To say that it’s been a volatile week in global banking is something of an understatement.
Yet, the US Federal Reserve has looked through the banking sector turmoil and continued raising the Fed funds rate at its meeting this week (to 4.75%-5%), concerned about persistent inflation and a rebound in job growth in the US.
Our Reserve Bank will also be weighing up recent data to make a judgement on whether Australia’s economy has slowed sufficiently to get inflation down.
There are plenty of indicators to suggest it has, but there are also some tailwinds for the Australian economy in 2023, with strong population growth key amongst them.
Last week’s ABS population data showed that Australia had recorded its highest level of net migration since before the GFC. In the September 2022 quarter, the national population grew 0.5%, driven significantly by a spike in net migration of 106,000 in the quarter. Over the past year, net overseas migration is up to 304,000 (a near record for annual growth).
The recovery of migration following the pandemic has helped to relieve some pressure from the labour market. However, the unemployment rate still sits at 3.5%, suggesting many organisations are still struggling to find enough workers. As the most recent population data available from the ABS records the September 2022 quarter, it is possible that net overseas migration has already moved to a record high. One of the key drivers for this sharp population rebound is the return of international students.
Chart 1: Net overseas migration, year-to growth
Source: ABS National, State and Territory Population
Border closures, particularly in China, had delayed the return of many international students to on-campus‑ learning in Australia. TEQSA (Tertiary Education Quality and Standards Agency), the regulator for tertiary education in Australia, made an announcement in October 2022 that international students will need to return to in person learning by the second semester of 2023. This highlights the potential for strong net migration numbers to continue through the remainder of 2023, with chart 2 showing that student visa lodgements from some markets already increased in 2022.
Chart 2: Primary student visa lodgements by year and applicant country of origin
Source: Department of Home Affairs
There are many key factors impacting the return of students from different countries;
The continued recovery of international student numbers provides a tailwind for Australia’s overall population and income growth in 2023, providing some offset to the demand crunch coming via the Reserve Bank. On top of this, healthy numbers of international students have started to help ease labour shortages, particularly in industries like hospitality and retail.
This blog was co-authored by Chris Bates, a Graduate in the Deloitte Access Economics team.