Australia younger, smarter thanks to migration: RBA governor

RBA governor Philip Lowe has used the population milestone of 25 million people to highlight the benefits of immigration.

Reserve Bank governor Philip Lowe in Sydney yesterday. Picture: Hollie Adams.

Reserve Bank governor Philip Lowe has used the population milestone of 25 million people to highlight the economic benefits of immigration, skirting over concerns championed by Tony ­Abbott about excessive growth.

Doubling down on an optimistic outlook of falling unemployment and rising wage growth, the governor said the nation’s population growth rate — at 1.5 per cent a year and consistently among the highest in the world — was a “basis for optimism about the future of our economy”.

It had produced a younger, more economically resilient ­nation, he told a business lunch in Sydney yesterday. “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 that Australia’s median age of 37 years made it “one of the youngest countries among the advanced economies”.

“Migration has helped our economy adjust to large swings in the demand for labour, and helped address some particular skills shortages.”

The government has come under attack from Mr Abbott and former NSW premier Bob Carr, among others, for permitting population growth that puts pressure on housing and infrastructure. Dr Lowe noted such concerns but said investment was catching up. “The growth in the number of dwellings exceeded growth in the population over the past four years,” he said.

He said growth in the number of young immigrants had slashed the forecast median age for 2040 from 40, since 2002. “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 on Tuesday night, according to official estimates, propelled higher by average annual increases of 1.5 per cent between 2005 and 2015, higher than almost any rich country ­except Singapore.

Dr Lowe stuck to a familiar script, suggesting unemployment was likely to fall to about 5 per cent. “It is possible that we could go lower than this on a sustained basis. Time will tell,” he added.

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

The Reserve Bank will release its quarterly economic statement tomorrow and it is expected to show GDP growth of 3 per cent this and next year. “As expected, the tighter labour market is leading to higher wage outcomes in certain pockets of the labour market,” Dr Lowe said. “Over time, we expect that this will become a more general story, although this is going to take some time.”

More than half the annual population increase has been due to immigration, especially of students. And about a sixth of foreign students in Australia, currently about 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.”

Dr Lowe reaffirmed that interest rates were more likely to rise than fall, adding that the economy was transitioning towards higher inflation. “If this is how things evolve, you could expect the next move in interest rates to be up, not down.”

Still, the pace was likely to be gradual and there was no pressure on the RBA to act soon, he said.

The RBA on Tuesday kept its official cash rate steady, completing two years of policy stasis. ­Prices in markets don’t indicate an increase in the cash rate until late 2019 or early 2020.