Our 2014 population forecasts were a surprise to many in that they projected a very significantly slowing in Australian population growth this year.
Growth went from 396,400 in 2013 to around a (conservative) 310,000 in this calendar year.
While population growth in Q1 2014 remained strong at a massive +111,600, the slowing in net immigration is now beginning to flow through to the quarterly data with growth of only +68,400 in Q2.
The second quarter of the year is traditionally a weaker period for population growth with the data not seasonally adjusted but this is significantly less than the +92,000 we saw in Q2 2013 and commensurate with our forecasts remaining broadly on track.
Year-on-year growth over the past two quarters has already declined from +396,200 (+1.7 percent growth) to +364,900 (1.6 percent growth) and there will be further declines in that figure over the next two quarters.
This is the slowest national level of population growth we have seen since Q4 2011.
At the state level we expected to see very strong growth in New South Wales and Victoria but slowing population growth elsewhere.
The ABS released its figures for Q2 2014 recently, so let’s take a look at what we can learn in 4 short parts, particularly as the trends relate to Australia’s housing markets.
Part 1 – Total Population Growth
The total population of Australia increased by 68,400 in Q2 to 23,490,700, suggesting that the rate of population growth will slow in the year ahead.
On a quarterly basis growth is still higher than has historically been “normal” but the extra-strong growth of recent years is fading post-mining construction boom.
Part 2 – Population Drivers
The natural increase of the population has ticked down a little, but the real driver of change is the fall in net immigration.
We have already been witnessing this in the monthly figures for a long while, but now this is beginning to flow through to the national quarterly data.
The latest (revised) rolling annual population change figures show that the rate of population growth in 2008 was even a little higher than we believed at the time at over 2 percent per annum.
However, rate of growth has now eased all the way back to 1.6 percent.
Part 3 – Interstate Migration
Our estimates of immigration and natural increase will be close enough to the mark.
The real key to understanding population growth within Australia is to look at net interstate migration.
One of the dynamics which has helped to grease the wheels of the Sydney housing market over the decades has been an outflow of population to cheaper (and sunnier) climes.
Sydney’s chronically under-supplied housing market grown accustomed to losing anywhere up to 42,000 heads from New South Wales in any given year, and usually somewhere between 10,000 and 35,000 per annum over the last few decades.
However, this is no longer happening with migration away from NSW falling to the lowest levelever recorded, with further declines to come over the next 6 months too.
At the same time net interstate migration into Victoria has increased to its highest level on record.
What’s happening here? In a word – a quest for jobs (alright, that’s four words).
Australians and migrants are increasingly gravitating to or around the largest two capital cities Sydney and Melbourne in search of employment as the mining construction boom wanes.
They may not always find it, but clearly the mining states are seen to be a less favourable prospect at this juncture.
Adelaide has been suffering from a “brain drain” for fully a dozen years now, while the mining states of Western Australia and Queensland – which once benefited massively from interstate population flows – are no longer doing so to anything like the same extent.
Indeed Western Australia passed a small but significant milestone in the June 2014 quarter – for the first time in 11 years the state saw a net interstate outflow – OK, so it was only 33 persons, but this represents a material downward shift from previous inflows.
And while Queensland still benefits from net interstate migration (+5,753) this is the lowest figure on record for the Sunshine State.
Part 4 – State by State
Over the long run population growth in Australia has all been about the four largest states attracting ever more heads.
On a rolling annual basis, in line with our forecasts NSW is comfortably leading the way with growth of +109,100.
Over the last decade the strength of the mining states has been evident.
In the current climate, we expect to see Sydney standing head and shoulders ahead of the other capital city locations in terms of population growth, while due to steadily rising rates of unemployment regional population is generally slower than that being seen in the capitals.
While population statistics are forever tricky to anticipate it seems likely that by the end of the calendar year population growth in Australia will have trended down close towards our forecast range.
The strongest growth still appears likely to be seen in New South Wales driven by the strength of Sydney’s economy, but Victoria may yet be a surprise package.
Virtually everywhere else, the trend in population growth is down for the foreseeable future.