Forecasting Population Shifts
It’s been parroted many times over in the Aussie media that our population will soar by 2 million over the next 5 years, putting great strain on our infrastructure deficit, and in some locations, our dwelling deficit.
While we agreed in particular with the infrastructure part, the two million figure appeared to become gospel without ever much being questioned. So, we questioned it.
In fact, although making forecasts comes with the associated potential to make one look like an utter plonker, particularly those concerning unpredictable demographic shifts, we felt sufficiently moved to put out a 2014 population forecast, with our key points being twofold:
(i) net immigration would slow sharply in 2014, leading Australian population growth to be significantly lower than expected by the mass media, perhaps even somewhere closer to 320,000 than 400,000; and
(ii) while Sydney would experience exceptionally high population growth, internal demographic shifts would see the rate of population growth slowing in most other states, particularly those with a mining focus, including Western Australia and Queensland.
Of course, for every predictable family in suburbia there are unpredictable bohemian types, often with long hair, who are worryingly prone to zipping off to Europe or East Timor and then randomly reappearing some time later with a wife or child.
While busily trying to extricate myself from the latter category and into the former, I do have some personal understanding, therefore, that a population forecast can never be entirely ‘accurate’, and nor indeed should it even try to be.
Nevertheless, here is what we forecast for 2014 by state (in red) benchmarked against the 2013 actuals (in blue), which is to say, a significant drop.
In the event we went with our conservative low-range forecasts to underscore the key points, thereby suggesting that population growth could be as much as 20 percent lower this year than last.
The ABS demographics data lags a little so we only have the Q1 data in to date, which if anything shows we may have under-cooked the interstate migration story, with migration from the mining states set to go into reverse gear as the mining construction boom unwinds, and migration away from New South Wales (i.e. Sydney) falling to the lowest level ever recorded.
The first quarter showed the New South Wales population recording a blistering growth of more than 35,000 heads, but Queensland and Western Australia slowing as compared to prior years.
Yesterday the ABS released its more timely Overseas Arrivals and Departures figures and, just as we expected, net long term migration has continued to decline all the way through to September 2014, racking up seven monthly declines on the bounce.
Let’s take a look at what we can learn from the release in three short parts below.
Part 1 – Short-term arrivals – Record Chinese Visitors
Part 2 – Net Overseas Migration – Arrivals Decline
September is not traditionally a strong month for permanent arrivals in any case, but the rolling annual trend in long term arrivals continued to decline in the month of September, a trend which has been firmly in place for more than a full year now. In short, immigration into Australia is slowing as we projected.
Netting off the long term departures we find that net long term migration is also now slowing fairly sharply in line with our forecasts, having peaked for this cycle way back in August 2013.
Q1 is always the strongest month for population growth in Australia and we saw recorded growth of more than 111,500 in that 3 month period, but the above net overseas migration data leads us to remain confident that the rate of growth will tank in the coming three quarters.
But the really big story appears to be that for the first time in the history of the data series, Aussie residents are not migrating away from Sydney and as a result the New South Wales population could be exploding higher even more quickly that implied by our above forecasts.
Part 3 – Who is Coming? An Asian Century?
Lastly for today, who are the settlers to Australia and where do they hail from? The first chart here tells you the clear-cut answer: Asia.
The Oceania data series is telling, for New Zealanders are increasingly choosing the homeland over Australia at this stage in the cycle, largely due to the inherent slack in Australia’s softening labour market (the new and improved Australian Labour Force figures, by the way, we will analyse on a state-by-state basis here tomorrow).
Interestingly, Poms are now also joining the Kiwis and voting with their feet, as the controversial experiment with QE appears to have worked some small wonders on UK GDP and employment growth, and the economy in the Old Dart has moved well into the recovery phase…
Last of all for today, drilling into the data at a regional level in the chart below, the decline of New Zealand settlers has, tellingly, left settlers from southern and central Asia right the top of the tree, with settlers from north-east Asia and south-east Asia not too far behind.
Is it going to be an Asian century for Australia? You bet it is!