Australia’s population to swell regardless of COVID-19

A group of researchers have modelled the impact of COVID-19 on Australia’s future population. They find that Australia’s population will still swell to nearly 32 million people by 2040 even if immigration “plummets to zero in 2020-21 and takes eight years to return to the long-run average”:

Our new modelling shows that under a worst-case scenario, Australia will be 1.4 million people – or 4% – smaller in 2040, than if COVID-19 had not happened.

This is largely driven by a massive reduction in international migration…

New projections are now needed to help plan economic and societal recovery from COVID-19. In a new paper, we developed three scenarios to work out plausible population futures for Australia…

Three scenarios for a future Australia

Our model then produced three scenarios.

  1. Light impact: assumes net overseas migration recovers quickly in late 2020. Interstate migration drops slightly in 2019-2020, before rebounding in 2020-21. Fertility is also assumed to dip in 2020-21, before quickly recovering.
  2. Moderate impact: assumes net overseas migration falls substantially in 2020-21, before recovering over the next few years. Interstate migration drops sharply over the next two years, before returning to the long-run average. Fertility falls this financial year and does not fully recover until the late-2020s.
  3. Severe impact: assumes net overseas migration plummets to zero in 2020-21 and takes eight years to return to the long-run average. Interstate migration plummets by up to a third over the next two years, before slowly recovering. Fertility drops to historic lows and takes a decade to recover to the long-run value.

In all three scenarios, life expectancy at birth is assumed to continue its long-run upward trajectory

Possible 4% drop in expected population

Based on the modelled scenarios, COVID-19 is expected to have a measurable and persistent impact on Australia’s population.

Under the severe scenario, Australia’s population will reach 26.6 million by 2025, 29 million by 2030 and 31.8 million by 2040. This is 1.4 million or 4% fewer than our “no pandemic” scenario.

Under the light scenario, Australia’s population will be 180,000 people fewer by 2040. Under the moderate scenario, we will be down 580,000 people.

The impact of COVID-19 will be felt most strongly in the short-term. Annual population growth would have been 1.38% in 2020-21 without the pandemic. This will be just 0.41% under the severe impact scenario. Such a drop in annual population growth was last seen in 1916 due to World War I. Even during the Great Depression, annual growth remained above 0.70%.

If the severe scenario comes to pass, the population of NSW will be almost half a million people fewer by 2040 than without the pandemic. Victoria will see a drop of 400,000, Queensland will be down by about 200,000 and WA down by more than 160,000 people.

Despite smaller population sizes, the impact of the pandemic on population ageing appears to be relatively modest. The proportion of Australians aged 65 and over will reach 20.8% under the severe scenario, compared to 20% without the pandemic.

This is because migration has a limited impact at older ages.

What does this mean for Australia?

A decline in population growth as predicted under each of our scenarios will inevitably impact many sectors of the economy. In the short-term, industries dependent on population growth, such as construction, consumer goods and overseas students, will be the hardest hit.

There are also likely to be ongoing consequences for economic growth, urban and regional planning and labour supply.

But there are also potential benefits, including a reduction in environmental impacts and lower congestion, particularly in Australia’s capital cities.

For too long, Australian policy makers have juiced the economy by importing hundreds of thousands of people annually to work in non-tradeable services industries, alongside increasing household debt. Together, these have driven consumption and malinvestment into property and catch-up infrastructure, rather than productivity, in turn eroded living standards.

Adding roughly one million people every 2.5 years also diluted Australia’s fixed mineral endowment, in turn diluting wealth per capita and making us individually poorer than we otherwise would have been.

In short, an economy built around mass immigration and population growth is a dumb economy.

The COVID-19 pandemic is the perfect opportunity to reset immigration back to early-2000 levels and create a more sustainable Australia built on growth in both productivity and individual living standards.

Lower immigration will lower the Australian dollar and input costs such that Australia grows more by creating and exporting goods and services rather than importing people.

The world has 7.6 billion people. We don’t need to import them to sell to them.

Policy makers must use this crisis to put Australia on a more sustainable path.

Leith van Onselen
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