The ABS has released its latest population projections, updating those it produced in 2012 (see here). So what has changed and how should we interpret these in terms of current policy?
Population projections use the current population by age and sex as a base and then apply assumptions for three key variables – fertility; life expectancy or in effect the mortality rate; and net overseas migration. In 2012, the ABS used the following assumptions:
- Fertility: High assumption of 2.0 babies per woman by 2026 and constant from then on; medium assumption of 1.8 babies per woman by 2026 and constant from then on; low assumption of 1.6 babies per woman by 2026 and constant from then on.
- Mortality: High assumption was that male and female life expectancy would rise from 2009-11 levels by 0.25 and 0.19 years per annum respectively reaching a life expectancy of 92.1 for males and 93.6 for females by 2060-61; and a medium assumption of life expectancy rising at declining rates reaching 85.2 for males and 88.3 for females by 2060-61.
- Net overseas migration: High assumption of 280,000 per annum; medium assumption of 240,000 per annum and a low assumption of 200,000 per annum.
Since 2012, fertility has declined more quickly than the ABS’s medium assumption (it reached below 1.79 in 2016) while net overseas migration has hovered between the medium and low assumptions other than for 2016-17 when it was around 260,000.
For its 2018 population projections, the ABS has used the following assumptions:
- Fertility: High assumption of 1.95 babies per woman by 2027 and constant from then on; medium assumption of 1.8 babies per woman from now on; low assumption of 1.65 babies per woman by 2031 and constant from then on.
- Mortality: High assumption is that male and female life expectancy will rise from 2012-16 levels by 0.14 and 0.09 years per annum respectively reaching a life expectancy of 87.68 for males and 89.16 for females by 2066; and a medium assumption of life expectancy rising at declining rates reaching 83 for males and 86 for females by 2066.
- Net overseas migration: Assumes net overseas migration rates provided by the Department of Home Affairs to 2021-22 (slowly declining) and then a high assumption of 275,000 per annum; a medium assumption of 225,000 per annum and a low assumption of 175,000 per annum.
The ABS has narrowed its spread of assumptions for fertility. In its medium assumption, it has brought forward the time at which we reach a fertility rate of 1.8 babies per woman (sensible as we are already below this level).
The medium assumption reflects an ABS view that Australia’s fertility rate will remain well above the average of all developed nations and that the decline in fertility in Australia since 2008 will cease (and indeed will rise slightly from the 2016 level of 1.79). Fertility rates are notoriously difficult to forecast but an assumption somewhere between the ABS’s medium and low assumptions would seem most plausible.
The Treasury Department’s assumption of fertility at 1.9 babies per woman used in the 2018-19 Budget Papers has little support amongst demographers in Australia.
In terms of life expectancy, the ABS seems to have become more pessimistic with a slower rate of improvement assumed.
For net overseas migration, the ABS has shifted its outlook downwards. This reflects both recent policy changes; the fact net overseas migration has been below the medium assumption the ABS used in its 2012 projections in every year other than 2016-17; and that net overseas migration has been trending down since 2016-17.
On current policy settings, my preliminary estimates indicate net overseas migration from 2018-19 will likely fall below 200,000 and more likely closer to 150,000, especially if economic growth were to slow (see here). This suggests ABS’s low net overseas migration is more plausible although it is possible future governments may pursue a higher rate of net overseas migration.
Taking the medium assumption for life expectancy, fertility and net overseas migration (ie Series B) gives a population outcome in 2027 of 28.8 Million compared to a current population of 25 Million. It would continue to rise to 34.3 Million by 2042 and 42.6 Million by 2066 with an average annual growth rate of 1.1 percent. The rate of natural increase (ie the difference between births and deaths) would slowly decline from the current level of just less than 150,000 per annum to around 117,700 per annum in 2066. The portion of the population 65 and over would rise from 15 percent currently to around 21 percent in 2066.
By contrast, using the medium assumption for life expectancy and the low assumption for fertility and net overseas migration (ie Series C) gives a population outcome in 2027 of 28.3 Million (ie some 500,000 less than under Series B); 32.3 Million in 2042 (2 Million less than Series B) and 37.4 Million in 2066 (ie 5.2 Million less than in Series B). The population growth rate would average 0.9 percent per annum and the rate of natural increase would decline to 14,200 per annum and heading quickly towards becoming negative.
The median age would rise from 37.2 in 2017 to 43.0 in 2066 and the portion of the population aged 65 and over would rise to 23 percent.
The key take away from this is to re-inforce the trade-off between a slower level of net overseas migration (and therefore population growth) and a faster rate of ageing. The government’s decision to target a lower level of net overseas migration (to reduce pressure on infrastructure and congestion) means it accepts the consequences of a faster rate of ageing. The research indicates faster ageing means a lower level of per capita economic growth, slower rate of productivity growth and a greater burden on government budgets.
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.