- Article
- Global Research
- General Research Insights
Australia: Embracing the global opportunities … part 1, migration
Australia is a great beneficiary of its global interconnectivity. Free trade, an open capital account and a managed, but healthy, migration programme are key elements of its economic success. As the world gets more geopolitically complex the challenges shift. But the growth opportunities for a resource-rich, advanced, mid-sized economy with a highly skilled workforce are still clearly about managing to continue to benefit from global interconnectivity, despite the challenges. Here, we briefly look at the role of migration.
One only needs to look at the disruption caused by closing the border through the COVID-19 pandemic to get a clear sense of the important role migration plays in Australia’s growth engine.
Migration underpins Australia’s population growth, which is both a source of demand in the economy, driving its expansion, and a source of supply, particularly of labour and skills. At 31% of the total population, Australia’s foreign-born population share ranks among the highest in the developed world, ahead of the UK at 16%, US at 14%, Canada at 23%, and around three times the OECD average.
Australia also has a diverse mix of migrants from different nations, with the largest group coming from Asia. In recent times, the largest inflows have been from India, followed by China, with Asia accounting for 70% of net overseas migration in 2022/23. Around 1.4 million people, or 5.5% of the population in Australia, are of Chinese ancestry according the most recent Census (2021), with around 780k people of Indian ancestry.
The migrant population in Australia, on average, also tends to be more educated, and younger, than the Australian-born population (Census, 2021). This helps to boost the skills base in the economy and help to deal with the aging population challenge.
The migration pathways to Australia are, broadly speaking, family connections, work visas or student visas.
All were disrupted through the pandemic, and all have bounced back since.
A key challenge facing the Australian economy coming out of the pandemic was an ultra-tight labour market and skills shortages, with the unemployment rate reaching a 50-year low in late 2022. A ramp up in migrants mostly on temporary work visas has helped ease some pressures, although the jobs market remains fairly tight.
Education exports, a key industry in Australia, were also heavily disrupted by the pandemic. These too have sprung back since the border has been re-opened, with international student numbers reaching new all-time highs and returning education exports to being the country’s fourth largest export, behind iron ore, coal and gas.
Tourism is important too. Australia has a lot to offer in unique experiences and inbound visitor numbers have rebounded recently, albeit annual short-term arrivals are still only at 83% of their pre-pandemic peak. Outbound tourism also matters for educating and interconnecting Australia population with the world, promoting a global perspective - as well for the great pleasures it delivers.
Australia’s growth relies on cross border movement of people for sustaining it in terms of new demand and new supply of skills.
But managing these cross-border connections is important.
More migrants mean more demand for housing and infrastructure. This is both an opportunity and a challenge. Building more housing and infrastructure is a key part of what is set to continue to underpin growth in Australia. But to do so requires skilled workers, materials, planning and time. The pandemic has heavily disrupted the construction industry, creating near-term bottlenecks. That said, from a macroeconomic perspective it is far better to have high demand - from strong population growth - and be dealing with supply disruptions, than to have supply challenges and a demand-led recession.
Having a well-designed and targeted migration programme is also important to ensure Australia gets the best out of it. A recent review of the migration programme should help in this regard. Care needs to be taken in balancing near-term supply bottleneck issues with longer-term growth objectives. This is particularly apparent in the recent rule adjustments for international student migration.
A recent study by The Economist, based on Gallup World Poll data, points out that tacit demand for skilled workers (graduates) to move to Australia is second highest in the world, just behind demand to move to Canada (The Economist, 17 August 2024). On their estimates, if everyone who wanted to move to Australia could, close to 9 million people would.
This is an opportunity, but a challenge too. Policy reforms can help to best take advantage of these opportunities.
As we have pointed out in recent research, increased interconnectivity with ‘south Asia’ - including India, Indonesia and ASEAN countries - offers Australia growth opportunities. These are the fastest growing large emerging economies on the planet.
At this stage Australia’s goods trade links to these economies are quite small and narrow. Less than 5% of Australia’s goods exports go to India, and nearly 70% of this is coal, while Indonesia takes around 2% of Australia’s goods exports and this is dominated by coal and wheat. Broadening and strengthening these trade linkages is an opportunity for growth and to diversify Australia’s export base. But how?
A key channel could be by building on strong cross-border people connections. Migration and student linkages are already rich - growing these links into trade, financial, technology and skills transfers could be the next step in growth and broadening Australia’s interconnectivity.
Of the three key ways that Australia’s economy is connected to the world, people connections through cross-border movement and migration are clearly important. Trade and financial connections matter a great deal too – more on these next.
The following analyst(s), who is(are) primarily responsible for this document, certifies(y) that the opinion(s), views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Paul Bloxham and Jamie Culling
This document has been issued by the Research Department of HSBC
HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt (including derivatives) of companies covered in HSBC Research on a principal or agency basis or act as a market maker or liquidity provider in the securities/instruments mentioned in this report.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking, sales & trading, and principal trading revenues.
Whether, or in what time frame, an update of this analysis will be published is not determined in advance
For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research.
Additional disclosures
- This report is dated as at 26 August 2024.
- All market data included in this report are dated as at close 26 August 2024, unless a different date and/or a specific time of day is indicated in the report.
- HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC’s analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC’s Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.
- You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument or of an investment fund.
This document has been issued by HSBC Bank Australia Limited, which has based this document on information obtained from sources it believes to be reliable but which it has not independently verified. Neither HSBC Bank Australia Limited nor any member of its group companies (“HSBC”) make any guarantee, representation or warranty nor accept any responsibility or liability as to the accuracy or completeness of this document and is not responsible for errors of transmission of factual or analytical data, nor is HSBC liable for damages arising out of any person’s reliance on this information. The information and opinions contained within the report are based upon publicly available information at the time of publication, represent the present judgment of HSBC and are subject to change without notice.
This document is not and should not be construed as an offer to sell or solicitation of an offer to purchase or subscribe for any investment or other investment products mentioned in it and/or to participate in any trading strategy. It does not constitute a prospectus or other offering document. Information in this document is general and should not be construed as personal advice, given it has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on it, consider the appropriateness of the information, having regard to their objectives, financial situation and needs. If necessary, seek professional investment and tax advice.
The decision and responsibility on whether or not to purchase, subscribe or sell (as applicable) must be taken by the investor. In no event will any member of the HSBC group be liable to the recipient for any direct or indirect or any other damages of any kind arising from or in connection with reliance on any information and materials herein.
Past performance is not necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the exchange rates may have an adverse effect on the value, price or income of that investment. In case of investments for which there is no recognised market it may be difficult for investors to sell their investments or to obtain reliable information about its value or the extent of the risk to which it is exposed. Some of the statements contained in this document may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors.
This document is for information purposes only and may not be redistributed or passed on, directly or indirectly, to any other person, in whole or in part, for any purpose. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. By accepting this report, you agree to be bound by the foregoing instructions. If this report is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact a HSBC Group member in your home jurisdiction if you wish to use HSBC Group services in effecting a transaction in any investment mentioned in this document.
Certain investment products mentioned in this document may not be eligible for sale in some states or countries, and they may not be suitable for all types of investors. Investors should consult with their HSBC representative regarding the suitability of the investment products mentioned in this document.
HSBC and/or its officers, directors and employees may have positions in any securities in companies mentioned in this document. HSBC may act as market maker or may have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell or buy securities and may also perform or seek to perform investment banking or underwriting services for or relating to those companies and may also be represented on the supervisory board or any other committee of those companies.
From time to time research analysts conduct site visits of covered issuers. HSBC policies prohibit research analysts from accepting payment or reimbursement for travel expenses from the issuer for such visits.
In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (ABN 48 006 434 162 AFSL No. 232595). © Copyright 2024, HSBC Bank Australia Limited, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of insert issuing entity name. . MCI (P) 061/09/2023, MCI (P) 073/10/2023, MCI (P) 007/10/2023, MCI (P) 008/01/2024
