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Population is back as an economic driver

The pandemic has permanently dented Australia’s population trajectory. However, the 2022-23 Population Statement released by the Australian Government Centre for Population in early January, now positions COVID in the rear-view mirror. The return of overseas migration propelled population growth to 1.1% in 2021-22, returning to pre-pandemic trends (Chart 1). 

The latest overseas arrivals and departure (OAD) data for November 2022, released on the 17th of January, confirms a rapid recovery in overseas migration. Permanent and long term arrivals are tracking at around 90% of 2019 levels for 2022 to date. Momentum is building across several components: 

  • 10,810 permanent arrivals in Nov-22 compared to 7,670 in Nov-19 and up 2,460 from Oct-22
  • 46,490 long-term overseas visitor arrivals in Nov-22 compared to 36,940 in Nov-19 and up 7,380 from Oct-22
  • 33,080 international student arrivals in Nov-22, 13.5% lower than pre-pandemic levels in Nov-19, but up 32,300 from Nov-21
  • 505,240 short-term overseas visitor arrivals in Nov-22 compared to 815,910 in Nov-19 and up 74,760 from Oct-22

New Zealand topped the table of short-term visitors with 91,210 arrivals. China was notably absent from the top 10 source countries of short-term arrivals, but that is likely to change significantly in 2023.

Source: Centre for Population

Much to Sydneysiders’ dismay, the Population Statement also sees Melbourne toppling Sydney’s crown as Australia’s most populous city by 2031.

Melbourne suffered a harsh exodus during the pandemic, with population growth decimated by not only a net outflow of overseas migrants, but also that of interstate migrants. Historically, net interstate migration (NIM) has contributed approximately 0.2% to Victoria’s population growth; comparatively in 2020-21, NIM detracted 0.3% from Victoria’s population growth, the lowest contribution since the 1990s. 

The Population Statement believes that the net outflow of NIM from Victoria will slow from 18,000 in 2020-21 and 17,000 in 2021-22 to just 6,000 in 2022-23, before reverting to pre-pandemic inflows from 2023-24 onwards. 
NSW also recorded historically low NIM during the pandemic years, reaching an estimated 40,000 in 2021-22 and subtracting 0.5% from population growth. The Population Statement projections do not bode well for NSW– net population outflows of 23,000 per annum subtract 0.3% from population growth from 2023-24 onwards.  

Victoria is projected to take a disproportionately large share of net overseas migration (NOM) – absorbing 34% of NOM despite making up approximately 25% of Australia’s population. 

Demographers at Macquarie University have observed that there is also a trend of recent overseas migrants moving to Melbourne after a temporary stint in Sydney. Hence, while the Population Statement believes NSW will remain the gateway for many incoming travellers to Australia, affordability and congestion challenges mean the state may have trouble retaining its new arrivals. 

For now, the strong rebound in NOM nationally may squeeze already tight rental and housing markets. This may be a particular issue for Melbourne, with the Population Statement expecting NOM to contribute around 70,000 people per annum to Melbourne’s population. 

This blog was co-authored by David Li, a Vacationer in Deloitte Access Economics.