From national treasure Tim Toohey:
Compared to government projections of 1.80%pa (ABS Series B), population growth has slowed to 1.35%yoy in 1Q15, and is well on track to meet our forecast of 1.2%yoy by the end of 2015. The source of the decline was mainly due to a further decline in the annual pace of net migration, 173k over the past 4 quarters and 33k less than the same time last year, despite a seasonal lift in net migration that typically occurs in the March quarter. We have argued that net migration would weaken in response to lower employment opportunities which would continue to impact the key categories of graduate students, 457 visas, working holidays, and NZ migrants. It is also worth noting however that our concerns over a falling number of births and high number of deaths also continued in the quarter. The contribution to population growth from natural increase fell appreciably in the quarter as births declined by the largest annual rate in the history of the data and deaths remains cyclically high. As a consequence ‘natural increase’ in the population declined by 15.5k over the year to 1Q15, a record 9.8%yoy decline.
In April we downgraded our estimate of Australia’s ‘potential’ economic growth rate to 2.5%pa and estimated Australia would move into an oversupply of housing by the end of 2017 based on emerging evidence of slower population growth. Although the RBA has recently suggested slower population growth warrants a lower estimate of ‘potential’ economic growth we also believe that they will also become increasing uncomfortable with the nearer term growth implications of rapidly slowing population growth.
Hello housing glut.
