Feeling crowded? Population surge likely to have peaked
Australia’s population surge may have reached its peak and even exceeded its pre-Covid growth path, according to Westpac.
People waiting for flights (AP Photo/Rick Bowmer)
While the surge has led to criticism because of its impact on the housing market, Westpac said without the increases, the economic outlook would have been much bleaker.
It said the labour market’s ability to soak up the intake was remarkable.
In the years leading up to the pandemic Australia had a net intake of about 235,000 a year but dropped to a net outflow during Covid.
Based on the pre-pandemic average, net migration would have amounted to around 470,000 over those two years had the pandemic not occurred.
The bank said net migration was about 408,900 in 2022 and contributed 1.6ppts of the 2 per cent a year jump in population growth.
“It has become clear that the strength of population growth observed over the course of this year has far exceeded even our ambitious forecast,” Westpac’s Ryan Wells said.
The bank now expects population growth of 2.3 per cent in 2023 and 1.9 per cent in 2024 followed by 1.5 per cent in 2025.
Against the pre-pandemic pace of around 235,000, these forecasts indicate an “excess” gain of 240,000 in 2023, 140,000 in 2024 and 40,000 in 2025.
“Over the period of 2020 to 2025, we therefore estimate that net migration will be roughly 125,000 more than what would have been expected before COVID-19. In other words, by the end of this year, migration will have fully caught up for the losses observed over the COVID period, and will be outstripping its pre-COVID trajectory.
This is not the first time in our history whereby global events have seen such a rapid shift in migration dynamics. Towards the end of WWII, for example, net migration did not contribute positively to population growth from 1944-46. By 1949, net migration was contributing 1.8ppts of the 3.1%yr surge in population growth.
The surge in population was aimed at addressing the labour shortage but has also added pressure on the housing market.
Population growth has played an important role in the aggregate strength of our economy to date – without it, the economic outlook would have been much bleaker. Accounting for the forecast strength in population, together with our view on economic growth, our forecasts imply GDP per capita declines in the order of 1.1 per cent in 2023 and 0.3 per cent in 2024.
“The ability for labour demand to soak up the surge in population growth so far has been remarkable,” Wells said.
