ABUL RIZVI: Coronavirus and Australia’s Population and Economic Directions

The coronavirus crisis brings to an end 20 years of high migration to Australia. On current policy settings, net migration in 2020 and 2021 will be close to zero, if not negative. Australia is looking at the biggest turning point in its population history – bigger than the Great Depression.

If significant numbers of long-term temporary entrants in Australia follow the Government’s instruction to ‘go home’, and are able to do so, net migration could be a very large negative. It is unlikely to recover quickly as border restrictions may only be gradually eased from 2021. History shows us net migration recovers only very gradually after a deep recession or depression.

Contrary to forecasts in the 2019 Budget, net migration in 2020 will not rise to 271,000 and average 268,000 for the period 2019-22. It was already falling in the second half of 2019 off a lower base.

The fertility rate will not rise to 1.9 babies per woman as forecast in the 2019 Budget. It had already fallen to 1.74 babies per woman in 2018. Early indications are that fertility fell further in 2019 and possibly below 1.7 babies per woman. The coronavirus crisis will push the fertility rate down further, as has been the case in past recessions, both in Australia and overseas.

Australia is looking at the biggest turning point in its population history – bigger than the Great Depression.

But how far will net migration fall and what does that mean for Australia’s population future?

Let’s start with an estimate of the stock of temporary entrants in Australia by end December 2020.

Estimate of temporary entrants by end December 2020

Including NZ citizens and visitors, there were 2.4 million temporary entrants in Australia at end December 2019. This was after growing steadily for over 20 years.

Minister Tudge announced in early April 2020, that the number of temporary entrants had fallen to 2.17 million, with some visa categories falling while others increased.

There is a further 60,000 overstayers who are not included in the above figuring. The number of overstayers may rise as various temporary entry visa applicants, including over 100,000 onshore asylum seekers who have arrived on tourist visas in recent years, are refused but cannot depart Australia.

The key public policy question is ‘what will happen to the 2.17 million temporary entrants in Australia at end March 2020 by end December 2020’. Detailed analysis of this is available from the author. The results are summarised in Table 1 below:

Table 1: Temporary Entrants in Australia

December 2019 March 2020 Forecast for December 2020
Students 480,543 565,000 486,900
Visitors 635,109 203,000 149,800
Working Holiday Makers 141,142 118,000 82,700
Skilled Temporary Entrants 119,160 139,000 93,080
Temporary Graduates 89,324 110,000 (Est) 112,640
Bridging Visas* 216,141 279,000 (Est) 192,500
Temporary Protection 16,509 18,000 (Est) 18,000
Temporary Parents 582 1,000 (Est) 6,000
Crew and Transit 23,748 15,000 (Est) 13,000
Other Temporary 42,319 50,000 (Est) 33,300
New Zealand Citizens 668,687 672,000 633,500
Total 2,432,682 2,170,000 1,821,400

Source: data.gov.au, Temporary Entrants in Australia, Alan Tudge Press Release, 4 April 2020, visa reports on Home Affairs website. * Bridging visa holders are onshore applicants for further visas that have not yet been processed. They are mainly applicants for student visas, temporary graduates, parents, partners and asylum seekers. The estimated 279,000 bridging visa holders in March 2020 would be a new record surpassing the previous record of around 230,000.

The key to Table 1 is:

  • how many temporary entrants will either find a job or some other form of support?
  • how many will become destitute because they resist leaving Australia for as long as possible, using up any savings they have and/or won’t have enough money to afford tickets to leave?
  • how many will be able to find flights and afford the skyrocketing ticket prices to get home?

Given the forecast weak labour market during the rest of 2020, a substantial portion of the 1.82 million temporary entrants forecast to be in Australia at end December 2020 are likely to be unemployed and reliant on charity to survive. If just over 70 percent are employed or have some form of support, including all remaining NZ citizens, that would still leave over 500,000 people reliant on charity.

At that level, it is likely governments will either assist people to depart or provide some form of social support to ease pressure on charities. The Government cannot continue to ignore an additional 500,000 people becoming destitute.

Net Migration

Of the 612,000 forecast decline in the number of temporary entrants in Australia during 2020, only those who were in Australia long-term (ie 12 months or greater over the past 16 months) will be counted as a net migration departure. And that is only if they subsequently stay out of Australia for the following 12 months out of 16.

The significance of this is that changes in net migration is how the ABS counts the contribution of immigration to population change in Australia.

Of the 485,000 forecast decline in the number of visitors in Australia during 2020, only a small portion will be counted as a net migration departure – perhaps as little as five percent.

In addition, there will be further arrivals of Australian citizens, existing permanent residents and new permanent residents (ie people who secure a new permanent resident visa offshore and then travel to Australia if they can) over the rest of 2020. These people are not counted in the temporary entrant figures in Table 1 but are included in net migration arrivals.

On the other hand, it is highly likely the Government has cut back on the formal migration and humanitarian programs from 2020, as governments have during each recession for the past 50 years. Moreover, there will be few, if any, additional temporary entrants for the rest of 2020 and perhaps also much of 2021.

The overall impact is likely to be a net migration outcome in 2020 (and possibly also 2021) that is close to zero and more likely negative. This would particularly be the case if the government decides to assist long-term temporary entrants who become destitute to leave Australia.

But what does that mean for Australia’s long-term population directions?

If the Great Depression and the recession of the early 1990s are any indication, both net migration and the fertility rate will remain low for the rest of the current decade.

While net migration will gradually recover after 2020-21, the combination of a weak economy and immigration policy settings that had already been driving down net migration in the second half of 2019, will ensure net migration in the decade of the 2020s will be well below that of the past 20 years.

The ABS’ Series B in Chart 1 reflects a fertility rate of 1.8 babies per woman and net migration of 225,000 per annum. It would result in the population growth rate steadily falling from 1.6 percent per annum (or over 400,000) to 0.8 percent per annum (or less than 350,000) by 2066.

While the net migration and fertility assumptions in Series B are both significantly above those used in the 2019 Budget and in Treasurer Frydenberg’s ten year budget plan, even Series B is now totally implausible.

Series C in Chart 1 assumes a fertility rate of 1.65 babies per woman, most likely still on the high side. It also assumes net migration of 175,000 per annum, also on the high side if economic growth remains weak. It was around 180,000 per annum during the Abbott Government even though immigration policy settings were highly facilitative – the low net migration outcome in those years was the impact of a weak economy and a weak labour market.

Series C would result in the population growth rate falling to 0.5 percent per annum (less than 200,000) by 2066 and natural increase becoming negative later in the century (ie positive net migration would be needed to prevent the population going into absolute decline).

The zero net migration option would lead to Australia’s population peaking in the mid-2030s and then declining to 23.8 million by 2066 and continuing to decline after that at an accelerating rate.

In terms of population ageing (see Chart 2), Series B would see the portion of the population 65+ rising from 15.6 percent in 2018 to 20.9 percent in 2066. Series C, with its more plausible fertility and net migration assumptions, would result in the portion of population 65+ rising to 23.0 percent. The zero net migration option (including fertility at 1.65 babies per woman) would lead to the population 65+ peaking at around 30 percent by 2060. That would be around 5 percentage points higher than the current situation in Japan.

Drawing on the consensus research findings, a higher rate of ageing would, all other things equal, lead to a lower employment to population ratio, slow productivity growth, weak private consumption and insipid levels of business investment. That would be similar to the last decade when the working age to population ratio of all developed economies had simultaneously been in decline. It would make it impossible for the Government to maintain its already quite unrealistic (and largely election-driven) forecast of real GDP growing at 3 percent per annum for the decade of the 2020s.

Forecast economic growth rates for the decade of the 2020s are likely to be closer to those used in earlier Intergenerational Reports (ie 2 percent in the 2002 Report (Costello); 2.3 percent in the 2007 Report (Costello); 2.5 percent in the 2010 Report (Swan)). The 2.7 percent assumed in the 2015 Report (Hockey) also appears highly optimistic.

A faster rate of population ageing would also reduce per capita income tax, GST and company tax collections at a time the ageing population would be putting upwards pressure on government expenditure, particularly health and aged care. The ongoing surpluses forecast in the 2019 Budget ten year plan were silly to begin with and are now simply ridiculous.

The idea of repaying government debt, if not already a fantasy, would become a pipe dream.

It should be noted the decade of the 2020s will be the second successive decade in which the working age to population ratio of all developed nations, plus China and Russia, will simultaneously be in decline.

In modern history, the developed world has never before experienced two successive decades of simultaneous population ageing.

For an open trading economy such as Australia, that represents a further obstacle to any return to positive per capita economic growth.

Abul Rizvi was a senior official in the Department of Immigration from the early 1990s to 2007 when he left as Deputy Secretary. He was awarded the Public Service Medal and the Centenary Medal for services to development and implementation of immigration policy, including in particular the reshaping of Australia’s intake to focus on skilled migration. He is currently doing a PhD on Australia’s immigration policies.

print

Abul Rizvi was a senior official in the Department of Immigration from the early 1990s to 2007 when he left as Deputy Secretary. He was awarded the Public Service Medal and the Centenary Medal for services to development and implementation of immigration policy, including the reshaping of Australia's intake to focus on skilled migration, slow Australia's rate of population ageing and boost Australia's international education and tourism industries. He is currently doing a PhD on Australia's immigration policies.

This entry was posted in Economy. Bookmark the permalink.

17 Responses to ABUL RIZVI: Coronavirus and Australia’s Population and Economic Directions

  1. Pratik Pancholi says:

    Hi Abdul,
    I have only one question, since its really hard to trust temporary entrant from out of Australia, why cant they allow people who already are here from years, they have accumulated enough points to be eligible for permanent residency and they are waiting for the invitation. They have studied here, they worked here but still because of ridiculously high points requirements and low invitation people who are here needs to apply for a student visa, just to stay in this country. Cant government think about onshore applicant?

    • Abul Rizvi Abul Rizvi says:

      Most state/territory governments are prioritising health and aged care professionals as they are the only occupations that are currently in high demand. Unemployment rates in all other occupations are currently skyrocketing. The key will be which occupations will be in demand as we pull out of the crisis.

  2. Dufa Wira says:

    One unresolved issue with immigration policy and other national reform issues is the lack of coordination and fair dealing between the Commonwealth and state governments. The CofA controls the flow of immigration and adjusts it to suit their macro-economic objectives (GDP growth not per-capita growth), while the states pick up most of the public infrastructure and service costs and workers suffer constrained wages growth. At immigration rates <1% this was perhaps sustainable, but not above that. So we have things to fix.

    I believe the Australian Aboriginal Civilisation maintained a scientifically based sustainable population policy that served them well with health and living standards better than all but the very wealthiest Englishman, for 65,000+ years. Say 1 – 2 millions! Given the damage and depletion wrought to the carrying capacity of our country over the past 230 years does anyone really believe that our current population policy is sustainable for even 500 years. I doubt it. Things to fix!

    From my conversations with knowledgeable men and women and my own reading, I am satisfied that 'population control' was a key component of the Australian Aboriginal Nations' political economies. I cite this statement from Wm. Gammage (2012) The Biggest Estate on Earth, p 303-4: "People limited population but used all their land, gave all life totem guardians, and even under extreme duress rarely stole."

    There are reports of various contraceptive practices employed by different nations, but I understand the primary factor driving population control was the onerous obligation accepted by every sane adult to comply with interlocking kinship obligations (including joy, happiness, health, child rearing and education) and all-encompassing duties to care for country (including complex patterns of visitation and ceremony, and landscape regeneration.

    Population control naturally flows from this reverence for, and constant observation and engagement with, kith, kin and country. We might call it 'sustainability' and apply the same principles. We have a lot to lean from the Greatest Civilisation on Earth.

    • Abul Rizvi Abul Rizvi says:

      The role of state governments in the immigration system if significantly underestimated. The intake over the last 20 years could not have been delivered with them playing a very active role. When Gladys complained about the size of the intake to NSW just prior to the last election, she knew of the major role her Government played in both attracting immigration to NSW and sponsoring migrants. Not surprisingly, after the election she made no changes to the role her Government plays in both attracting and sponsoring migrants.

      • Dufa Wira says:

        I agree. So they must. But from what I see, feedback loops are broken, and states (that provide most of the added infratructure and services) are ever mendicants*. If each immigrant household the CofA invites in cost a state $2 mil, the CofA should perhaps provide $1 mil^ payment up front. Feedback loop closed.

        * At least until they twig to the potential of a land tax and do a deal with local governments, where LG continues to levy land tax on unimproved value (which picks up most roads, rats and rubbish costs) and state taxes ‘improvements’ only.
        ^ One may hope the state could recoup the rest over time.

        • Abul Rizvi Abul Rizvi says:

          State/territory governments do their own nominating of skilled migrants on the basis of their own self interest, including positive economic and budget impact for their state/territory. If they did not think that would deliver a positive economic and budget impact for their state/territory, they would not nominate any skilled migrants. They are not stupid.

  3. don owers says:

    I agree with Wayne, Our immigration system is deeply flawed and has created or at least worsened many of the problems we now face including housing affordability, developer related corruption, exploitation of migrants, GHG emissions, and high unemployment. We are continually bombarded with media releases that claim we have economic wizz kids who have given us decades of economic growth. They mean GDP which tells us little about wellbeing but is a good measure of environmental decay. Our unemployment, officially about 5.3% is a sham, real figures by independent bodies like Roy Morgan show twice that number and when you take into account those who have given up looking for work it comes to 2.9 million people.
    After the virus shut down many more will remain out of work especially in the retail sector.

    • Abul Rizvi Abul Rizvi says:

      No doubt immigration policy can always be significantly improved but I would note the RBA, the Treasury and the Productivity Commission consistently argue immigration has given Australia a substantial advantage. Are they the wiz kids you are referring to?

  4. Anthony Pun says:

    Dear Abul — Suppose the government suddenly decided to allow all temporary entrants to remain in Australia and further intake in the next 2 years is closed, would that improve the economic viability of Australia since it will reduce the aged population ratio, maintain tax revenues and cushion the budget deficit?
    If the age profiles of these temporary entrants (excluding foreign students) is skewed towards the younger age group, and if your were Immigration Minister with no bias alignment, would you consider giving amnesty to these groups of temporary residents and why?

    • Abul Rizvi Abul Rizvi says:

      Hi Anthony. Risk with amnesties is that whichever political party proposes it, they would be crucified by the other party. So no one will propose it.

      I think we need to be careful not to assume temporary entrants are a homogeneous group. They cover a vast array of visa categories. My approach to the current predicament of temporary entrants would be guided by 3 objectives: (1) Minimise spread of the virus because temporary entrants cannot afford to self isolate, etc; (2) Reduce risk of temporary entrants becoming destitute by either helping them to get home or if that it not possible, at least enabling them to survive until they can; (3) Ensure temporary entrants with skills needed for the crisis and the recovery after the crisis can be retained.

  5. Keith MacLennan says:

    Hurrah – maybe just maybe the population ponzi scheme has ended?
    Its certainly on the nose with EVERYBODY who does not benefit and that the majority of Australians like the 74 per cent of voters surveyed by TAPRI thought that Australia does not need more people.
    Australians are over our overlords cramming an extra 1,000,00 extra people into Australia every 30 months
    They are over monumental traffic congestion, crammed roads, crammed schools, crammed hospitals, overloaded environment and overloaded infrastructure.
    And they don’t believe the story that we just need to plan better and fund more infrastructure” argument as Australian cities have not been well planned ever,
    so what makes people think we can start now?
    And its absolute rubbish to suggest retro fitting infrastructure given its failed miserably to date can happen to meet our third world rate of population growth
    or is in anyway affordable
    Since Howard arced up migration to extreme levels our productivity per capita and gdp per person has been dropping as are wages as a share of profits – coincidence?
    Vested interests have captured our major political parties, you included, who want us living in vertical rabbit hutches for “vibrancy” whilst ignoring the ordinary Jo Blow
    incumbents who are screaming NO! with polls by Newspoll, Lowy, CIS, Essential APRI all screaming stop the planes!
    The facts are we pay our way in the world by selling minerals, energy and a bit of agricultural product and the thick as shit Aussie incumbent is working out that with more people in Australia to share finite assets is not good for the incumbents.
    And lets not forget the support for multiculturalism is now under serious threat and our social glue is fraying

    • Abul Rizvi Abul Rizvi says:

      Only people with zero understanding of demography refer to ‘population ponzi’ schemes. And no one with any understanding of survey techniques refers to TAPRI’s surveys. They are designed to reinforce Bob Birrell’s views on immigration and Bob always gets the result he wants.

  6. Wayne McMillan says:

    Abul the federal deficit is not a problem we should be concerned about just yet. Growing personal household debt is a bigger worry. We have no inflationary pressures and under employment/unemployment is increasing. I guess the question on every one’s mind is can we comfortably sustain a larger population given pressing ecological and environmental constraints. Those scientists and economists that think we can continue to maintain a high standard of living with endless growth are becoming fewer and fewer. Population growth seems to be the elephant in the room that no one wants to discuss for fear of offending people. Eventually it will have to be addressed hopefully sooner rather than later.

    • Abul Rizvi Abul Rizvi says:

      I agree Wayne. But I fear the Government, having talked incessantly about debt and deficit disasters for years, will not be able to adjust to the thinking you rightly point to. It would be political poison for them to admit they had been talking rubbish for years. And you are also right about the Government not being able to talk about population. They will want to only discuss that with the BCA, etc, behind closed doors while representing a different position to the public.

      • Charles Lowe says:

        Governments in Australia, the U. S. and the U. K. have a discernable strategy of blythely assuming that their electorates will ‘forget’ the contradictions – clearly demonstrable by the record – of their Leaders’ statements. Trump is an excruciatingly excellent example.

    • Peter Farley says:

      While the world and Australian environments cannot continue growth in demand at the current rate, it is quite possible for Australia to grow its economy while reducing its demands on the environment. Fortunately for us international tourism is not as big a contributor to our economy or GHG’s as for some countries so a decline in foreign students and tourism while painful, will not be devastating as it might be in Italy or Austria

      We have extraordinary opportunities for climate and employment friendly economic growth. Renewable hydrogen reduced steel in SA and the Pilbarra is one example. Renewables powering mining and refining of electrical materials and eg Lithium, Nickel etc for batteries, Aluminium, steel and copper for electrical machinery, Titanium, aluminium, carbon fibre and zinc for transport equipment can all be mined and refined more cheaply in Australia than in most of Europe and Asia.
      On the food and fibre front regenerative agriculture, reforestation and regeneration of mallee and saltbush country can present a huge opportunity for carbon trading as a widely adopted plan could see 100’s of millions of tonnes of long term soil carbon sequestration every year. If Australia joined the European carbon market that would provide a lucrative export trade. In addition regenerative farming would reduce the cost and increase the productivity of agriculture enabling us to maintain or increase food exports in a drying environment, while substituting labour for some chemical and fossil fuel inputs to farms.
      Finally Australia will still offer a better lifestyle and society than many northern hemisphere countries with their necessarily lower opportunities and higher taxes so it will still be attractive to immigrants.
      Thus while there is no doubt Mr. Rizvi is on the right track with his short term projections, Australia can, if it wishes become a leading light in sustainable development and re-industrialisation. It can do this without having to compete with the EU, China and North Asia in elaborately transformed manufactures and TCF

Comments are closed.