The international border lockdown has halted immigration and the economic fallout stagnant from population growth will be widespread
26 June 2020 | Toby Thomas
This morning Australia’s outgoing Chief Medical Officer Brendan Murphy told the ABC television network Australia’s borders shall remain shut until a vaccine for the coronavirus is developed.
Aside from returning Australian citizens and their families, national borders are set to remain shut for an indefinite period due to the COVID-19 pandemic.
The Australian Bureau of Statistics, reports that 538,000 people migrated to Australia 2018-19 period. Of that number, the UTS Australian-China Relations Institute calculated that 15% of all immigrants were of Chinese origin, with students from China accounting for one-quarter of total approved student visas in this country.
Coupled with long-term duration migrants, around 1.4 million Chinese tourists visit Australia each year, spending close to $12 billion in the process. In light of these numbers, the halted influx of Chinese students, families and tourists to Australia leaves a sizeable hole in the economy.
Far-reaching economic implications
Analysis from AMP Capital senior economist Diana Mousina examines the economic effect of flat lining immigration in the coming 1-3 years.
The findings suggest that Australia’s stellar economic growth over the past decade has been complemented by higher population growth of 1.5% and improved net migration.
Mousina writes, “Population growth is one of the ‘three P’s’ that drives economic growth (as measured by GDP) in an economy, along with productivity growth and the labour force participation rate.”
Despite these strong past few years, the Australian government expects a 30% fall in net overseas migration over 2019-20 and an 85% decline over 2020-21.
Although the analysis indicates that the incidence of overseas migration will eventually recover to pre-pandemic levels, concerns linger particularly in relation to Chinese immigration.
According to Mousina, “The biggest risks to this view are a permanent change in Australian migration intake perhaps due to political pressure around higher unemployment, Australian/Chinese trade frictions reducing Chinese student numbers in Australia or a long-term structural decline in overseas travel.”
How will the housing market fare?
The report also suggests lower population growth may be the catalyst for a significant decline in short-term housing demand. Based on the current government estimates, the falling intake of migrants will reduce housing demand by 80,000 dwellings in 2020-2021, “resulting in downward pressure on rents and home prices.”
However, it is maintained that the declining demand will likely be offset to some extent by government fiscal support through the HomeBuilder subsidy. Up to 27,000 grants are expected to be approved under the scheme, which Mousina reports “will increase demand for new housing over the next six months” through new construction and renovation of homes.