There could be a million fewer people than previously predicted in Australia by the end of the decade as a result of COVID-19, producing an annual hit to the economy of $117 billion by 2030 and an ageing workforce.
- If there is no COVID-19 vaccine for two years, KPMG forecasts Australia’s population will be 1 million people lower in 2030 than predicted
- KPMG says Australia should make a more aggressive pitch for international students
- The Government is due to make an announcement on the migration mix in October
The forecasts, from consultancy KPMG, highlight some of the longer-term impacts of the global pandemic on an Australian economy which has relied on a continued boom in population — mostly from migration — for growth in recent years.
Even if a vaccine is found within 12 months, according to KPMG, the shortfall in previously forecast population would be around 420,000 by 2030. But if there is no vaccine for at least two years, it would be 1 million people.
The forecasts raise the question of how the country best rebuilds its migration program post-pandemic, at a time when there are already political pressures to limit migration in future if unemployment is already high.
KPMG says that in the absence of a vaccine in the next two years, Australia’s population in 10 years is projected to be 28 million rather than the 29 million predicted by the Australian Bureau of Statistics before the COVID-19 crisis.
The $117 billion loss of GDP, on an ongoing basis, equates to an $80 billion drop in household disposable income — or $2,800 a person.
“What net overseas migration does is it gives us a demographic dividend,” KPMG chief economist Dr Brendan Rynne told 7.30.
“That enables us to reinvigorate our population with younger people into our workforce”.
Looking to New Zealand
While Australia has become used to the steady underlying stimulus of population growth, New Zealand provides a case study of a similar economy that has had to deal with much more erratic population growth.
Until about five years ago, the New Zealand economy grew much more unevenly than Australia’s, as it suffered regular periods of “brain drain” to Australia as people sought higher wages and more jobs.
That has had knock-on effects in areas like the housing industry, where uncertainty about consistent housing demand has meant an industry that can build large developments, like Australia’s “McMansion” builders, has not developed.
And it has made it hard to find skilled workers.
In Auckland, Andrew Radcliffe runs an IT business, 3PM, specialising in the construction industry.
“We employ a lot of high-tech software developers and hardware developers,” he told 7.30.
“And in the last 10 years or 15 years I’ve been doing business, getting the top-quality staffing was actually a real problem.”
But booming growth in more recent times has seen the tide of people turn and it has become a flood in recent months as Kiwis go home as a result of COVID-19.
Businessman Lee Stewart is in quarantine with his family in Auckland after returning to his home country after 20 years in Australia.
“I had three days notice to get from Wellington to Sydney in 1997,” he said.
“It was totally incomparable — you would have more business in one building in George Street than in the whole of New Zealand at the time.”
Getting international students back
New Zealand is now in the position where about half its stronger growth prior to COVID-19 was coming from population growth.
Australia is now confronting a similar loss of economic growth post-COVID-19, with Prime Minister Scott Morrison forecasting in May that annual migration would be down 30 per cent this year and 85 per cent in 2021.
That includes everyone from permanent arrivals to the huge number of temporary workers and tourists. But the drop in the number of international students is a particular issue, given its significance as a revenue source for universities and in providing export income to the economy as a whole.
KPMG is arguing that making a more aggressive pitch for international students, in what will be a much more competitive international market, could be key to rebuilding migration and growth.
“One of the solutions that we think makes good policy sense is to look to increase our competitive chances of getting them by offering not only the higher education opportunities here, but also a pathway to residency once they’ve completed their university studies,” Dr Rhynne said.
“So that what we’re offering is higher education as a bundled product, where it becomes not only learning at good universities but also a pathway to residency and becoming part of our community and society.”
Such a strategy “would add to our net overseas migration intake, formally, but it also enables that migration intake to be highly skilled residents coming in to help grow our workforce”, he said.
Migration announcement to come in October
Acting Immigration Minister Alan Tudge says the Government is considering the post-COVID-19 migration mix and will have more to say about it in the October budget.
But, in the meantime, he argues Australia will be particularly attractive for students and high-skilled workers, post-COVID-19, on existing policy settings “because we have done better healthwise and economically”.
“We’ll be wanting to gradually start that student program up again but only when we’ve got the clear advice that it is safe to do so … and, of course, ensuring the quarantine spots that are utilised in addition to those we already have, so that Australians aren’t missing out,” he said.
Labor’s immigration spokeswoman, Senator Kristina Keneally, created controversy in May when she argued there was a question over whether Australia should restart a migration program “in the same numbers and in the same composition as before the crisis?”
“Our answer should be no. Our economic recovery must help all Australians get back on their feet, and to do that we need a migration program that puts Australian workers first,” she said.
Mr Tudge acknowledges that migration does not just have a cultural or social impact but is “a significant contributor not just to GDP but per capita growth … it is making us all wealthier”.
He does not anticipate problems of competitive job pressures, noting much of the migration program “is demand-driven and dependent on employers not being able to find an Australia to do the job”.
“My expectation is, the sponsored skilled migrant stream will be much lower because there will be more Australians looking for work,” he said.