Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 13 February 2016

Tourism booming

Permanent migration slows

The Overseas Arrivals & Departures figures for December 2015 showed net permanent and long term migration of +275,300 into Australia, which is the slowest rate of intake in 8.5 years. 

With the population growth rate tracking at around +1.3 per cent over 2015 - less than half of the rate of employment growth - solid inroads have been made into the unemployment rate, which to date has fallen from a cyclical peak of 6.3 per cent to 5.8 per cent.

The most recent Reserve Bank forecasts imply further declines in the unemployment rate over the next few years to 2018 to 5.3 per cent, but at a slower pace. 

Although the above figures will likely be presented as evidence of some kind of impending gloom, population growth isn't really slowing all that much, tracking at around 317,000 per annum, which will take the total estimated headcount past 24 million in the early hours of Tuesday morning at 12.51am.

Recall that at about the time of the Sydney Olympics it had been projected that Australia's population would not hit 24 million for another 33 years, which should tell you something important about the bias towards immigration into this country, as well as a surprise jump in the fertility rate. 

Moreover, the folk who should know best what is likely to happen to population growth, the Department of Immigration and Border Protection (DIBP), forecast that net overseas migration and therefore population growth will begin to accelerate from the third quarter of this calendar year and through the remainder of the decade.

At least initially, the driver is expected to be a huge wave of international students as I looked at in more detail here, with many students likely to go on to become permanent residents. Thus for all the spruik about slumping growth, the population is still expected to reach 40 million by the middle of the century.

Education arrivals

Following a review and subsequent streamlining of the visa process, the current pace of growth in visa applications lodged implies that 2016 will see another surge in international student numbers.

A large and increasing number of students go on to apply for second visas and find a path to Australian residency - the visa types that students move on to include post study work visas, 457 visas, working holiday visas, permanent points-test and other substantive visas.

Migration experts see this opening up of the higher education field as one of the most productive and effective shifts in economic policy in recent times.

The Arrivals & Departures figures released on Friday certainly added some weight to the forecasts, with an unprecedented growth in education arrivals in 2015, surging by a massive +19.3 per cent to 473,700.

The impacts of this are already evident in some Sydney rental markets in locations close to University campuses and hospitals. 

Settlers hail from Asia

The demographic make-up of permanent settlers continues to shift away from largely Brits and New Zealanders and towards migrants of Asian heritage. Asia as a continent of origin accounted for an all-time high 57.3 per cent of settlers in 2015. 

Tourism takes off

The lower dollar has seen Australia become a hugely popular destination for short term visitors, with total short term arrivals taking off to hit a record high 7.44 million in 2015, for another strong increase of +7.7 per cent. 

Although the pace of increase in short term departures has slowed in sympathy to the weaker dollar, there is a huge level of aggregate household wealth in Australia, and Aussies still made some 9.42 million overseas trips through 2015 (+3.7 per cent).

Last year there was another enormous rise in number of visitors from China, Taiwan & Hong Kong to 1.4 million (+18 per cent), while there was also an 18 per cent increase in the number of visitors from India. 

A record 607,000 arrivals were notched up for Americans enjoying the more favourable exchange rate, another demographic along with the Chinese who have the potential to "spend up big" whilst on Australian shores. 

Despite the surge in education arrivals, the overwhelmingly majority of arrivals still come for holidays (47 per cent), or to visit friends and relatives (28 per cent).

The wrap

These figures appear consistent with population growth continuing to track in a range of about +300,000 to +350,000 per annum for the next couple of years.

Population growth has clearly slowed into mining locations and resources states, yet in the largest cities the pace of growth has hardly budged at all - there may even be some upside as international students flock to Sydney and Melbourne in particular.

Meanwhile, tourism arrivals are surging in response to the lower dollar, which is a helpful means of rebalancing the economy. It wouldn't be surprising to see fewer Australians opting to travel overseas in 2016 either.