The end of the COVID-era migration boom
The massive migration-led boom in population growth is over, with growth back at pre-pandemic levels in most countries, including Australia
In terms of the overhang from the pandemic, population growth boomed across nearly every advanced economy in the wake of COVID, but that boom is over.
That is, most countries saw their populations broadly stall at the height of COVID and some saw their populations shrink a little.
As borders re-opened, pent-up demand saw massive migration flows boost populations across nearly every advanced economy (Japan was unusual, in that its population briefly fell at a slower rate, while the flows into the euro area were boosted by Ukrainian refugees).
Now, populations are growing back in line with pre-COVID averages and sometimes below.
US population growth – which seems likely to fall further as the new administration deports illegal immigrants and refugees – has eased to an annualised rate of about ½%, matching the immediate pre-pandemic experience, which was the lowest growth in the history of the republic.
Japan’s population is contracting at an annual rate of about ½%, while the euro area’s population is back to barely growing, increasing at an annualised rate of about ¼%.
The UK’s current population growth is hard to judge, though, as recent annual estimates are ONS forecasts.
Canada’s population, which experienced a massive post-COVID surge, is back growing at an annualised rate of about 1%.
Australia’s population growth has also slowed to an annualised rate of about 1½%, also in line with pre-COVID readings, but still at the high end of advanced economy experience.
Across the Tasman, the adjustment has been more abrupt, with annualised growth slumping to about 1%, which is at the low end of the range of the past few decades.
Why does the end of the migration boom matter? The return to slow population growth – where Australia is still an outlier – points to slower growth in potential output.
Other things being equal, slower growth in potential output should resume placing downward pressure on central bank neutral policy rates.
However, other things are not equal, and an increase in defence/AI-led investment, as well as spillovers from investment to productivity growth, should counteract this demographic drag.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy, contributing to the investment decisions of the firm. Kieran has long experience as a macroeconomist in both the private and public sectors. He has worked most recently as Chief Markets Economist for National Australia Bank and was previously Chief Economist, Australia and New Zealand, for Barclays Bank and ABN Amro Bank/RBS. Kieran also worked as Principal Adviser on the macroeconomy and budget policy in the Commonwealth Treasury and Director of Forecasting.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
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