Deloitte pushes population panic button

Deloitte chief economist, Chris Richardson, has long been a vocal proponent of mass immigration and previously called for Australia to lift its already turbo-charged immigration levels.

So, it’s not surprising that Deloitte is the latest economic outfit to sound the alarm over Australia’s lower population projections in response to the COVID-19 pandemic:

When borders open again is, if anything, less certain than a few months ago. And even if Australia opens most international borders gradually through 2021, the nation’s total population in just two years is set to be about 600,000 (six full MCGs) smaller than we’d forecast it to be ahead of COVID. That shortfall looks here to stay. So, if demographics is destiny, then our destiny just got a lot more challenging. That loss of migrants will have impacts for many years: it weighs on the pace of recovery, slowing everything from housing construction to the utilities. And, combined with a slumping birth rate, it will change the outlook for school numbers…

The coronavirus crisis will leave behind a huge hangover: we see an Australian economy permanently be more than 3% smaller than our pre-COVID forecasts, mostly as closed borders mean our population will be similarly smaller. That’s two-thirds of a million missing Australians. (Treasury estimates that shortfall at a million.) The arc of our nation’s history is bending before our very eyes. A smaller and older Australia awaits us. That isn’t necessarily bad, but it’s definitely big: it will reshape the nation’s future in a bunch of ways. So the longer term outlook is worse for all those selling into Australian markets. (It’s our exporters, miners and farmers in particular, who have less to fear on this score.) And it’s most challenging for those industries whose market size is determined by the increase in population. Their pain will linger…

Our current population forecasts fall well shy of those we made immediately pre-COVID. By mid-2022, and as the chart below shows, the gap between our current forecasts for Australia’s population and those we had pre-COVID is 600,000 people…

As usual, Deloitte has failed to mention the upsides from lower growth. You know, nuts & bolts things like alleviating Australia’s chronic infrastructure bottlenecks and other livability indicators.

This is curious, because two years ago Chris Richardson admitted that Australia needed to spend five times as much on infrastructure if we hope to keep up with projected “exceptional” levels of population growth:

Mr Richardson, a partner with Deloitte Access Economics, says a “disappointingly patchy” approach to infrastructure investment means that Australia is running well behind on the infrastructure spending required to ensure smooth-functioning big cities like Melbourne and Sydney and a yawning gap has opened up… “The backlash is building”.

He says that infrastructure spending in the next 50 years in Australia needs to be running at five times the rate it has been in the past 50 years…

Australia had been too slow to build the infrastructure to cater for the extra 380,000 people a year it would add to its current 25 million population and now people are angry as traffic congestion cost the nation an estimated $20 billion a year. An extra 380,000 people a year was the equivalent of a regional city the size of Canberra.

“Where’s the extra Canberra in terms of infrastructure?” Mr Richardson said…

“Better infrastructure is the path to prosperity. We are not on that path.”

Obviously, with much fewer migrants arriving, Australia has the opportunity to catch-up on its gaping infrastructure deficit, thereby unlocking the “path to prosperity”.

I explained in detail all the other benefits from lower immigration and population growth levels on Friday (see here), so I won’t do so again here.

All I will say is that the Nordic countries – Sweden, Denmark, Finland and Norway – are renowned as being among the wealthiest, happiest, best functioning nations in the world. They also have the highest living standards. And they got there without mass immigration-driven population growth:

So, what’s the big deal if Australia’s population growth reverts back to historical levels?

Australia should seek to emulate these Nordic nations – one of which is also a commodity economy – by focusing on improving productivity and living standards instead of perpetual quantity-based growth.