Australia’s Central Bank Chief Says the Unspeakable

Talk about a failure of forward guidance.

Australia’s population hit 25 million this week, three decades sooner than the government had forecast. Sure, it’s not much compared with the size of some Asian cities and the American states of California and Texas, but this population boom has had a huge effect on the economy and life in cities, where most Australians reside. Contrary to popular imagery, the country is one of the most urbanized on the planet.

The bulk of the transformation can be attributed to immigration. Few politicians or business leaders will say so. When they visit London or New York, they tirelessly – sometimes tiresomely – trumpet 27 years of economic expansion. Most of the credit is showered on China, minerals and the stimulus deployed in 2008-2009. No mention of the 25,000,000th Australian.

Except at the Reserve Bank of Australia. Don’t let two years of unchanged interest rates deceive you into thinking RBA officials have nodded off. Governor Philip Lowe was unequivocal this week in praise of population growth, including immigration. Here’s one huge forecasting error that’s being embraced.

Perhaps it’s something that only Lowe can do: He’s still in the early stages of his seven-year term, and the central bank is revered in Australia. Lawmakers responsible for immigration are reluctant to go there in advance of next year’s national elections. They are too vulnerable to dog whistles from the right (yes, Australia has that, too).

Hours after the national headcount hit 25 million, Lowe devoted most of a speech in Sydney to demographics. Monetary policy had to wait for the final two pages of a 17-page address. He was careful to acknowledge concerns that infrastructure, transportation and housing hadn’t always kept up, but the message was clear: Population growth, largely attributed to immigration, has been a big plus for the economy.