The missing forecast: rising population growth

Michael Pascoe -May 14, 2012

Population growth is on the rise again.

Population growth is on the rise again. Photo: Jessica Shapiro

The federal budget papers are missing an important figure: population growth is on the rise again with a 30 per cent surge in net overseas migration over the seven months to the end of March.

And the absence of that figure or any mention of the population growth outlook for 2012-13 looks more than a little suspicious as stronger population growth makes it more likely that the government's forecast of trend economic growth is indeed achievable in the year ahead.

While Treasury's Budget Paper No. 1 spells out any number of assumptions that underpin the headline economic forecasts, population growth - a key cause and effect of economic growth - is missing.

The only oblique reference is to the projections of the 2010 Intergenerational Report, which held that Australia's population growth was in the process of slowing from its 40-year average of 1.4 per cent.

The most recent demographic release from the Australian Bureau of Statistics is for the year to the end of September, when the population grew by 1.4 per cent with net overseas migration down to 172,500.

Last week's budget announcements included an increase in the migration “official program” of 5,000 places to 190,000, but that gives little-to-no idea of what's actually happening with net migration.

For a start, the official program doesn't count the nearly 14,000 migrants who arrive in the humanitarian program, or a number of smaller categories. Ditto for the 25,000 or so Kiwis who cross the ditch each year, or the international students for whom visa requirements have again been loosened or the sub-section 457 temporary work visas which have been recently embraced and promoted by both sides of politics as Australia struggles to handle its skills shortage.

Uncapped program

The 457 program is uncapped and untargeted - there are as many available as there are employers with positions that meet the scheme's requirements. With the commodities and capital investment booms still gathering pace, demand for 457 visas is rising strongly.

An important contributor to the fall in Australia's population growth rate from the peak of 2.2 per cent in 2008 was the slashing of the international student industry as visa requirements were drastically tightened and the stronger dollar made Australian education more expensive. The publicity surrounding attacks on Indian students in Melbourne didn't help either (and nor will reports of similar threats against Chinese in Sydney).

But now the government is seeking to reinvigorate the education export industry by liberalising tertiary student requirements.

Lagging indicator

While it takes about six months for the ABS to publish its quarterly demographic release - the year to September numbers were released on March 29 - the monthly arrivals and departures figures give an indication of how net overseas migration is rapidly growing again.

Last week's arrivals and departments release was for March. In the seven months since and including September, the ABS counted 393,540 “permanent and long-term” arrivals and 229,030 departures, indicating a net gain of 164,510 people. For the same period up to March 2011, there were fewer arrivals and more departures, indicating a net gain of 125,810.

That 31 per cent surge in apparent net migration, if it maintained over the whole year and assuming natural population growth is steady, would lift total population growth to 1.6 per cent.

The decline in population growth from the bubble's peak in 2008 has been an often overlooked factor in businesses feeling times were much harder.

It's also been part of the reason the unemployment rate hasn't risen as much as our low rate of employment growth would generally cause.

Dog whistlers

Both the major parties went for the dog whistle during the last election and ran away from championing and explaining our necessary strong migration policy. (The Liberal Party's policy is to outsource migration to the Productivity Commission while Labor produced a Sustainable Population Strategy without numbers.)

Both sides know Australia needs to maintain a healthy migration program to both handle the skills crisis in the short term and carry some of the tax burden of most the vast majority of the baby boomer demographic bulge being dependent on the pension in retirement. But neither side really wants to take responsibility for it or spell it out.

Leaving such an important assumption or forecast as population growth out of the federal budget process no doubt suits both sides.

Michael Pascoe is a BusinessDay contributing editor.

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