Property Australia

Why population matters for property

PROPERTY AUSTRALIA October 13, 2020

International border closures will have a long-term impact on our economic and population growth, with one million fewer people living in Australia by the end of 2022.

 

  Three key takeaways:

  • Australia’s population growth is expected to slow to its lowest rate in over 100 years, dropping to 0.2% in 2020/21, and net overseas migration will fall by 72,000 people in 2020/21
  • The National Housing Finance and Investment Corporation forecast that demand for housing could fall by up to 232,000 dwellings over the next three years
  • The Property Council is calling for a “comprehensive national plan for the staged resumption of our migration program,” says chief executive Ken Morrison.

 

Australia’s borders were closed to non-citizens and non-residents in late March as part of the strategy to contain the spread of COVID-19.

At the time, around 80 per cent of coronavirus cases in Australia were traced to people who travelled from overseas or had been a close contact of a returned traveller.

The Morrison Government is now exploring the possibility of ‘travel bubbles’ with low risk countries, including New Zealand, South Korea, Singapore and Japan. Last week’s federal budget assumed that most of the world will be off limits to international travel throughout 2021 until an effective vaccine is available.

The border closure has had an immediate and profound impact on the education and tourism sectors, with overseas visitor arrivals in July down by 99.6 per cent on the previous year. Australian resident returns have also plummeted, down by 99.1 per cent on the same period.

These impacts are reflected in the Federal Budget population growth forecasts. Australia’s population growth is expected to slow to its lowest rate in over 100 years, dropping from 1.2 per cent in 2019/20 to 0.2 per cent in 2020/21 and 0.4 per cent in 2021/22.

Net overseas migration, or NOM, will fall from 154,000 people in 2019/20 to -72,000 in 2020/21 and then to -22,000 people in 2021/22.

Overseas migration has accounted for around 60 per cent of population growth since 2008.

The Budget papers say this negative NOM over the next couple of years will lead to a permanently lower level of population and working age population. Migration is not expected to return to pre-COVID levels within the forward estimates period, and is not expected to be recovered through higher migration rates in following years.

Families are also expected to delay having children because of uncertainty, which will lead to a fall in Australia’s fertility rate. The pandemic will also impact the distribution of population due to the disruption of historical settlement patterns, including hard border closures by states and territories.

Alan Tudge, minister for population, cities and urban infrastructure, told the ABC this week that the decline in population growth would have “a very big impact on our economy and on our GDP growth”.

“Populations been a very significant part of our economic growth story for more than a century, and we’re now going to have the lowest population growth this financial year since World War One.”

Tudge estimated the decline in the population growth rate would reduce Australia’s GDP by 1.4 per cent – growth that would need to be made up in other ways, including through boosted productivity and the employment participation rate, he said.

A recent report by the National Housing Finance and Investment Corporation forecast that COVID-19 could cut demand for housing in Australia by between 129,000 and 232,000 dwellings over the next three years, based on a range of scenarios.

Large falls in underlying demand are already putting upward pressure on vacancy rates and downward pressure on rents, NHFIC says. If sustained, this could cause a contraction in construction activity that would add to the recessionary forces impacting the economy.

Property Council chief executive Ken Morrison says Budget forecasts “reinforce the importance of a comprehensive national plan for the staged resumption of our migration program”.

“This will be fundamental to our economic recovery prospects. We need a plan that sets out how we safely and steadily restore international arrivals supported by tight quarantine arrangements.

“This could start with pilot programs for international students from low risk destinations, followed by skilled migrants before there is a wider reopening to other visitors.

“Fundamental to this approach is to ensure that Australia’s border screening, quarantining arrangements and contact tracing systems are able to provide the needed protection against COVID-19.

“With a strong safety framework we can begin to reopen parts of the economy that rely on international movements and provide population growth to support economic recovery.

“We all hope there will be an effective vaccine available sooner rather than later, but we shouldn’t be putting all our eggs in one basket.

“We should be working on plans now to ensure that we create a safe way to reopen to the world and reactivate one of the biggest drivers of our economic growth – people power,” Morrison concludes.

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