RBA Governor Philip Lowe welcomes population milestone

Amid a backlash against rapid population growth, the RBA head has used the 25 million milestone to laud its economic benefits.

Governor of the RBA, Philip Lowe, says Australia’s demographic profile has changed in a positive way. Pic: AAP

Amid a growing backlash against rapid population growth, Reserve Bank Governor Philip Lowe has used Australia’s 25 million milestone, reached last night, to laud its economic benefits.

In a landmark speech in Sydney the governor said the nation’s population growth, which at more than 1.5 per cent a year is consistently among the highest in the world, has been a “basis for optimism about the future of our economy” and led to a much younger, more economically resilient nation.

“The movement to Australia of large numbers of young people over the past decade has changed our demographic profile in a positive way,” Dr Lowe said, pointing out how Australia’s median age of 37 years made it “one of the youngest countries among the advanced economies”.

“Over the past five years over 80 per cent of net overseas migration has been accounted for by people under the age of 35,” he said.

Australia’s resident population exceeded 25 million last night, according to ABS estimates, following a decade of average annual increases of 1.5 per cent, higher than almost any advanced country. More than half the annual increase has been immigration, especially of students.

Support for rapid population growth appears to have fallen recently, in the wake of large increases in house prices and continual wage stagnation.

Dr Lowe said housing supply and infrastructure, which had been insufficient to meet the growth, were catching up.

“The growth in the number of dwellings exceeded growth in the population over the past four years,” he said.

Around a sixth of foreign students in Australia, currently around 500,000, stay in Australia after completing their studies.

“People living in Australia who were born overseas are more likely than the average Australian to have a post-secondary school qualification,” Dr Lowe said.

“We also benefit from stronger overseas connections when foreign students return home after studying in Australia.”

Also in his speech, Dr Lowe reaffirmed that interest rates are more likely to rise next than fall, adding the economy is slowly transitioning toward higher inflation and lower unemployment.

Still, the pace is gradual and there is no pressure on the RBA to come off the sidelines any time soon, he said.

“The timing of any future change in interest rates is dependent upon the speed of the progress that is made in reducing the unemployment rate and having inflation return to around the midpoint of the target range on a sustained basis,” Dr Lowe said.

“If we were to make faster progress than we currently expect, any future increase in interest rates is likely to be earlier. Conversely, slower progress would likely see a longer period without an adjustment,” he said.

The RBA yesterday kept its official cash rate steady, completing two years of policy stasis. Market’s don’t expect the RBA to come off the sidelines until late 2019 or 2020.

“We see reasonable prospects that the economy will record good growth, the unemployment rate will come down gradually and that inflation will increase over time,” Dr Lowe said.

“This is a favourable outlook. If this is how things evolve, you could expect the next move in interest rates to be up, not down,” he said.

“As the economy strengthens and income growth and inflation lift, it would be natural for interest rates to return towards more normal levels,” Dr Lowe added.

With Dow Jones Newswires