Australia Careful what you wish for: COVID-19 transforms population politics
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Population pressures have preoccupied NSW politics for decades. Traffic congestion, crowded trains and high-rise property developments are perennial themes of public debate, especially in Sydney. Migration is routinely blamed for pushing up prices in the city's famously expensive housing market.
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In October 2018, with voter anger over population pressures palpable and an election six months away, Premier Gladys Berejiklianimmigration to be halved so NSW could "take a breather".
Sydney had just added more than 110,000 people in a single year and the city's population growth rate - 2.2 per cent - was the highest in a quarter of a century.
A few weeks later, Prime Minister Scott Morrison, a long-time defender of migration,to change tack on the issue.
"Population growth has played a key role in our economic success," he said in November 2018. "But I also know Australians in our biggest cities are concerned about population. They are saying: enough, enough, enough. The roads are clogged, the buses and trains are full. The schools are taking no more enrolments. I hear what you are saying. I hear you loud and clear."
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But now COVID-19 has transformed population politics.
Tuesday's federal budget predictedthan forecast only a year ago. By that time, the national population will be 1 million smaller than expected.
After years of grappling with population growth pressures, NSW now faces an historic collapse in new arrivals that will drag on the economy and reshape the state's demographic complexion.
The main cause for the population growth slump is border closures, as well as other restrictions, imposed to limit the spread of the coronavirus. In 2018-19, net overseas migration added more than 230,000 to the national population. Now net overseas migration has turned negative for the first time since the Second World War. The budget predicts 72,000 more people will leave Australia than arrive this financial year, followed by a net decline of 22,000 in 2021-22.
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Social researcher Mark McCrindle says the budget forecasts show Australia can no longer simply "adjust the migration tap" at will.
"The change is just phenomenal," he says. "We know brand Australia is still very strong and it will remain a desirable destination, but COVID has changed everything. Now there is great uncertainty."
Yet the effects of the pandemic on the state's population go beyond immigration. The budget says state border restrictions and the uncertainty caused by COVID-19 would also reduce the number of people moving from NSW to other states. In 2018-19, a net total of 22,100 people left the state for other parts of the country, but that will fall to 14,300 this financial year.
The budget also predicts fewer babies will be born in Australia as a consequence of the pandemic. The fertility rate is forecast to drop from 1.69 babies a woman in 2019-20 to 1.58 in 2021-22.
Macquarie University demographer Professor Nick Parr says that's typical in times of economic crisis.
"Past experience has been that when there has been higher economic uncertainty that birth rates tend to dip, particularly first births tend to be put off until later," he says.
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The fertility rate will rise a little once births delayed due to COVID-19 take place in later years. But the rate is forecast to settle at 1.62 babies a woman in 2030-31, significantly lower than before the pandemic. This reduction was put down to the long-term trend among families to have children later in life, and to have fewer children overall.
The lower birth rate will contribute to "permanently lower" population growth compared with what was forecast before the pandemic.
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Rather than being under pressure to deal with congestion and overcrowding, the Berejiklian government must now contend with the far-reaching consequences of low population growth.
Economist Terry Rawnsley, who researches state and regional economies, says it will be "another economic headwind in addition to the COVID recession".
Population has long been a key driver of economic growth.by Professor Parr shows additional immigration by those aged 15 to 39 raises future living standards for all Australians on average.
The economic effects of the COVID-induced slump in population growth will be so significant that the federal government has cut what it considers to be the growth potential of the national economy from 2.75 per cent a year to below 2 per cent.
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"Lower population growth from lower net overseas migration during the COVID-19 pandemic will weigh on the economy into the medium term," the budget papers say.
NSW is likely to be disproportionately affected because, along with Victoria, it receives a large share of the migrants arriving in Australia.
Migration has been especially important for the housing sector, which is a large employer in NSW.
"A real driver of housing construction and the supporting infrastructure in NSW has been our population growth," McCrindle says. "But with international borders closed, it suddenly means we don't need so many homes, and we can't justify so much infrastructure investment."
Lower population growth will also affect demand for rental properties and house prices. Although McCrindle says that may provide "new opportunities" for first-home buyers.
Rawnsley expects some city regions to be hit harder than others.
"Within Sydney, the south-western part of the city, where a lot of international migrants end up, will be more exposed than some other areas, along with the CBD and its surrounds - which hosts a lot of international workers and students," he says.
"Sydney's north shore and north west are probably not quite as impacted by this change in population growth."
Lower population growth also means fewer taxpayers and less revenue for both state and federal budgets.
Without strong migration to fuel demand, governments will be under more pressure to come up with reforms that enhance productivity and increase the supply of labour.
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"The economy has been geared up for population growth," Rawnsley says. "If it disappears for a year or a year and a half, you can pause and get through, but if there is a longer term decline in international migration, you'll have to start thinking of different ways to grow the economy."
NSW Treasurer Dominic Perrottet says he will introduce productivity-enhancing reforms to help offset the effects of the population growth slump in next month's state budget.
"This is not just an opportunity but an obligation on us now to look at ways we can drive productivity growth in the absence of population growth," he told The Sun-Herald.
A sustained period of weaker-than-expected population growth, coupled with higher unemployment in NSW, will affect the cost-benefit equations for big infrastructure projects proposed by the state government. That will raise questions about the timetable for their construction.
"If this is a population growth pause, then big projects should still stack up, but if this is a fundamentally longer period of lower growth, you will need to run the ruler across those projects again," Rawnsley says.
Slower population growth will also alter the demographic character of NSW.
A disproportionate share of new arrivals now settles in major urban centres, so the slowdown in migration will gradually shift the distribution of the state's population.
"It will slow the growth of our larger cities to a greater extent than it impacts on population growth elsewhere," Parr says.
He predicts a period of lower immigration will also accelerate the ageing of the population in NSW and reduce the proportion of working-age people.
"There will be long-lasting consequences from these changes," he says.
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