Foreign students, population boom fuelling ACT economic surge: report

Booming foreign student enrolments at Canberra's universities is fuelling growth in the city while the threat of public service job cuts is receding, says one of Australia's leading private sector forecasters assessing the health of the nation's economy.

The double digit-growth in international students living in the ACT last year drove a population surge second only to Victoria's and expanding the national capital's wealth, a business outlook report by Deloitte Access Economics said on Monday.

A stronger federal budget position had reduced the risk of public sector cuts, and Canberra's economy had grown with government spending on staff and consultants for defence projects, IT, and the roll-out of the National Disability Insurance Scheme, it said.

The report warned a different threat was emerging for the ACT economy, as Australia's relations with China grew more strained, risking slower growth in international student numbers.

"Tensions in the relationship between Canberra and Beijing haven't gone unnoticed and there have been news reports about attempts to discourage attendance by Chinese nationals at Australian universities," it said.

The ACT last year had the second-highest growth in international student numbers, at 17 per cent, and most came from China, Department of Education and Training figures show.

International students are driving population and economic growth in the ACT, a new report says.Credit: Andrew Plant

Australia's relations with China have grown strained amid fallout from the federal government's foreign interference laws, and as Beijing's influence in the Pacific grows. Chinese state media have advised students to avoid enrolling in Australian universities after accusations that Australia was delaying visas for political reasons.

However Deloitte found the risk for the ACT's education sector from rising tensions wasn't large and had not yet played out.

It said the industry had driven the territory's services exports higher as it received a disproportionate share of foreign students. Canberra's education boom could grow further if a deal was struck for the University of New South Wales to open a new campus in the city centre.

Deloitte forecast its unemployment rate would drop to 3.3 per cent by 2021 while wage growth would eventually overtake cost of living rises. Population and international tourist number growth would ease.

The ACT last year had the lowest unemployment rate, at 3.5 per cent, and its full-time job growth was the strongest in the nation, the report said.

A soaring population and strong employment had also fuelled a rise in Canberra retail spending and business investment.

"Our baseline view remains that the ACT will continue to perform well, albeit maybe not quite as well as it has over the past 12 to 18 months," Deloitte said.

"This will see the ACT’s share of economic activity and population stay stable over the next few years."

Canberra's housing construction boom was showing signs of peaking, but any slow-down would be modest and short-lived as demand for new dwellings remained high.

Growing bank caution about lending had created a small credit crunch for Australia that would push down house prices and stamp duty revenue for the east coast's state governments.

However Canberra's property prices were still growing, Deloitte said. The ACT government's move from stamp duty to land tax revenue would also protect it from property market falls, Deloitte Access Economics economist David Rumbens said.

The ACT government's light rail project had helped grow the territory's small engineering construction sector, the report said.

"The good times might be nearing an end, with much of this action having already occurred, and with the value of work yet to be done taking a tumble. That’s not a massive shock, given that construction on the light rail is set to wrap up in late 2018."

The Deloitte Access Economics report said a drop-off in Europe, Japan and South Korea's economies had not hurt Australia as it exported to China and the US, which were performing more strongly.