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Population growth is nearing its peak

The pandemic caused a sudden and extreme shift in Australia’s population dynamics. The migration-driven recovery in population growth has exhibited a considerable amount of strength so far this year, and it looks as though we are approaching its peak.

In the five years leading up to the onset of the pandemic, Australia’s net migration intake averaged roughly 235,000 per year. Upon the implementation of general border closures to limit the spread of COVID-19, net migration fell effectively flat over two years – with a net outflow of 5,000 in 2020 followed by a modest inflow of 6,800 in 2021. 

Based on the pre-pandemic average, net migration would have amounted to around 470,000 over those two years had the pandemic not occurred.

In February 2022, Australia reopened its borders to the world. Westpac forecast a historic surge in net migration would unfold – the likes of which had not been seen since the post-WWII migration boom – amounting to +400,000 for 2022. Official data has since confirmed our view. Net migration printed +408,900 in 2022 and contributed 1.6ppts of the 2.0%yr jump in population growth. 

We initially expected the pace of net migration to ease from its record pace in 2022, to +350,000 in 2023 and +275,000 in 2024. These forecasts were well above the Government’s at the time, which assumed net migration would only return to a pre-pandemic pace of +235,000.

However, it has become clear that the strength of population growth observed over the course of this year has far exceeded even our ambitious forecast.

Westpac now expects population growth to print 2.3%yr in 2023, 1.9%yr in 2024 and 1.5%yr in 2025.

Based on the Government’s updated forecast for natural increase – which assumes a return to pre-pandemic trends by 2023-24 – the above growth rates imply net migration will print in the realm of +475,000 in 2023, +375,000 in 2024 and +275,000 in 2025.

Against the pre-pandemic pace of around 235,000, these forecasts indicate an “excess” gain of 240,000 in 2023, 140,000 in 2024 and 40,000 in 2025. 

Over the period of 2020 to 2025, we therefore estimate that net migration will be roughly 125,000 more than what would have been expected before COVID-19. In other words, by the end of this year, migration will have fully caught up for the losses observed over the COVID period, and will be outstripping its pre-COVID trajectory.

This is not the first time in our history whereby global events have seen such a rapid shift in migration dynamics. Towards the end of WWII, for example, net migration did not contribute positively to population growth from 1944-46. By 1949, net migration was contributing 1.8ppts of the 3.1%yr surge in population growth.

Updates on Australia’s estimated residential population (ERP) – including the contribution from net migration – are not particularly timely, being published with a six-month lag. The latest update, for March 2023, has population growth running at a 2.2%yr pace.

We have found that estimates of the working age population from the ABS Labour Force Survey (LFS) – which utilise a combination of ERP projections and other data sources, including information from the Department of Home Affairs – have become a more reliable indicator for total population growth over recent years, especially during periods of significant shifts in population dynamics.

As of the August LFS, working age population growth is running at a pace of 2.8%yr to August 2023, not materially different from the 2.7%yr pace from June 2023 but well above the 1.9%yr pace observed back in August 2022. 

On our figuring, these results imply that total population growth lifted to 2.3%yr in the June quarter and, based on just August’s LFS observation, it will likely maintain that pace through the September quarter. Hence, our forecast for 2.3%yr in December 2023 implies that population growth, having accelerated sharply through 2022, has tapered towards its peak over the course of 2023. 

Looking into 2024 and 2025, we anticipate a slowing in the pace of net migration, arising from both an easing in arrival flows and a pick-up in departures.

We believe that most of the slack will come through an easing in arrivals. This partly reflects an unwinding of the COVID-19 ‘catch-up’ – with the majority of those with delayed migration plans, as a consequence of the pandemic cycle through – but this also captures a shift in the migration policy stance, in response to the immense stress the pandemic and subsequent border reopening places on Australia’s migration system.

To better understand these dynamics, it is helpful to inspect how the stock of temporary migrants in Australia (excluding visitors) has evolved over recent years.

The two largest segments of our temporary migrant stock are foreign students (28%) and New Zealanders (39%). While these groups had vastly different pandemic experiences – the number of students in Australia nearly halved over two years – both groups have begun to move beyond pre-pandemic levels as of mid-2023.

Similarly, the number of individuals on working holiday maker and skilled employment visas – together accounting for roughly 18% of the temporary migrant stock – collapsed during the pandemic and have begun to find their footing, nearing pre-pandemic levels.

In the later portion of 2022 and into 2023, there has been a surge in “other” temporary migrants, from an average of roughly 170k over 2019 to 426k as of July 2023. Most of this lift centred on the Subclass 408 Pandemic Event visa, which provided support to working arrangements over the course of the pandemic. A similar dynamic was evident amongst bridging visas, but they have since moderated from their pandemic-era highs. 

Many individuals utilised the Pandemic Event visa as a form of bridging visa, with numerous reports suggesting the visa approval process for certain visa categories remains restrictively slow. Indeed, according to data from the Department of Home Affairs, visa grant volumes for temporary skilled and working holiday maker visas have risen but not nearly to the degree that has been seen for foreign student visas.

Ultimately, we are left with temporary migrant stock which has largely returned to pre-pandemic levels, with the exception of a large portion of individuals bound to a Pandemic Event visa, who are contributing to Australia’s labour force but otherwise lack the economic security associated with other visas. 

In response, the Government announced in early September that the Pandemic Event visa will only be open to applications from existing holders of this visa, with no further applicants from February 2024. 

Over recent months, there have been several other policy announcements on the migration front. That includes the reinstatement of work-hour restrictions on student visas (from unlimited to 48hrs/fortnight) and the lift in the Temporary Skilled Migration Income Threshold (TSMIT) – the minimum rate an employer must undertake to pay sponsored workers under the temporary skills programme and the employer-sponsored permanent migration programme. 

These developments aim to lower the risk of exploitation (as highlighted in the Migration Review) and will ultimately lower the amount of stress on the migration system by prioritising the stock of migrants current in Australia, rather than introducing policies that would sustain the historic pace of net migration and the strain it has caused on visa processing.

On the other hand, overseas departures have scope to lift further. At 227k over the year to March 2023, departure flows remain well below the five-year pre-pandemic average, at roughly 300k. The rise in departures will likely start with the Pandemic Event visa, as processing issues are resolved and some individuals return overseas. In time, we will begin to see a return to more normal dynamics for those who have arrived over the last couple of years, as students complete their courses (2 years for VET; 3 years for university) and temporary workers finish their sponsored terms.


The migration-driven recovery in population growth has exhibited a considerable amount of strength so far this year, and it looks as though we are approaching its peak. 

Population growth has played an important role in the aggregate strength of our economy to date – without it, the economic outlook would have been much bleaker. Accounting for the forecast strength in population, together with our view on economic growth, our forecasts imply GDP per capita declines in the order of 1.1% in 2023 and 0.3% in 2024. 

The ability for labour demand to soak up the surge in population growth so far has been remarkable. While our central view is for the pace of net migration to slow in 2024, we expect that the softening in labour demand – in response to the unfolding slowdown in the broader economy – will be greater. This will drive a rise in the unemployment rate over the next year, which we forecast will lift from a quarter-average of 3.8% by end-2023 to 4.7% by end-2024

Ryan Wells, Economist

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