treasurer said.

He flagged housing affordability as a key issue for intergenerational equity.

Removing barriers like stamp duty will make it easier to move home and enable more people to buy their own homes, the report concludes.

An ageing population will put more pressure on the budget.

By 2061, more than a quarter of the population will be aged over 65.

The median age in NSW will jump to 44, a near-50 per cent increase on the median age of 30 in 1981.

There will be 2.4 people of working age for every person aged 65 years or older, compared to 3.9 today

NSW will become the country's first trillion-dollar economy, worth around $1.4 trillion by 2061 in today's dollars.

Mr Perrottet praised the report, saying it set out a vision of the future that government can use to make sure children enjoy a healthier, wealthier and wiser future.

"If you don't know where the future lies, then you can't make adjustments to improve the lives of our people in the future," he said.

CEDA Chief Economist Jarrod Ball said the report was a stark reminder of the generational challenges confronting the state over the coming decades.

"Bold new policy ideas to address the state's ageing population, climate change, geopolitical tensions and the uptake of technology are now critical."

Australian Associated Press