Reserve Bank governor says Australia’s high immigration levels boosted economy | Australia news
Australia’s high immigration levels have been a positive for the economy, helping to arrest the rate of the ageing of the population and ensure higher than average growth in recent years, the Reserve Bank governor says.
It means Australia has one of the youngest populations among advanced economies, with a higher fertility rate and better prospects for growth.
Philip Lowe’s comments to a Sydney audience come at a heated time in the population debate, with the federal government cutting Australia’s permanent migration intake by 10% over the last 12 months, to just 162,417, the lowest level in a decade.
The reduction, confirmed by the home affairs minister, Peter Dutton, was the result of a departmental crackdown after Dutton and the former prime minister Tony Abbott unsuccessfully advocated for a lower migration cap for Australia.
Lowe said on Wednesday the movement to Australia of large numbers of young people over the past decade had changed Australia’s demographic profile in a positive way.
He reminded the audience that, in 2002, Australia’s population was expected to age quickly, with the median age projected to increase “significantly” to over 45 by 2040, but after a decade of increased immigration of younger people, the latest estimate was the median age in 2040 would be around 40 years.
“This is a big change in a relatively short period of time and reminds us that demographic trends are not set in stone,” Lowe said.
Lowe said that, on average, new migrants to Australia in recent years had been younger than the resident population, with the median age of new migrants sitting between 20 and 25, more than 10 years younger than the median age of the resident population.
“This inflow of younger people through immigration has significantly reduced the rate of population ageing in Australia,” he said. “Over the past five years, over 80% of net overseas migration has been accounted for by people under the age of 35.”
Lowe said RBA staff had recently examined demographic trends over the next quarter of a century for 37 advanced economies using United Nations data, and Australia was better placed than most comparable countries.
He said Australia’s population was now ageing more slowly, it had a higher fertility rate than most advanced economies and its old-age dependency ratio was rising less quickly.
“This has implications for future economic growth and the pressures on government budgets,” he said.
However, Lowe also warned that the population was still ageing, reflecting a combination of the transition of baby boomer into retirement ages and increased life expectancy.
“By 2040, around 20% of the population is expected to be over 65, compared with 15% currently.”
Turning to the short term, Lowe said he expected the unemployment rate to fall to 5% over the next few years, and possibly lower.
“An unemployment rate of 5% is the conventional estimate of full employment in Australia but it is possible that we could go lower than this on a sustained basis,” he said. “Time will tell.”
He said headline inflation was expected to increase from 2.1% to 2.5% by 2020 but it was likely to slip in the short term – to 1.75% by the end of 2018 – as changes to state government programs led to lower measured prices for some services.