Population growth downswings and their consequences
Population growth has slowed since the post-pandemic surge. The pace of moderation is uncertain but the implications for both the labour and housing markets are significant.
Five years on, some pandemic effects are still washing through. The surge in population growth following the reopening of Australia’s international borders is now unwinding, as was widely predicted. However, this unwind has happened a bit faster than leading indicators previously implied. Current RBA assumptions and our own population forecasts also imply that population growth will run a little slower this year and next than the 2010s average. While the difference might seem quantitatively small relative to all the other sources of uncertainty currently, it has implications for near-term labour market developments. It also takes some demand pressures off the housing market.
This slowdown in population growth was to be expected, given how much of the initial increase was catch-up. After the borders reopened, students returned seemingly all at once, especially after China’s borders reopened in early 2023. Though quantitatively smaller than the bounce-back in resident student numbers, there were also backlogs of people who had been approved as permanent residents before 2020 but had not arrived before the pandemic hit, as well as people who applied while the borders were shut and could not physically arrive to be counted in the population, even if their applications had been processed. Overall population growth peaked just above 2.5%yr in Q3 2023. Once those backlogs had worked through though, the rate of growth eased.
This pattern of a surge in growth and correction is evident in many peer economies, including some that did not close their borders as tightly. Canada, New Zealand, the United Kingdom and Germany all saw qualitatively similar cycles in population growth, with Canada’s being even bigger than Australia’s, and Germany’s peaking at a slower rate but still high relative to its own history.
While the downswing has been widely expected, the pace of decline in the growth rate has been surprising. Until recently, we had been expecting population growth to finish 2024 at around a 2%yr pace, or even a little above that if the leading indicators of overseas arrivals and departures were to be believed. The RBA’s February SMP forecasts also rested on an assumed population growth rate for 2024 of 2%yr.
The official data on resident population numbers are quite lagged relative to other data – getting these data correctly disaggregated by state and territory of residence is hard. As noted previously, when the latest data (for September quarter 2024) were released in March, the annual growth rate had already declined to 1.8%. Both we and the RBA are now working on an assumption of 1.7%yr growth for calendar year 2024. (The RBA did not discuss this change in the SMP, marking its 2024 estimate to the latest data while leaving its 2025 and 2026 growth assumptions unchanged.)
It is not clear why the leading indicators gave a stronger steer or why the slowdown has been sharper than earlier thought. An apparent slowdown in processing times for some classes of visa application might have something to do with it, as might increased departures of long-term but non-permanent residents.
For working-age population growth (those aged 15 years and over) to outpace total population growth (including children) by more than usual, as it has, the increase in resident population must have been skewed to adults. Given the catch-up in population was skewed to young adult students, most of whom meet the ’12 months in 16’ test to be in scope for the Labour Force Survey (LFS), the gap seems relatively straightforward to explain. Other contributing factors might include the slower pace of natural increase since the pandemic; the number of young people turning 15 outnumbers births currently. Whatever the driver, though, as the population surge has unwound, so has the gap between the two measures.
Yet if the data for working-age civilian population from the LFS are to be believed, the decline in population growth is becoming less steep more recently. The gap between this measure and our forecasts for resident population increases again in the latest two quarters.
To be fair, the ABS has to publish the labour force population numbers without the benefit of the official Estimated Resident Population (ERP) data for the latest periods. It therefore must use projections, and these can be revised. This has several implications for interpreting near-term labour market developments. First, regardless of whether the LFS or ERP trend is correct, population growth is lower now than a year ago. Even if trend labour force participation is still rising (as we believe), this means that employment growth will not have to run so hard to keep pace.
Second, there is a good chance that LFS estimates of working-age civilian population will be revised when the ABS re-benchmarks these data. Employment growth and other LFS measures that key off the population growth estimates would therefore also be revised. Indeed, the growth of the working-age population over 2024 was already revised from 2.4% to 2.1% following quarterly re-benchmarking to official population estimates in February. In these circumstances, observers are much less likely to get a bad steer from the current data by focusing on ratio measures that are robust to changes in estimated population growth. These include the employment-to-population ratio and the participation rate, as well as the unemployment rate and other measures of underutilisation. (The RBA discussed this issue back in 2012, the last time large swings in population growth skewed the LFS data.)
Third, and again regardless of whether the LFS estimate or our forecasts are correct, fewer net new residents implies less pressure on housing markets. It was no wonder that rent inflation surged over the same period and housing prices got a second wind in many cities despite high interest rates. Even the most flexible building industry (which Australia does not have) would have struggled to suddenly pivot and build 30–40% more homes to accommodate all the extra population. As population growth slows, so does demand for additional housing. This implies that rent inflation should slow further, as we expect. It also implies that the boost to established housing prices coming from lower interest rates could be less than usual this time around.
It is also worth noting that state-level population growth can vary considerably from the national total. For example, over the year to the September quarter, Victoria (2.1%yr), Queensland (2.0%yr) and WA (2.5%yr) all saw population growth run ahead of the national pace, while it lagged in NSW (1.4%) and the smaller states and territories. A key difference is that NSW had negative net interstate migration, while for Victoria this figure was close to zero, after being noticeably negative during the period of lockdowns and noticeably positive in the 2010s. These relativities can also shift quickly, as Western Australians know all too well.
The upshot is that, while we often think of demographic variables as slow-moving, they need not be. In the aftermath of the pandemic, these implications warrant careful monitoring.
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Australia and NZ Weekly 2 June 2025
CAPEX likely peaked on current plans
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.