Australia | Sep 30 2010
By Chris Shaw
For the year to March the population of Australia increased by 403,082 people to 22,271,864, which represents an increase of 1.8% for the period. This rate of growth is down slightly from the year to March 2009, where population growth was its highest in 40 years.
CommSec economist Savanth Sebastian notes it hasn't just been migration driving this growth, as 303,500 babies were born in the year to March. This is the highest number of births in a year since quarterly records were started 28 years ago.
Driving the increase in population are the mining states of Queensland and Western Australia, a trend Sebastian expects will continue in coming years. Next best was South Australia, where population growth held at just below its fastest pace since the middle of the 1970s.
In Sebastian's view there are significant implications for the Australian economy from the strong population growth being experienced, the first being a faster rate of population growth means the economy can grow at a faster pace.
As well, Sebastian points out more people in Australia means more demand for housing, roads, schools, hospitals and a variety of retail goods. This is helping stimulate the domestic economy even while the global economy remains weak.
This means the current baby boom is also a reflection of how well the Australian economy has survived the global downturn, as Sebastian sees economic considerations as playing a key role in any decision to start or expand a family.
Looking more broadly at the impact on the Australian economy of the current population growth being recorded, the increase in skilled migration has helped meet employment demand. As Sebastian notes, in this cycle rising population growth in Australia hasn't resulted in higher unemployment but has helped drive economic growth and contributed to a firmer job market.
The increase in the population is also seeing extra productive capacity being added, though as Sebastian points out this carries with it some additional inflationary risks. Large infrastructure programs will be needed to address the population gains, which should also help support economic growth.
As a rising population boosts the sustainable rate of economic growth, this means there should also be a boost to the potential growth rate of investment funds and returns. Housing demand should continue to rise according to Sebastian, as should demand for child-care places over the next five years and for school places over the next 5-20 years.
For the economy in general, Sebastian takes the view the Reserve Bank of Australia (RBA) is likely to raise interest rates next week before again moving to the sidelines. CommSec's forecast is for the cash rate to reach 4.75% by the end of this year and 5.75% by the end of 2011.