Qld MYFER should factor in population growth pick up

Higher coal royalty revenue associated with higher coal prices will be the big story coming out of Queensland’s Mid Year Fiscal and Economic Review, to be released today, but there should be some other important variations to note. Population growth is one of the important parameters I expect the Queensland Treasury will have revised. At State Budget time in June, the Treasury forecast 1.5 percent population growth over 2017-18 and 2018-19, but 2016-17 data from the ABS suggest 1¾ percent is now probably a better forecast. The June 2017 ABS population estimates released last week revealed Queensland’s population growth rate has recovered slightly and is once again above that of the rest of Australia’s, and Queensland has regained third position in population growth rates among States and Territories, after Victoria in 1st place and ACT in 2nd (see charts below).

Pop_post_Jun17

Queensland’s current population growth rate is still relatively low in historical terms, but it is encouraging in that it suggests the state is rebounding from the post-mining investment boom slump better than previously expected. In the MYFER forecasts, higher population growth should be associated with slightly higher employment and economic growth. My colleague Nick Behrens observed last week that the pick up in net interstate migration, one of the contributors to higher population growth, is strongly related to Queensland’s much improved labour market over the last year and a half (Population flows towards employment opportunity).

The recovery in population growth has been due to a resurgence in both net interstate migration and overseas migration (see chart below). Net overseas migration (31,148) was the largest source of population growth for Queensland in 2016-17, just ahead of natural increase (31,006), and nearly 80 percent larger than net interstate migration (17,426).

Components_population_growth_Jun17

Net overseas migration should continue to exceed net interstate migration so long as Victorians continue to shun Queensland (see chart below).

NIM_by_State

As we have seen over the past year, the strong net overseas migration into Australia has prompted a debate on Australia’s immigration level, and I expect this to intensify over the next few years. While migration does expand the size of the economy, it also imposes costs, particularly for additional infrastructure. To illustrate, Queensland’s net overseas migration in 2016-17 of 31,148 was similar in magnitude to the current population of Gladstone (34,300, excl. Tannum Sands & Boyne Island), and exceeded the population of Maryborough (22,500) and many other Queensland regional centres.

The recent pick up in state population growth should prompt the Queensland Government to consider the sufficiency of current provisions for infrastructure investment over the forward estimates (currently in the 2-2.5 percent of GSP range, but this should shift slightly upward as election commitments are incorporated into the forward estimates in MYFER). We may not be at the high population growth rates we have seen in the past, but there is no reason for complacency. Historically, Queensland has had a poor record of planning for future population growth, and I remain concerned we will one day experience a re-run of the crisis-ridden 2000s.

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