Migration to Australia surges, with overseas students returning en masse
Following the re-opening of Australia’s border earlier this year, net migration has surged and the population is again growing strongly, almost back at pre-pandemic levels.
This is in line with CCI's forecast put forward by Chris Joye, who earlier last year foreshadowed that, "Opening borders to vaccinated and rigorously tested human capital flows ... will precipitate a wave of skilled, and much needed, overseas talent coming into Australia".
Prior to COVID, Australia’s population was growing at an annual rate of about 1.5%, which was among the fastest growth in the advanced economies, eclipsed by only a few small nations.
During the pandemic, the population broadly stalled for the first time in over a century, as many people returned to their home country and migration dried up as the border was closed.
With the border open again, the population is rapidly recovering, up about 1% from a year earlier as at early 2022. This pick-up has continued, with more timely data on the working-age population from the labour force survey suggesting growth accelerated to 1.2% in Q3.
Most other countries do not publish timely population data, but it seems very likely that Australia's population growth is again at the top of the league table of advanced economies.
This is not surprising given Australia is a very attractive destination given the turmoil in Europe, the political mess in the UK, and China's continued fight against COVID, while for its part the Commonwealth is working hard to increase skilled migration.
The extent of the rebound in Australia's population is clear from the surge in net overseas migration, which increased at an annualised rate of 0.4mn people in Q1 after going backwards in 2020 at the height of the pandemic and remaining broadly unchanged last year.
This was the largest increase in the number of migrants in decades, with more timely, albeit volatile, data on net long-term/permanent arrivals suggesting net migration has continued to Q3.
Scaling the gain in net overseas migration by the size of the population, this surge in Q1 matches the peak briefly seen at the height of the mining boom, which itself was the largest increase since the post-WW2 boom in migration.
Students have also returned in extremely large numbers, reversing the decline in 2020 when many students left Australia as the border closed because they were not eligible for government financial support.
On an annualised basis, net student migration was running at about 0.25mn in both Q1 and Q2 this year, accelerating to 0.5mn in Q3, which is the biggest increase since quarterly data first became available in the mid 2000s.
At the same time, there has been a very large rebound in dedicated visas for skilled and temporary workers, although these numbers are volatile.
In Q3, the net number of skilled/temporary visas increased at an annualised rate of 0.2mn, which was also the biggest increase since these quarterly data were first published in the mid 2000s.
Although the estimated number of non-resident workers is yet to show a meaningful rebound, these broader trends points to an imminent pick-up.
All this points to relief for some of the more intense shortages of both skilled and unskilled workers around the country.
The return of strong population growth also points to stronger economic activity, although that will be overwhelmed over the next couple of years by the negative impact of higher interest rates as the RBA tries to bring inflation under control.
Stronger migration is also a plus for the rental market, with our version of the RBA's Saunders-Tulip model of the housing market showing that population growth has the greatest impact on vacancy rates and rents.
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Based in Sydney, Kieran Davies joined Coolabah Capital in 2020, an asset manager than runs over $7 billion in fixed-income strategies, and is responsible for macroeconomic research and investment strategy, contributing to the investment decisions...
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