Australia needs more people like this, apparently. Photo: John Selkirk
7 August 2015
John McDuling – Sydney Morning Herald
The solution to Australia’s economic malaise is clear: more Kiwis.
That might be difficult for Australians to stomach on the weekend of Rugby’s Bledisloe Cup, but it’s also one conclusion you can draw from the latest forecast from the RBA on the Australian economy, released on Friday.
The RBA modestly downgraded its forecasts for economic growth in its statement on monetary policy.
What’s fascinating is how it repeatedly cited declining population growth as a key contributing factor.
“Australia experienced rapid population growth over much of the past decade, both by the standards of recent decades and in comparison with other advanced economies,” the bank says.
Australian population growth 1979 to 2014 (Source: Reserve Bank of Australia)
“Recently, however, population growth has declined to be well below the rates experienced over most of the preceding five years.”
Why? Basically, it’s a vicious cycle.
Australia’s economy isn’t performing as well as it was a few years ago, so fewer people want to emigrate here. Particularly New Zealanders, since the Kiwi economy is performing comparatively well at the moment.
The RBA said it lowered its forecast for future population growth “in part because labour market conditions in Australia are expected to remain weaker than those in countries that have traditionally been a source of skilled, prime-age immigrants, such as New Zealand”.
And that has considerable knock-on effects for the rest of us.
“Lower population growth has important implications for the economy. It lowers the growth in demand for goods and services, as well as the economy’s capacity to supply those goods and services.”
Australian Net long-term and permanent arrivals (Source: Reserve Bank of Australia)
The link between population growth and economic growth is bitterly contested by economists and yes, we’re being a bit simplistic here.
But it’s still something to think about, particularly if you tune in to watch the Bledisloe this weekend.
[Read the Sydney Morning Herald article].