What Low Migration Means for the Economy
Australia has always been a land of migration - a place where people come to dream big and work hard for a brighter future. The COVID-19 pandemic continues to rewrite the Australian story, however, with international borders mostly closed and migration-based economic growth severely disrupted both now and into the future. Australia's economic prosperity can no longer rely on population growth as a key driver, as demographics change and the nation gets smaller and less connected to the rest of the world.
According to The Australian Bureau of Statistics, Australia’s population was 25,649,985 at the end of March, 2020. Population growth in Australia has always relied heavily on new arrivals, with 61.8% of the annual growth rate, or 357,000 people, due to net overseas migration. Back in May, Prime Minister Scott Morrison estimated annual migration of 34,000 for the year ahead, a sharp drop from the 270,000 originally forecast. According to the latest quarterly business report from Deloitte Access Economics, Australia can expect greatly reduced migration and population numbers, with overall population growth forecast to decline by 600,000 by 2022.
Before the pandemic, Australia was forecast to reach 30 million people by 2029. Now, no-one is sure what lies ahead. According to economic consultancy Deloitte, the decision to shut Australia's borders will impact every single aspect of society: “The arc of our nation’s history is bending before our very eyes – a smaller and older Australia awaits us... That isn’t necessarily bad, but it’s definitely big. It will reshape the nation’s future in a bunch of ways... If demographics is destiny, then our destiny just got a lot more challenging."
Along with fewer new arrivals, Australia can expect a greatly reduced birth rate over coming years. Treasury predicts a significant slump in the domestic fertility rate over the next decade, which means Australia will be a substantially older population than forecast just a year ago. Over the next decade and longer, the combination of fewer workers, more retirees, and an absence of migrants from the labour force will put additional pressure on an already struggling economy. Deloitte is expecting the economy to be permanently "3% smaller than pre-COVID forecasts."
Deloitte is not alone in its predictions, with Treasury itself predicting an even bigger downturn of 1 million fewer people by 2022 if the international border remains closed until late 2021. The Property Council has made a less pessimistic prediction, forecasting a decline in population growth of 214,000 by 2021 and a drop in housing demand between 129,000 and 232,000 dwellings. While no-one knows exactly what the numbers will be, no part of the Australian economy will remain unaffected.
Fewer people entering the country is already having a huge economic impact, from a lack of seasonal and healthcare workers to a sharp drop in housing demand. The housing sector has urged the government to create a migration plan in direct response to the new and ever-changing conditions, including an extension to HomeBuilder incentives. According to Deloitte, the "loss of migrants will have impacts for many years; it weighs on the pace of recovery, slowing everything from housing construction to the utilities. And, combined with a slumping birth rate, it will change the outlook for school numbers.”