[CommSec Research]Record migration slump dampens population growth

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Record migration slump dampens population growth

Population

¾ Australia’s population grew by 345,500 people over the year to September. Population growth increased by 1.57 per cent over the past year – the weakest growth rate in four year and well below the 40-years highs reached in the year to March 2009.

¾ A total of 185,800 people migrated to Australia over the year to September – marking the weakest result in just shy of four year and a slide of 41 per cent on migration growth pre-GFC (December 2008).

¾ There were 301,500 babies born in the year to September – holding just shy of the highest reading since quarterly records began 28 years (303,500 - March 2010).

¾ Across the state and territories, it was the mining states of Western Australia and Queensland that recorded the fastest annual population growth rates – a trend that is likely to gain traction in coming years.

What does it all mean?

· Australia’s population growth rate continues to moderate, easing further away from the 40-years highs reached 18 months ago. And the blame can be placed squarely on slide in migration that has occurred in the past year. In fact, a record 102,200 less people called Australia home over the past year, robbing the economy of momentum at an important time and keeping job markets tight.

· It is understandable that migration levels came off the boil during the global financial crisis. A similar result took place in previous downturns, and has largely to do with the uncertainty surrounding job prospects during a downturn. However Federal policy makers need to also take some of the blame. Migration targets were cut and while they are being slowly reinstated the slide in migration is still being felt.

· Contrary to popular belief it isn’t just skills shortages in the mining sector that is driving the demand for additional workers. In fact the Department of Immigration’s occupational shortages list, highlights that a whole manner of workers are needed from Engineers, Accountants, IT experts, Pharmacists, Dentists, Nurses and Doctors. Interestingly the demand for medical related professions makes up a significant proportion of that list. And given that Australia’s population is still growing and at the same time it is an aging population the demand for medical related skills will continue to gain traction.

· The Reserve Bank believes that a pickup in skilled migration will be the key to ensuring that Australia continues to have a relatively balanced job market. But given the rebuilding that is currently underway in flood damaged towns, and the anticipated pickup in economic growth the risks are clearly around a sustained slide in unemployment over the coming year.

· The Federal government certainly has a role in controlling migrant inflows, however further liaisons with businesses will be important in judging the scope and depth of the labour shortage over the coming year. Proactively raising migration targets will also ensure that there isn’t exacerbating tightness in the job market in the years to come. And ensure that the Reserve Bank will have one less thing to worry about in terms of wage growth pushing up inflation and in turn adding further upward pressure to interest rates.

· It can’t be stressed enough that Australia’s strong migration levels is a big deal. Not just in boosting economic growth in the short-term but also in addressing the longer-term implications of Australia’s ageing population. Rising population growth hasn’t resulted in higher unemployment, rather it’s been instrumental in driving economic growth and contributing to firmer job markets.

· Overall population growth of 1.57 per cent is still healthy. Interestingly the result is being driven by the current baby boom that is taking place. Economic prosperity – low unemployment, rising incomes and greater prosperity have prompted more couples to start families. In fact in the past year more than 300,000 babies were born – holding near the highest reading in records going back 28 years.

What do the figures show?

Population Statistics:

· Australia’s population expanded by 345,500 people over the 12 months to 22,407,700 people. Overall, Australia’s population grew by 1.57 per cent over past year, easing further away from the 40 year record pace of 2.16 per cent recorded in the year to March 2009.

· A total of 185,800 people migrated to Australia over the year to September – falling further away from the biggest annual total since European settlement which was recorded in the year to December 2008 (315,700). An additional 509 people called Australia home each day over the past year.

· Over the year to September, 56,069 migrants settled in NSW, followed by Victoria (52,334), Queensland (33,827), Western Australia (25,475), South Australia (13,243), ACT (2,101), Tasmania (1,571), and Northern Territory (1,144).

· There were 301,500 babies born in the year to September - just shy of the year to March (303,500) which was the highest reading in records going back 28 years.

· Population growth eased in all states and territories. Over the past year population growth was fastest in Western Australia (2.09 per cent), followed by Queensland (1.85 per cent), ACT (1.70 per cent), Victoria (1.65 per cent), NSW (1.33 per cent), Northern Territory (1.27 per cent), South Australia (1.07 per cent), and Tasmania (0.81 per cent).

What is the importance of the economic data?

· Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.

What are the implications for interest rates and investors?

· The solid pace of population growth will continue to underpin housing demand. While the sharp lift in the number of births will translate to an increased demand for child-care places over the next five years, and a greater demand for school places over the next 5-20 years.

· Not surprisingly population growth is strongest in the mining states, with Western Australia and Queensland leading the charge. No doubt as the global economic recovery gains traction and mining investment is increased a further demand on labour resources will be required.

· The Reserve Bank is likely to remain on the interest rate sidelines over the next few months, given the near term weakness of the economic data.