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Despite the many recent headlines highlighting large-scale job losses in huge global companies, predominantly in the technology and consulting sectors, the employment outlook in Australia remains positive.

Last Thursday’s job vacancy data for February showed both total vacancies (438,500 – see graph, above) and the proportion of businesses reporting at least one vacancy (24.3%), exceeding their equivalent figures (423,300 and 23.5%, respectively) from twelve months previously although the February data represented a small drop (of 1.5% and 3.4 percentage points, respectively) for both data points compared to the November 2022 results.

The primary reason for the continued jobs boom is the surge in Australia’s population that was confirmed in the recent six-monthly release of national population data.

In the twelve months to September 2022 Australia’s population grew by 418,500 people (1.6%), to reach 26.1 million people.

This is the highest twelve-monthly percentage increase for five years since the 1.62% recorded in September 2017 and it’s the highest increase in raw numbers, for the equivalent 12-month period, since the 451,900 increase in population recorded in September 2009.

Net overseas migration (NOM) contributed a record 303,400 people to the total.

By contrast, the twelve months to September 2021 (incorporating the closed international borders of the pandemic) saw a net outflow of 67,300 overseas migrants (see graph, below) – the first time net overseas migration was negative, on an annualised basis, since World War 2.

The other significant reason for the continued robustness of Australia’s employment market, and economic outlook generally, is the ending of China’s zero COVID policy, announced last December. On the 8th of January, after 1,016 days, China re-opened its borders to the world.

China’s economy grew by only 3% in 2022 – its worst performance in nearly half a century however the reopening has shifted global economic sentiment around China’s short-term prospects.

Powered by the reopening, China is expected to be a significant engine of global economic growth in 2023 and 2024 with The Economist saying that “China’s reopening will be the biggest economic event of 2023”.

This is especially good news for Australia as China is easily our largest trade partner accounting for just over a quarter of our total exports, slightly more than double the share of second-placed Japan (12.2% of total exports).

China’s reopening has significant Australian implications for two key exports (and hence jobs): international education and tourism. Australia was a popular destination for both pre-COVID, with 1.4 million short-term visitors from China in 2019 and 212,000 Chinese students enrolled at Australian schools, colleges, TAFEs, and universities in the same year.

COVID border closures hit Australian tourism particularly hard with only 9,000 short-term visitor arrivals from China in November 2022, a mere 7% of the pre-pandemic monthly average. International student numbers fell by one-third in 2022 as pre-COVID students finished their courses and fewer new students replaced them.

An edict from the Chinese government instructed students enrolled in overseas institutions to return in-person classes for the first semester of 2023, significantly boosting student arrivals in Australia across the first three months of 2023 (numbers to be known when official data for the current period is released in August).

The return of overseas students to Australia has twin benefits for local businesses– increased demand in the retail, food, accommodation, and leisure sectors while also adding to the workforce, especially for low-skilled roles, in those same four sectors.

The importance of international students to the supply of labour is even more pronounced as the working holidaymaker market is yet to return to pre-pandemic levels. In 2019, more than 140,000 young people on the 417 visa arrived in Australia. In 2022, it was less than half that number.

The slow return of backpackers has prompted a jump in the number of work visas issued under the Pacific Australia Labour Mobility scheme (PALM), a federal government program that allows farmers (and other eligible employers) to recruit workers from nine Pacific Island nations as well as Timor Leste.

In 2019, under the PALM scheme’s predecessor policies, there were 6,753 temporary migrants from Pacific Island nations in Australia. By the end of last year, it was almost 24,000. By the end of this year, it is expected to reach 40,000.

As you might expect the transition from (predominantly) British, Irish, Scandinavian, and European backpackers to Pacific Islanders has not been an easy one for both employers and local communities, not to mention the workers themselves as cultural misunderstandings create unwelcome divisions.

Although the short-to-medium-term economic outlook is bright nationally, the long-term trends reveal some significant variations across the three most populous states.

New South Wales is forecast to be a loser in relative terms as both Queensland and Victoria are on track to improve their economic strength, relative to the country’s original colony.

In the most recent population update, Queensland recorded both the largest increase in raw numbers (+114,400) as well as the largest percentage increase (+2.2%) in population over the same period.

The difference that net interstate migration, compared to NOM, makes across the three largest states is significant, as the table below highlights.

1 October 2021 -
30 September 2022
NSWVictoriaQueenslandAll other states &
territories combined
Natural increase*36,78627,26225,01825,760
Net interstate migration-37,914-15,56946,6236,860
Net overseas migration109,83396,66242,80554,281
Total population increase108,705108,355114,44686,901
*Live births minus deaths

According to projections contained in The 2022 Population Statement, Victoria is on track to overtake New South Wales as Australia’s most populous state by 2031.

New South Wales’s projected net population outflows of 23,000 per annum subtract 0.3% from population growth from 2023-24 onwards while Victoria is projected to take a disproportionately large share of NOM – absorbing 34% of NOM despite making up approximately 25% of Australia’s population.

Demographer Simon Kuestenmacher says “…the lion’s share of population growth is set to occur near university campuses and near the CBDs (Central Business Districts) of our capital cities – the new arrivals are either international students or skilled workers. Both groups are unlikely to own a car initially, will rent for the first few years, and aim to live as close as possible to their campus or place of work. Anyone running a business in the inner suburbs or owning property there will love to hear this.”

Macquarie University demographers have observed that there is also a trend of recent overseas migrants moving to Melbourne after a temporary stint in Sydney. Hence, while the Population Statement expects NSW will remain the gateway for many incoming travellers to Australia, affordability and congestion challenges mean the state may have trouble retaining its new arrivals.

As a result, NOM is projected to contribute around 70,000 people (approximately the same population as Coffs Harbour) each year to Melbourne’s population growth.

The elephant in the room is, as I wrote about last October, the chronic lack of rental accommodation, let alone rental accommodation affordable for workers not earning a six-figure income.

Although tourists will stay in hotels (there are enough of those for the time being) the biggest problem is for all the international students and other migrants who arrive to commence (or resume) studies, start work, or seek employment – where are the affordable places to rent?

The most recent (November 2022) arrival data shows permanent migration is exceeding pre-pandemic levels (10,810 permanent arrivals compared to 7,670 in November 2019) and growing. A significant monthly jump in long-term overseas visitor arrivals in November 2022 (46,490 compared to 39,110 in October 2022) suggests the peak of the labour shortage might now be behind us, for the time being at least.

However, with a vast number of visas still in the system, the dire residential rental market is only going to get worse as we head toward 2024. Australia’s rental vacancy rate remained at an all-time low of 0.8% in February 2023  according to Domain. Vacancy rates fell to record low levels in Sydney (0.9%), Melbourne (0.8%), Brisbane (0.6%), Darwin (1.2%), while Perth and Adelaide hover at just 0.3%.

Unfortunately, the cavalry is not coming over the hill anytime soon with official forecasts, released this week, predicting a large housing shortfall amid plunging construction activity and low consumer confidence.

The National Housing Finance and Investment Corporation (NHFIC)’s annual State of the Nation housing report for 2022-23 predicts fewer than 150,000 new homes will begin construction each year over the next two years, insufficient to cater for the 180,000 new households forming a year.

Over a decade that mismatch is predicted to worsen and produce a shortage of almost 80,000 new homes a year.

Those active in the market for a first home are confronted with a financial barrier that seems hopeless without help from a cashed-up family member or some form of a windfall gain. Buyers in Sydney face the toughest conditions, with a median house price of $1.23 million in March.

The financial comparison website, Canstar, says that after paying the $246,000 deposit for a median–priced Sydney house, an annual income of $239,000 is needed to service the almost $6000 in monthly home loan repayments. Sydney’s average annual before-tax income is only 40 per cent of that figure, at just over $94,000.

Unless the various governments in Australia do something radical to solve our housing issue many of the students and workers we have worked hard to entice to this country will return to their respective countries of origin, disillusioned that Australia’s plentiful job market is insufficient to overcome the demoralising, and worsening, housing market. 

Related blogs

Will overseas workers live in tents? (because there’s no housing for them)

Demographics guarantee a vacancy boom for years to come

Australia’s skilled migration program: Slow, out-dated, complex and failing us


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