How to manage our population boom?

Australia is going through a baby boom.  Over the last year 293,600 babies were born in Australia; an absolute record number of new arrivals.  At the same time, Australia is recording the highest level of overseas migration on record.  The steep ‘natural increase” (ie births minus deaths) and the rate of overseas migration have combined to produce the record level of population growth we are currently experiencing – almost 440,000 new residents over the year to March.

While the issue of overseas migration has been much commented on, the trend of a rising fertility rate has largely flown under the radar.  Based on the latest figures from the Australian Bureau of Statistics (here) the average Australian woman is expected to have 1.97 children in a lifetime.  That’s up from 1.73 in 2001 and the highest rate since 1977.

Fertility rate over time

The national fertility rate has been trending upwards since 2001.  Not so coincidentally, that is when the baby bonus started.  Another important contributor is likely to have been the exuberant economic conditions (notwithstanding the GFC) which have boosted couples confidence in having larger families.

The rise in fertility rates is likely to have an impact on household sizes.  It is logical to assume that more children will lead to larger households.   The Census of Population and Housing, which is conducted every five years, is the best measure of average household size.  The last Census was held in 2006 and the average household size across Australia remained constant at 2.6 persons after falling from 2.7 persons in 1996.  The next Census will be held in 2011 with the results likely to be available in 2012.

Balancing the rise in number of children, changing lifestyle and household formation trends may even out any move towards larger households.  Single person households are a growing proportion of the community, as are single parent families and couples without children (including empty nesters).  The prevalence of these smaller household formations may be enough to cancel out any increase in the average household size.

The average size of an Australian household is one of the key variables in how demand for housing is estimated.  In simple terms, the demand for new housing can be estimated by dividing the net population growth by the average household size.  For example, last year there were 439,000 new Australians.  Divide this figure by the current average household size of 2.6 persons and you get demand for approximately 169,000 new homes or about 14,100 new homes every month.  Of course, to arrive at a true demand figure you also need to include additional factors such as housing occupancy rates, changes in household formation, affordability and economic factors. 

The surge in Australia’s population has been met with a great deal of debate.  Some politicians and commentators are calling for a scrapping of the baby bonus and a wind back of the migration intake.

Australia is a large country with a relatively small tax base, so getting more people to share the ‘tax burden’ should be seen as a positive.   Additionally, more people translate to more demand for Australian products and services providing a stimulatory affect on our economy.

The solution to such strong population growth largely comes back to how our Government manages growth – specifically how does Australia deliver the much needed infrastructure and services required by such a rapidly growing population.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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2 Responses to How to manage our population boom?

  1. franklyn williams November 19, 2009 at 7:03 am #

    In addition to the 439,000.00 you failed to mention those on temporary visas in this currently. At any given time there are approximately 300,000.00 people on Temporary visas ,such as overseas students . There are over 100,000 overseas students in victoria alone.
    The lack of supply both rental and home ownership is due to many factors . One major reason is the lending restrictions by our Banks to developers (only 4 since the GFC) . The other is the shortsigted approach of the current federal government in trying to solve this issue using FOHG and thereby stimulating demand only.
    I suggest your figure should be more like 739,000 divided by 2.6 gives you 284,000 dewellings required or 23,000 new home /mth

    • RP Data Research November 19, 2009 at 7:11 am #

      Franklyn, that is absolutely right and thanks for the contribution. Eduction is one of Australia’s biggest and most rapidly growing industries. The student accommodation market in terms of rental demand is absolutely enormous and underpins a large part of inner city rental stock.

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