Population – June Quarter 2013

• Australia’s population rose by 95.7k in QII to 23.13 million.  Over the past year it rose by 407k or 1.8% which is high by global standards.
• The natural increase (births less deaths) was a record 163k in the year to QII 2013.  There were 311.4k births and 148.8k deaths.
• Net overseas migration was 244k over the past year.
• Natural increase contributed to 40% (or 163k) of the population rise over the past year and net migration 60% (244k).
• For the States, WA had the strongest annual growth rate at 3.3%pa, followed by the ACT and Qld.
• New dwelling construction is 161k annually, well below population growth, putting upward pressure on house prices.

Analysis

Australia’s population up by 0.5%

Australia’s population rose by 95.7k (0.5%) over the June quarter 2013, taking the annual population increase to 407k, the highest since September 2009.  The increase means that Australia’s population was just over 23 million in June.  The major driver of population growth has been net migration which was 244k over the past year, the highest since December 2009. Natural population growth (births less deaths) was 163k over the year.

Across the States the annual growth rates were diverse. WA’s population rose by 3.3%, ACT 2.2%, Qld 2%, Vic 1.9%NT 1.8%, NSW 1.4%, SA 0.9% and Tas 0.2%. WA’s population growth should ease over the next few years as the investment and construction phases of the resources boom deflate and are replaced by the operational phase which includes a significant rise in export volumes of iron ore and LNG. The national population figures are still likely to stay in the 1.6% to 1.8% range as Australia’s relatively attractive economic position attracts migration.

The older age groups, those above 55 years of age, have had the fastest growth rates compared to other age groups over the past twenty years. The proportion of the population over 65 years is rising gradually and is now just over 14% compared to under 12% in 1993. It means that the median age of the population has risen from 33 to 37.3 years old from 1993 to 2013. The economic adjustment to an ageing population is already underway and presents a significant challenge to Federal and State Governments. The labour force participation rate is shifting lower, as the largest of the population age cohorts, the “baby boomers” retire. Health care demand will rise dramatically in the next ten years and stay high as the population ages. In a partial counter to the ageing forces, the Federal Government has allowed a much higher migration rate. It also introduced the “baby bonus” which produced a noticeable rise in births over the past seven years. It has also given rise to much higher demands for prams and baby wear, child care, primary school places and teachers.

There is a strong link between population growth and housing demand which is worth highlighting because of the debate around the level of, and current upswing in, Australia’s house prices. Australia’s relatively high annual population growth rate of 1.8% compares to the US growth rate of 0.8%, the UK’s 0.6%, Canada’s 1.0% and China’s 0.6%. It helps explain the strength of housing demand and rising national residential rents.

New housing supply is near 150k annually, and has been running well below our estimate of underlying housing demand of 170k, for the past few years. The current upswing in house prices reflects the interplay of population pressures, constrained new housing supply and low mortgage rates. National house prices have risen by around 8% over the past year while the number of loans is about 15% higher. In our view the underlying conditions still point to some more upside on national house prices.

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