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Life expectancy is calculated using a mathematical tool called a 'life table'. These are constructed by taking death rates from the population in question (such as Australian males in 2006) and applying them to a hypothetical cohort of persons. The life table is then able to provide probabilities concerning the likelihood of someone in this hypothetical population dying or surviving before their next birthday. Life expectancy can be provided for any age in the life table, by summing the number of person years (the total number of years lived by all persons in the life table) and dividing this by the number of persons still alive in the life table.

Understanding how life tables work illustrates two important points about life expectancy as an indicator. Firstly, the life table models a synthetic population, not a real one. Life expectancy is therefore only a guide to the health of a population at a specific point in time - it is not a prediction about how long people alive today will actually live. Secondly, changes in mortality at younger ages will have a larger impact on life expectancy than changes at older ages. This is because the total number of years the population lives (person years) is used in the life table. For example, infants surviving into adulthood and living long lives will add a considerable number of person years to the population when compared to the elderly living only a few years extra.

It should also be noted that, since 1995, the ABS has published life tables based on three-year averages (such as deaths and populations over the period 2004-06). This is so that fluctuations, especially in older ages where there is a small population at risk, are kept to a minimum. However, as life expectancy is currently increasing, taking a three-year average will (for some years) slightly depress the life expectancy figure we would get compared to if the latest single-year data were used.