Learning to live with less

Population growth has been a mantra of our property industry for as long as I can remember. And once again there are predictions of a surge in growth, driven (this time) by people allegedly fleeing Victoria. However, there are good reasons to think this may not happen, and that we may need to prepare for an extended period of minimal growth. This may not be a bad thing.

One of the first things to understand about our recent rates of actual and predicted future population growth is that they have been extraordinary in terms of the actual numbers and also in terms of the rate (speed) of growth. On a global scale, our forecast rates of population growth in major cities exceeded many leading world cities and was on a par with places like Shanghai and Beijing. In just 15 years, Brisbane, Sydney and Melbourne were predicted to grow by around a third – roughly three times the rate of growth of cities we often like to compare ourselves with like Copenhagen (for some reason), Los Angeles, San Francisco, London or Paris.

Given we started this forecast period with widely acknowledged urban infrastructure deficits (failing to keep up with population growth in the past), how we were supposed to not make the problem worse with these rates of growth is something smarter people than me might like to explain. Let’s just say the Chinese do things very differently so we can’t use Shanghai or Beijing as comparisons.

These predicted rates of growth were driven by three components: international migration (net overseas migration or ‘NOM’); interstate growth (net interstate migration or ‘NIM’) and natural growth (more births over deaths). And all three now look severely compromised by the policy responses intended to manage Covid.

In Queensland’s case, NOM has grown in importance in recent years, now accounting for more than a third of our population growth. However, with the closure of international borders, there’s been a virtual halt to 457 work visas, along with foreign student visas. Net overseas migration to Australia – Queensland included – will slow from record numbers to a trickle. This is likely to recover but unlikely to recover to pre-covid levels for some years: rising unemployment in Australia would not be helped by importing more labour on work visas. I cannot see a Federal Government supporting NOM at the same levels as we have seen in recent years when so many Australians themselves are out of work – something sadly that’s unlikely to change for a few years yet.

The rate of natural population increase is also significant, and typically stable. It has sat at around 30,000 per annum since 2016. There are two schools of thought here: lockdowns and work-from-home will lead to a post Covid baby boom (for obvious reasons) or that the post Covid recession will see fewer people plan on starting families until their financial futures are more certain. I can see a bit of both – an initial baby bump possible at year end after the March-April lockdowns, followed by a slowdown in births as the full implications of the recession sink in. In short, less growth from natural increases is my punt, for the foreseeable future.

The final source of population growth has been net interstate migration and this is where some are seeing hope of significant growth. The numbers of net interstate migrants to Queensland has been increasing since the 40 year lows recorded from 2010 to 2014, but will this continue?

There are a few things to keep in mind here. First, when NIM reached levels of 1,000 a week (around 50,000 per annum) in the late 1980s and early 1990s, Queensland’s total population was around 2.4 million. Today it is around 5 million. To have the same proportional impact, we would need to see NIM rise to around 80,000 per annum – and we are a very long way from that.

Second, there has been a close correlation between periods of high net interstate migration and periods of economic prosperity in Queensland. People did not come just for the weather or the lifestyle (attractive as these were) but they came in numbers when Queensland’s full-time jobs growth was strong, even stronger than NSW or Victoria.

There have been recent media reports speculating about Victorians (in particular) seeking refuge from Covid impacts in their home state and moving to Queensland. I don’t believe the media reports will reflect significant real numbers for the reason that Queensland’s full-time jobs growth has actually been negative in the last five years and anaemic in the last ten.

It’s important to look at full time jobs because these are the things people need to secure mortgages and to provide family security. Much has been made of the Gig economy, but part time and casual jobs are particularly vulnerable in recessions and especially to downturns in Covid-sensitive industries like hospitality, travel and tourism. Which happen to be synonymous with Queensland.

Would Victorians (for example) logically leave a state that has produced more full-time jobs than any other in the last five years for a state that now has fewer full-time jobs than five years ago? I have heard some in the property industry argue that if you had to be unemployed, where better than in Queensland. Which is true, but is this what we want? Migrants arriving without jobs to go to or limited prospects of getting any in the near term isn’t helpful. This won’t stimulate our economy but will add to the drain on services in costly areas for governments (meaning taxpayers) like health and education. Fewer full time employed taxpayers and a rising population of dependent unemployed is not a recipe for economic growth. Property professionals spouting this line need to take a long, cold shower. All population growth is not alike.

So each of three sources of population growth looks challenged in a post Covid Queensland, for the next few years at least. Less NOM, fewer NIM and less breeding.

Is this such a bad thing though? Provided we continue with infrastructure projects, it could allow the State to begin to close the infrastructure gap which has widened significantly in recent decades. The pressure is everywhere to see – rising congestion, hospital waiting lists, rising school class numbers, and hostility to development generally. If Covid forces a breather on the rapid rates of population growth we’ve been used to, perhaps it will mean we can actually enhance our quality of life and standards of amenity in the process?

It’s also worth keeping in mind that there are many global examples of low growth cities and regions which remain highly attractive and economically prosperous. The surplus of demand by people wanting to live and work there, relative to supply (deliberate limits on housing supply and population caps) invariably makes these very expensive real estate markets, completely unaffordable for many. But from a selfish property market point of view, they are still viable markets for development and redevelopment. Locally, think Noosa. Being horrendously expensive for residential or commercial property hasn’t stopped some of our other property markets before?