Last week, Treasury Secretary Jenny Wilkinson and her predecessor Martin Parkinson participated in a roundtable discussion focused on economic growth, specifically around the themes of population, productivity, and participation. A significant issue remained unaddressed: Treasury’s historically poor record in forecasting net migration numbers. This lack of oversight has led to legitimate questions as to whether the government can competently handle the growing tide of new arrivals to Australia.
In the last four years, Australia has had a net 800,000 more arrivals than Treasury predicted. This difference further exposes a significant blindspot in the federal government’s migration planning and economic game plan. Our roundtable discussion quickly honed in on the importance of key economic metrics. It failed to account for the huge impact that migration forecasts would have on housing, infrastructure, and public services.
Inaccurate Forecasts Impacting Policies
For fiscal year 2022-23, Treasury had forecasted net migration at 235k. They were flabbergasted when the final number came in at 535,520. The prediction for 2023-24 was once more capped at 235,000, but it’s looking like it will actually come in at around 445,640. According to the Australian Bureau of Statistics (ABS), net permanent and long-term (NPLT) arrivals rose to 457,560 for the year ending in June. This number is in sharp contrast to Treasury’s predictions.
Indeed, over the year ending June 2022—before the much-ballyhooed increase in legal immigration— Treasury projected a net migration of a mere 41,000. The actual count turned out to be 203,590, significantly more. These inaccuracies have significant implications for government planning and resource allocation as local governments struggle to meet the demands of an increasing population.
Migration expert Abul Rizvi has estimated that net overseas migration (NOM) could range between 350,000 to 380,000 in the upcoming years. This alarming trend raises questions about the government’s capacity to manage such rapid population changes without adequate foresight or planning.
Housing Shortages and Infrastructure Strain
The impacts of these gross underestimations can be seen in Australia’s housing market. During that time, builders only built 705,442 net new dwellings. This figure is roughly 150,000 units short of what’s estimated to be needed. This shortfall increases pressure on existing high housing demand making it more unaffordable for many millions of Australians.
Their unprecedented pace of population growth has been accompanied by tremendous strain on infrastructure and public services. A new wave of residents has surged into the greater DMV area. Unless we act fast and smart, our schools, hospitals, and transit systems will struggle under the pressure. The government appears to be grappling with how to effectively accommodate this growth while ensuring quality living conditions for all residents.
Economic Growth vs. Quality of Life
When engaging in conversations on economic growth, Treasury officials often underscore the need to focus on the “three Ps”— population, productivity, and participation. These elements are crucial in fueling Australia’s economic growth. Despite reporting high GDP growth, critics have pointed out that GDP per capita has remained stagnant due to rapid population increases. Renowned economist Paul Krugman once remarked that “productivity isn’t everything, but in the long run it’s almost everything,” emphasizing the importance of balanced growth that prioritizes both economic output and quality of life.
The Australian government seems caught off guard by the net migration increase of 1.6 million over the next four years post-pandemic. As planning for future growth and managing our resources becomes a more urgent reality, it’s easy to understand the panic behind this out-of-control gain in population.
