Australia will not be building its way out of recession. A new report released by the National Housing Finance and Investment Corporation (NHFIC) today revealed that demand for housing could be cut by between 129,000 and 232,000 over the next three years, a collapse triggered by a fall in migration and population growth.
For decades, high levels of migration was central to Australia’s strong economic performance. Thanks to the COVID-19 pandemic, closed borders and a stagnant global economy, Australia’s population growth is at its lowest level in more than a century. And it’s a dramatic change which will send shock waves across the Australian economy for years to come.
An economy of migrants
Over the last two decades, Australia’s population grew at 1.6%, compared to an OECD average of 0.6%. About 60% of that growth comes from migration. And without it, Australia’s economic narrative might’ve looked quite different.
“If we hadn’t had the population growth we had, we wouldn’t be able to say we’ve gone nearly 30 years without a recession,” economist Saul Eslake told Crikey. “The absence of immigration is going to make a big hole.”
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Just how big will the hole be? Net overseas migration is expected to fall from 154,000 in 2019-20 to 31,000 in the next financial year. And by some forecasts, that number might not get back up to pre-pandemic levels this decade, thanks to the lingering economic effects of the pandemic and border closures.
Who gets hit?
The worst case scenario in NHFIC’s modelling on construction envisaged an Australia with 214,000 fewer people. A drop in population like that won’t all hit at once, but will instead be felt in fits and starts across the economy over coming years.
Some sectors are already in full-blown crisis. Higher education, which for years leaned heavily on international student numbers, could lose up to $4.8 billion. Without meaningful government support, 11,000 jobs have already gone.
Without migrant workers picking our fruit, Australia’s horticulture sector could shrink. Since 2015, more than half Australia’s doctors were trained overseas, and there are real worries about how closed borders could lead to medical shortages in the regions, where migrants frequently help paper over gaps in the health system.
The impact will be felt across the country too. While most migrants, pre-crisis, were going to Sydney and Melbourne, plenty were also heading to the regions, where migrants contributed to 26% of population growth, and more than half in specific areas like New England.
Eslake also says that the fall in migration is likely to hinder both GDP growth and per capita GDP growth, since migrants often tend to improve levels of human capital, and the skill and entrepreneurial quality of the workforce.
And while there are already signs our post-pandemic political debate could get burdened by nativist narratives about migrants stealing Australian jobs, that characterisation just isn’t born out.
“Migrants are much more likely to be skilled, they’re not competing for jobs, and they’re more likely to be creating jobs for native-born Australians,” Eslake says. “But because we import our political ideas from the US and Europe, that argument spreads.”