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POPULATION ‘X’ FACTOR A KEY RISK FOR BUDGET OUTLOOK

The Federal Budget highlights the significant progress Australia has made in containing the spread of COVID-19 and the importance of the economic interventions made by the Morrison Government to support individuals, households and businesses through the impact of the global pandemic.

Property Council of Australia Chief Executive Ken Morrison said:

“There is no doubt Australia starts the process of economic recovery from a much better place than most other developed nations, thanks to governments’ successes in containing COVID-19 and supporting the economy.

“The Budget contains many new welcome measures – including the bringing forward of personal income tax cuts, substantial infrastructure investment, support for employers to take on workers, and business investment incentives – all of which will help to build momentum for recovery.

“The previously announced extension of the First Home Loan Deposit Scheme will provide a welcome boost for new apartment and housing construction. This scheme, along with the HomeBuilder grant, have been vital in supporting residential construction.

“However, the Budget papers also expose a key risk to economic recovery – the population ‘x’ factor.

“One of the three ‘Ps’ of economic growth – population – will be a big drag on the economy.

“The delayed population restart assumed in the budget papers presents a key risk to Australia’s recovery and the forecasts presented in the budget.

“The closure of our international borders means net overseas migration which previously accounted for around 60 per cent of population growth will actually go into reverse next year for the first time since 1946, with an outflow of 72,000 people.

“There will be a further 22,000 decline in 2021/22, before net overseas migration rebounds to 201,000 in 2022/23.

“As a result, Australia’s population growth is expected to fall to 0.2 per cent in 2020-21 and 0.4 per cent in 2021-22, the slowest growth in over a century.

“These population forecasts underscore the critical importance of a comprehensive plan to reboot our migration program and get our population growing again.

“The Budget papers assume that international students and permanent migrants will gradually return through the latter part of 2021 along with the resumption of inbound and outbound international travel.

“This is a critical assumption for the Budget which is also vital to the outlook for our residential construction industry which is a big driver of jobs and economic growth.

“The Budget forecasts an 11 per cent decline in dwelling investment in 2020/21, before growing by 7 per cent in 2021/22 – but it’s not clear how this can be achieved in the same year that net overseas migration is forecast to be negative.

“Growing our population again will be essential to realising the Budget’s forecasts, and requires Australia to safely and methodically begin to reopen our borders to the rest of the world,” Mr Morrison said.

“We encourage the Government to begin this important work to underpin Australia’s recovery.”

Media contact: Matt Francis | M 0467 777 220 | E mfrancis@propertycouncil.com.au