Open the gate!
The Federal Government has announced that as of 15 December our international borders will reopen to fully vaccinated Australian citizens, permanent residents, and eligible visa holders.
At this stage that means international students, skilled workers, working holiday makers and refugees will be allowed into Australia without a travel exemption or requirement to hotel quarantine.
We didn’t bank on a new variant rearing its head, though, so while the plan is in place to open our international borders, it is a waiting game to see how the emergence of Omicron plays out and how Australia manages it.
According to our Prime Minister Scott Morrison there are 235,000 international migrants on the waiting list for Australian entry; 162,000 of these are foreign students, 57,400 skilled workers and 12,000 or so are refugees.
When it comes to putting these numbers into perspective, it is worth noting that Australia’s population sits at about 25.7 million. Pre-Covid, it was growing by about 375,000 a year.
Roughly a third of our country’s population growth is due to new babies being born, while the other two-thirds is a result of overseas migration, which is made up of international students and skilled workers.
Given the international borders have been closed since March last year, this has died off.
Border opening, what does it mean?
With movement in and out of the country restricted for 18 months Australia has been hit hard.
It’s even more sobering when we consider that alone, international education contributes $20 billion to the Australian economy every year – about 2 per cent of every dollar spent locally – and supports at least 250,000 jobs.
We are also supporting an ageing population and in the past 50 years alone the number of people aged over 60 years has increased from 12 per cent to upwards of 20 per cent.
Migration offers a couple of solutions. Firstly, I believe we need to replace our ageing workforce with younger workers (students and skilled migrants can assist in this). And secondly it helps solve an economic problem for the government.
If we wind the clock back half a century, we will see that there were 7.5 people of working age for each person eligible for the pension. Today that number sits at 4.5.
Regardless of how you feel about migration and population growth, we as a country need borders to be open. Bear in mind that our country was built off migration.
Some of the biggest contributors to the Australian economy have been migrants. There’s Dick Dusseldorp who founded Lend Lease, Frank Lowy of Westfield fame, Meriton’s Harry Triguboff, Richard Pratt who founded Visy, and that is just a start.
Did you know that a third of the CEOs of Australia’s biggest 100 companies weren’t born in Australia?
Where do we stand?
Most global calamities or crises are usually followed by a period of economic recovery and prosperity.
It’s with this in mind that I say that the opening of our international borders is the next step in the transition from crisis to recovery.
Tourism will be next. Prior to the pandemic, international tourism accounted for 5 per cent of every dollar spent in our economy – more than double what international students contribute.
We will see an explosion in population growth in Australia over the coming years. Remember there is two years’ worth of pent-up demand for migration Down Under.
In addition to this, Australia has handled the pandemic better than most other nations. We offer one of the world’s best lifestyles and have one of the best public health care systems in the world.
It is one of the safest places in the world to live in, or travel to, in a post-pandemic environment. With population growth comes demand for housing.
House prices drop
Q – I read that the Commonwealth Bank is forecasting house prices to drop in most capital cities of Australia by 10 per cent in 2023. Do you think that is likely?
A – It didn’t take them long!
Economists, the same people who forecast unemployment to hit 20 per cent during the pandemic, predicted that house prices would drop by 10 to 20 per cent.
They weren’t right then, and they won’t be right this time either, that is my forecast.
Over the past 50 years, there hasn’t been one year that the median house price has fallen in every capital city.
Having said that, I think it’s foreseeable that some capital city markets will experience a correction. I don’t think it was ever going to be possible for house prices to continue increasing at the rate they are today (2 to 3 per cent per month).
The Sydney median house price has doubled in the last eight years and grown by 30 per cent in the last 12 months.
It’s now twice as expensive to own in Sydney as it is in Brisbane, yet you don’t get paid twice as much in Sydney. At some point, Sydney’s rapid rate of growth must slow down, and perhaps come back a little.
The markets do cycle, so there will be other markets that continue to grow.
Depending on how fast international borders reopen, and the rules attached to their opening, I think it could be feasible that we see three or four years of sustained growth to house prices. Sydney, traditionally the place most internationals settle in, could even keep going.
James Fitzgerald
Author, BULLETPROOF INVESTING
