Australia’s most valuable import may not be a good or a service, but people.
Commonwealth Bank chief interest rate strategist Jarrod Kerr, the co-author of a report on the impact of migrants on economic growth, said one of the most important growth drivers for nations is population.
He says advanced countries are undergoing a “seismic shift” in demographic terms as baby boomers begin to retire.
In much of Western Europe and Japan, there are not enough people being born to replace those dying, so their economies are unable to replace the people who leave the workforce, causing a fall in both economic growth and inflation.
Mr Kerr said retired baby boomers will draw down their savings, which means less cash in the banks.
In Australia though, a huge annual intake of immigrants means the economy has a steady supply of young people to fill the gaps left by those retiring, he said.
Australia took in 478,557 migrants with a median age of 26.5 years in 2013/14, according to the most recent figures from the Australian Bureau of Statistics.
“That’s why we have higher potential growth rates here, higher interest rates here and a potentially stronger currency over time. It’s a big part of our story, it always has been,” Mr Kerr told AAP.
Reserve Bank governor Philip Lowe, a vocal supporter of immigration, just last Friday rejected a suggestion that it would be worth cutting migrants to make housing more affordable.
“Our immigration program, I see, as a source of strength,” Dr Lowe told a federal parliamentary committee hearing.
“To give that advantage up just so we can take some pressure off housing prices, I find that problematic.”
Mr Kerr said populist and anti-immigration politics posed a huge risk for Australian economic growth.
If the flow of migrants were to be cut off, the entire dynamic would shift and slash Australia’s growth potential, he said.
Germany’s potential growth rate was in the low one per cent range until a large influx of refugees from Syria last year, and now that has doubled, Mr Kerr said.
“That’s just on population” he told AAP.
“It’s quite an interesting thing, so if we were to stop the migrant flow then clearly that would change the dynamics.”