Australia will not be building its way out of recession. A new report released by the National Housing Finance and Investment Corporation (NHFIC) today revealed that demand for housing could be cut by between 129,000 and 232,000 over the next three years, a collapse triggered by a fall in migration and population growth.
For decades, high levels of migration was central to Australia’s strong economic performance. Thanks to the COVID-19 pandemic, closed borders and a stagnant global economy, Australia’s population growth is at its lowest level in more than a century. And it’s a dramatic change which will send shock waves across the Australian economy for years to come.
An economy of migrants
Over the last two decades, Australia’s population grew at 1.6%, compared to an OECD average of 0.6%. About 60% of that growth comes from migration. And without it, Australia’s economic narrative might’ve looked quite different.
“If we hadn’t had the population growth we had, we wouldn’t be able to say we’ve gone nearly 30 years without a recession,” economist Saul Eslake told Crikey. “The absence of immigration is going to make a big hole.”
Just how big will the hole be? Net overseas migration is expected to fall from 154,000 in 2019-20 to 31,000 in the next financial year. And by some forecasts, that number might not get back up to pre-pandemic levels this decade, thanks to the lingering economic effects of the pandemic and border closures.
Who gets hit?
The worst case scenario in NHFIC’s modelling on construction envisaged an Australia with 214,000 fewer people. A drop in population like that won’t all hit at once, but will instead be felt in fits and starts across the economy over coming years.
Some sectors are already in full-blown crisis. Higher education, which for years leaned heavily on international student numbers, could lose up to $4.8 billion. Without meaningful government support, 11,000 jobs have already gone.
Without migrant workers picking our fruit, Australia’s horticulture sector could shrink. Since 2015, more than half Australia’s doctors were trained overseas, and there are real worries about how closed borders could lead to medical shortages in the regions, where migrants frequently help paper over gaps in the health system.
The impact will be felt across the country too. While most migrants, pre-crisis, were going to Sydney and Melbourne, plenty were also heading to the regions, where migrants contributed to 26% of population growth, and more than half in specific areas like New England.
Eslake also says that the fall in migration is likely to hinder both GDP growth and per capita GDP growth, since migrants often tend to improve levels of human capital, and the skill and entrepreneurial quality of the workforce.
And while there are already signs our post-pandemic political debate could get burdened by nativist narratives about migrants stealing Australian jobs, that characterisation just isn’t born out.
“Migrants are much more likely to be skilled, they’re not competing for jobs, and they’re more likely to be creating jobs for native-born Australians,” Eslake says. “But because we import our political ideas from the US and Europe, that argument spreads.”
Requiring immigration to drive your economy is lazy and stupid.
Rather than relying on bulldozing more of the natural environment to build housing estates, maybe it would be a better idea to build high-tech industries and aim for a more sustainable population.
Of course, this will never happen as all levels of government in Australia are driven by the real estate lobby.
Totally agree. There’s also a great need for social housing to be built for people who live here already.
As for the medical workforce. Most of those who get into medical courses are from upper income backgrounds in the cities and don’t want to work in country towns. Or often in poorer parts of town. This has been an issue for decades. I don’t know whether it is still the case, but overseas trained doctors (generally not from Anglo-background countries) could be recognised for work as a doctor in the bush but not the city. Medicare practice numbers should be tied to location in order to have an equitable distribution of medical practitioners throughout the country. But that, like getting rid of the inefficient fee-for- service model is regarded by doctors as rank socialism.
Excellent idea – “…Medicare practice numbers should be tied to location…”.
As rural areas have much lower population densities than cities it would be necessary to ”weight’ them as we do with electorates.
See how keen doctors are to make a living off an entirely fee paying public.
The great Australian Ponzi Scheme.
Kishor, this is such an intellectually vapid argument. Consistent studies by the Productivity Commission amongst others has shown that GDP Per capital has actually fallen for Australians due to rapid populations increase. Adding annually the equivalent population of a major city like Canberra, without building the necessary infrastructure, education, health and community resources has Progressively depleted common good. When we look beyond the very limited measure of GDP to areas like the environment, water resources and biodiversity Australian-has an appalling record of mismanagement. And what has this mirage of rapid population growth produced in terms of mental well being or social cohesion? . In fact there is not a single challenge we face that actually gets easier with a rapidly expanding population.
A little more thought pleas before you mindlessly spruik the interests of property developers.
I forgot to mention that the Welsh coal industry (English capitalists) folded due to the banning of child labour; & the US cotton industry became less competitive with the ending of slavery in the US. ClearLy both policy failures. The thing is, economics as a discipline, and it’s buddy capitalism, have no morals whatsoever.
I have the same sympathy to Australia’s horticulture, farmers, and temporary immigrant worker industries that I would have towards the British coal mines and the US cotton farms, & like I do to the South Asian footwear and apparel sweatshops, because they aren’t prepared to pay people (mums, dads, sisters, brothers, ie. people) decent wages. I’m sick to death of the race to the bottom and the constant cry of the drug dealers’ defence, ‘if I don’t do it, someone else will’, as an excuse by those praying to their god capitalism.
Another article which takes as a given that population increase is good, no questioning of the premise. I give up.