While the Treasury’s December 2020 population forecasts seem unrealistic, they're still more believable than those from the 2019 Budget, writes Dr Abul Rizvi.
IN DECEMBER 2020, without much fanfare, Treasury issued its latest population projections.
After the embarrassment of its population projections in the 2019 Budget in which it forecast Australia’s population growing at an unprecedented average of 450,000 per annum, Treasury now claims:
‘Transparency and openness to scrutiny are also necessary if [Treasury] is to advance the quality and reliability of population analysis available to governments and the public.’
Sadly, Treasury continues to pretend its 2019 Budget population forecasts never existed. We may never know whether that forecast was just a bungle or whether Treasury had allowed itself to be politicised in compiling a forecast to suit the Government’s agenda for the 2019 Election.
The overall population projection Treasury is now making is that once international borders fully re-open and things go back to “normal”, the population will grow at around 350,000 per annum for the second half of the 2020s.
So, can we believe this latest population projection? Is Treasury really now being transparent?
Treasury should be given credit for commissioning Professor Peter McDonald to develop a forecast of Australia’s fertility rate. As a result, Treasury no longer forecasts Australia’s fertility rate rising to 1.9 births per woman but instead is forecasting fertility remaining in the range between 1.6 births per woman and 1.7 births per woman.
According to Treasury, this gives the number of births in Australia stabilising during the 2020s at just over 300,000 per annum assuming Treasury’s net migration forecasts are realised (see Chart 1). A lower level of fertility or a lower level of net migration would result in the annual number of births starting to fall earlier as Australia’s population ages.
It is in terms of the annual number of deaths that Treasury’s most recent forecast remains excessively optimistic (see Chart 2).
Treasury is projecting a relatively gradual increase in the number of deaths from less than 170,000 in 2019 to 205,100 in 2030-31. This is a much slower rate of increase in deaths than suggested by the ABS which projects deaths reaching over 200,000 by 2027 and over 220,000 by 2030-31.
That would result in Australia’s rate of natural increase declining more slowly than the ABS based on some bullish assumptions about the rate at which life expectancy in Australia will rise. It should be noted that prior to COVID-19, life expectancy in the U.S. and the UK had, in fact, fallen and that it is not unusual for Australia to follow trends in those two countries.
In its December 2020 population projections, Treasury forecasts net migration being negative in 2020-21 and 2021-22 based on international border restrictions remaining in place and then rising to 95,900 in 2022-23 and 201,100 in 2023-24 as international travel returns to normal. Treasury then projects net migration steadily rising to 235,000 per annum by 2028-29 and then remaining at that level.
While long-term annual net migration of 235,000 is much more plausible than the 270,000 per annum Treasury used in the 2019 Budget, it is still a very optimistic projection reliant on a rapid return to a strong economy and much lower levels of unemployment. It also relies on a significant shift in the net movement of Australian and New Zealand citizens compared to the situation pre-COVID-19, steady growth in the stock of temporary entrants, particularly students, temporary graduates, provisional visa holders and possibly also asylum seekers who had become a significant part of net migration pre-COVID-19.
After the 1991 recession, it took over a decade for net migration to recover to the levels of the late 1980s. It remained low, generally below 100,000 per annum, primarily due to persistently high levels of unemployment. Recessions have a long-term impact on both unemployment and net migration.
Over the past decade, net migration has averaged 215,000 per annum with four calendar years in which it was at or slightly over 235,000. For 2019, the ABS’ preliminary estimate of net migration is 225,600 compared to the 2019 Budget forecast of 271,000. It was trending down well before COVID-19.
Once internal and international movement fully resumes, two broad outcomes for net migration in the second half of the 2020s are likely.
- Australia falls well short of the forecast increase in net migration to 235,000 per annum due to pre-COVID-19 immigration policy settings for both permanent and temporary migration being retained, a persistently weak labour market and re-imposition of the temporarily postponed four-year wait for access to social security by newly arrived migrants; or
- the government takes major risks with temporary resident policy, particularly students and farm labour, leading to net migration of 235,000 per annum being delivered but through the build-up of a record number of overseas students, temporary graduates, farm labourers and asylum seekers, many of whom will be at high risk of exploitation and/or destitution in a weak labour market. In a weak labour market, many newly arrived permanent migrants will also be at risk of destitution due to the four-year wait for access to social security.
A persistently weak labour market would almost certainly ensure net migration falls well short of 235,000 per annum. In 2014 and 2015, net migration fell to around 180,000 per annum when unemployment increased to six per cent. That was when the formal migration program was delivered at 190,000 per annum and a humanitarian program of around 18,000 per annum compared to the current migration program of 160,000 per annum and a humanitarian program of around 13,500 per annum — even these are unlikely to be delivered in 2020-21.
Perhaps recognising this, Treasury has assumed the Government will return the permanent migration program to 190,000 per annum while leaving the humanitarian program at the reduced level of 13,500 per annum.
No formal announcement of this increase has yet been made. Given the Prime Minister’s cynical message of cutting immigration to bust congestion prior to the 2019 Election, the ongoing high level of unemployment as well as the Department of Home Affairs continuing to deliver the migration program at levels well below the 160,000 ceiling, the lack of formal announcement that the Government plans to increase the program to 190,000 per annum is understandable.
If the permanent migration program is not increased to 190,000, to achieve an average net migration of 235,000 per annum would require taking major risks with temporary entry policy.
It would mean that by 2030, the number of temporary residents in Australia would begin to approach 3 million — currently, it is around 1.9 million but was over 2.3 million prior to COVID-19. Because most temporary residents don’t have access to any form of government welfare support, in a weak labour market there is a strong risk of a further increase in exploitation, wage theft and abuse — many would become destitute and reliant on charity.
A follow-up article will examine Treasury’s net migration forecasts in more detail.
The take away from this article should be that Treasury’s December 2020 population forecasts are much more plausible than its 2019 Budget effort. Nevertheless, even its December 2020 forecasts remain substantially on the high side.
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