Data released this week by the Australian Bureau of Statistics highlights the continuing slowing of Australia’s population growth. The quarterly increase is now lower than that recorded during the global financial crisis. Caused by an increase in deaths and a slowdown in births and immigration, the unexpected slowdown affects official growth forecasts and came as a surprise to many economists.
John Daley, chief executive of the think tank the Grattan Institute, comments that it could place the budget under pressure by reducing economic growth and revenue. Gross domestic product has been slowing and is set to slow further. It could also make interest cuts more likely. In the long term, many also question how the decrease in population growth will affect house prices. Any slowdown in population growth increases the risk of a surplus of housing. Like Auckland, Australia is in the midst of a housing boom, and many people invest in property expecting a good capital gain. Goldman Sachs warned in April that Australia could have too many houses, especially in Melbourne and Perth, by 2017 due to slowing population growth. Saul Eslake, an independent market economist, also comments that:
“We still have a shortage of housing nationally and in most national cities … But if the rate of population growth and hence the rate growth in underlying housing demand continues to slow … I would guess that in less than four years we won’t have a shortage of housing and in some cities, most obviously Melbourne and Perth, we might have an excess.”
In the very long term, the aging Baby Boomers that currently make up a high proportion of society will no longer need their houses. Many are already starting to think about retiring to smaller apartments and later retirement villages. Will this put a surplus of houses onto the market? Perhaps those of us to assume year on year capital gain on the family home because that’s what happened for our parents need to think again in the long term. If you live in a desirable city, you can perhaps find comfort in the fact that immigration will somewhat make up for low birth rates and maintain demand. However, that means that we must accept immigration as being key to our economy continuing to work as it historically has and provide the tax take necessary to provide such things as pensions to the growing elderly. It is worth considering how the choice not to have children, or to have few children, affects all areas of society including the economy. Parents who take seriously their role of raising productive, ethical citizens contribute much to society and the economy.
This chart, produced by Business Insider, Australia, depicts the number of Australians aged 65 years and older. In the December quarter the number increased to 3.456 million, 14.6% of the nation’s total population, and the numbers will continue to grow.