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In this report, KPMG Australia (KPMG) examines the impact of the COVID-19 pandemic on Australia’s population and economy by 2029-30 by modelling two scenarios: one where a vaccine is found within the next 12 months and another where a vaccine is not found in the next two years. The report then estimates the benefits of increasing Australia’s international student intake to help offset the economic losses caused in both scenarios.

Summary

Lower projections for 2029-30

In the ‘no-vaccine’ scenario, KPMG estimates the population in 2029-30 to be more than one million less than the baseline projection prepared by the Australian Bureau of Statistics (ABS) before the onset of COVID-191. Instead of 29.12 million at the end of the current decade, KPMG projects the Australian population to be 28.04 million.

A lower-than-projected Australian population by 2029-30 would not of itself be a problem. But if lower rates of population growth were associated with missing out on younger, more highly skilled Australian migrants, then Australian living standards would be adversely affected.

KPMG’s economic modelling suggests that in a ‘no-vaccine’ scenario, real GDP would be $117 billion lower in 2029-30 on an ongoing basis than it would have been had COVID-19 not triggered a slowdown in immigration.

KPMG projects household disposable income, a better measure of material living standards than GDP, to be $80 billion lower as a result of COVID-19’s effect on immigration, or more than $2,800 for every man, woman and child in Australia. In other words, in the absence of a vaccine within the next 12 months, Australians on average are estimated to be more than $2,800 worse off on an ongoing basis by the end of the decade from reduced immigration than they would have been if immigration had not been reduced by the COVID-19 pandemic.

Causes and potential solutions to immigration slowdown

The annual loss of GDP and household disposable income from reduced immigration is caused by two factors. The first is fewer working-age people supporting older Australians as immigration, which consists mainly of younger people, is curtailed by COVID-19-related international travel restrictions. The second is the loss of more highly productive migrants, since the immigration program is deliberately tilted towards skilled migrants including university students and graduates.

One way of cushioning the blow from a reduced intake of younger, skilled migrants caused by the COVID-19 international travel restrictions would be to make Australia more attractive to international students. In a post-COVID-19 world, where competition for international students will be even more intense, Australia will do well to hold onto its pre-existing levels of international students. But if it could do so, and achieve a meaningful increase in those numbers, the nation would be better off.

What KPMG proposes

In responding to the economic crisis inflicted on Australia by the COVID-19 pandemic, KPMG proposes that the Australian government should seek to increase Net Overseas Migration (NOM) by attracting more higher education students. International students are younger than the Australian population as a whole and can be expected to be highly skilled as a result of their educational attainment before and after arriving here.

To retain and attract international students in a highly competitive global marketplace, the Australian government could consider making post-study work rights easier to obtain and last longer, add further permanent residency points to these post-study work rights and increase permanent residency points for students who undertake study in areas of skill shortage or in regional areas.

These measures combined would help solve the economic growth and living standards problem facing policy makers as we seek to emerge and recover from the COVID-19 pandemic.

The baseline used in the scenario analysis is ABS’s Series C rebased as at June 2019. Without the COVID-19 population shock, Australia’s resident population was anticipated to reach 29.1 million by June 2030 under rebased Scenario C and this compared with 29.8 million for rebased Scenario B. For the purpose of this analysis we have assumed Series C birth rates and life expectancy rates and that COVID-19 will not have a material impact on natural population growth rates. Source ABS Catalogue 3222.0 https://www.abs.gov.au/ausstats/abs@.nsf/latestProducts/3222.0Media%20Release12017%20(base)%20-%202066


KPMG's 8 findings

420,000 and 1,079,000 short

Finding 1: Under the ‘vaccine’ and ‘no-vaccine’ scenarios, Australia’s population levels by June 2030 could be between 420,000 and 1,079,000 short of the original ABS projection of 29.12 million.

$100 billion

Finding 2: Under the ‘no-vaccine’ scenario, real GDP is projected to be almost $100 billion lower than the baseline projection in 2029-30 and each year thereafter, even where no productivity loss is considered from the loss of younger, more skilled workers.

Annual GDP from 2029-30 $17 billion lower

Finding 3: Where we assume that the ‘lost’ working-age population was 20 per cent more productive than the incumbent workforce, given that these workers were more likely to be highly skilled and younger, the negative impact on the economy is greater, with annual GDP from 2029-30 being $17 billion lower.

5.5 per cent reduction in real GDP

Finding 4: Overall KPMG’s economic modelling suggests that in a ‘no-vaccine’ scenario the time profile of real GDP would be 5.5 per cent lower in every year from 2029-30 and beyond relative to the profile projected in the absence of COVID-19 triggering a slowdown in immigration. To put this in context, a 5.5 per cent reduction in real GDP in 2029-30 alone is equivalent to $117 billion.

Real household disposable income more than $80 billion lower

Finding 5: Under the ‘no-vaccine’ scenario, real household disposable income – a better measure of material living standards than GDP – is projected to be more than $80 billion lower than the baseline projection in 2029-30 and each year thereafter, which is more than $2,800 for every man, woman and child in Australia.

2 ways to address decline in population growth

Finding 6: There are two options available to government to address the decline in population growth: option A) A no-policy approach of a gradual return to pre-COVID-19 ABS population growth rate assumptions with a reduction in overall population out to June 2030; and option B) An accelerated population growth strategy to offset some of the projected reduction in population levels due to COVID-19.

Attracting international students in a highly competitive global marketplace

Finding 7: To attract international students in a highly competitive global marketplace, the Australian government could consider making post-study work rights easier and last longer, add further permanent residency points to these post-study work rights and increase permanent residency points to students who undertake study in areas of skill shortage or in regional areas.

Population, participation, productivity

Finding 8: These measures combined would help solve the population and growth dilemma facing policy makers and would address the drop in international enrolments. This policy option would boost the three ‘Ps’, population, participation and productivity, with the increase in participation and productivity strengthening the economy and raising the material living standards of Australians in a post-pandemic world.


Download the full report

We analyse:

  • population, immigration and economic growth
  • international students and Australia’s prosperity
  • Australia’s population post-pandemic – looking at two scenarios, one where there is a vaccine in the next 12 months, one where there is no vaccine
  • slower population growth hits economic growth
  • competing for international students.


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