Australia is younger and better off: RBA governor defends immigration rate
“Australia is younger and better off: RBA governor defends immigration rate”*
Migrants have put Australia in a better position than most other advanced economies, the Reserve Bank governor has said, in a speech designed to inject an economic perspective into the immigration debate.
Philip Lowe said Australia’s relatively high immigration rate had created one of the youngest countries among advanced economies, lowered the old-age dependency ratio, increased fertility rates and driven economic growth.
The 1.5 per cent annual growth rate of the population, which reached 25 million on Wednesday, outstripped the 1 per cent rate of most other advanced economies over the past decade.
The influx of up to 190,000 permanent migrants a year has dramatically lowered the median age, with 80 per cent of net overseas migration coming from people under 35.
The intake has slashed the projected median age from over 45 in 2040 to 40. That means the old-age dependency ratio – the number of those aged over 65 compared to the working age population – has also declined to among the lowest of United Nations advanced economies, helping reduce relative long-term government healthcare expenditure while boosting the tax base. “Our relative youth and higher fertility rates mean that the dependency ratio is expected to remain lower than elsewhere over the next generation,” he said.
Dr Lowe warned beyond that, “on current projections, it is then expected to increase quite significantly”, suggesting a higher intake of young migrants may be needed to keep the ratio in check. “The movement to Australia of large numbers of young people over the past decade has changed our demographic profile in a positive way,” he said.
Dr Lowe said a decade of dawdling infrastructure investment had failed to keep up but policymakers had started realising the transport needs of Sydney and Melbourne.
“The adjustment has now taken place, with growth in the number of dwellings exceeding growth in the population over the past four years,” he said.
First home buyers accounted for more than 18 per cent of home loans in June as investors continue to flee the market, down 16 per cent for the year.
Overall housing finance volumes dropped by 4.8 per cent in NSW, 0.7 per cent in Victoria and 5 per cent in Queensland and South Australia.
Western Australia plunged by 18 per cent, suggesting the regulator’s intervention to restrict investor lending is having a much broader impact than just taking the heat out of the east coast markets.
“If this is how things evolve, you could expect the next move in interest rates [from 1.5 per cent] to be up, not down,” he said.
“As the economy strengthens and income growth and inflation lift, it would be natural for interest rates to return towards more normal levels.”