Population projections reveal the Treasury is hopeful for strong population growth, but Dr Abul Rizvi suggests it could be assuming too much.
Comparing these with the most recent Australian Bureau of Statistics (ABS) population projections – published in 2018 based on 2017 data – provides a useful basis for understanding the impact of the pandemic and international border closures on Australia’s population.
Chart 1 compares these two sets of projections.
Prior to the pandemic, the ABS medium population projections indicated Australia’s population reaching 30.7 million by mid-2032. This was based on an assumed fertility rate of 1.8 births per woman, net overseas migration of 225,000 per annum and life expectancy rising to 83.0 for males and 86.0 for females by 2066.
Treasury’s projections indicate Australia’s population by mid-2032 will be around 29.3 million. That is 1.4 million less than that projected by the ABS for the same year.
Treasury’s projections adjust for the impact of the pandemic on net overseas migration which was negative for around 18 months. Treasury assumes that once international borders are open, net overseas migration will rise to 235,000 per annum by 2024-25 and remain at that level.
It’s important to note that the 235,000 figure is an assumption, not a forecast. It is not based on an analysis of immigration policy. Indeed, evidence given to the Senate by the Department of Home Affairs (DHA) indicated DHA was not consulted on the 235,000 net overseas migration assumption.
It is also relevant that Treasury assumes the formal migration program (permanent visas issued) will rise to 190,000 per annum from 2023-24 from the current level of 160,000. No government decision has been made on that assumed increase.
Treasury assumptions of net overseas migration are inevitably associated with rosy forecasts of GDP growth. Strong GDP growth is the key lever both the past Coalition Government and the current Labor Government are relying on to reduce government debt as was the case after World War II when the baby boom and the post-war migration program fuelled strong economic growth.
But is strong GDP growth a safe assumption at a time the population of the developed world, plus China and Russia, will be declining and ageing rapidly?
Treasury assumes that Australia’s fertility rate will rise from its 2020 level of 1.58 births per woman to around 1.66 births per woman through the second half of the 2020s before settling at 1.62 births per woman in 2032.
While that would be a fertility rate significantly below replacement level, it would be higher than the current fertility rate in most developed nations. A higher fertility rate would slow the rate of population ageing.
Despite Treasury’s assumed increase in the fertility rate, natural increase (births minus deaths) is forecast to continue to decline as the annual number of deaths increases at a faster rate for the rest of this decade and most likely the decade after that as the baby boomers start to die out.
Treasury projects natural increase falling to 111,700 by 2032 compared to around 135,000 in 2021. A lower assumption of net overseas migration would accelerate the decline in natural increase and the rate of population ageing.
The assumption of rising life expectancy has traditionally been viewed as non-controversial. However, falling life expectancy in the USA which started well before the pandemic has brought that assumption into greater focus.
Will life expectancy in Australia continue to rise or will it decline as in the USA?
Based on Treasury’s assumptions and projections, Australia may be one of the last developed nations to experience population decline.
The UN’s latest population projections indicate world population decline may start from 2080 after peaking at around 10.4 billion.
That is a significant development given the very cautious nature of the UN and its assumption that the fertility rate in many nations such as China, Japan and Russia will rebound from their current very low levels.
Many demographers are convinced the world’s population will peak much earlier and at a much lower level. They are not convinced by the UN assumptions of a fertility rate rebound in low fertility nations.
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