The coronavirus pandemic is expected to cause Australia’s steepest population plunge since World War I – amid fears of a 40 per cent house price plummet.

The federal government’s National Housing Finance and Investment Corporation is forecasting a 0.8 per cent population decline over two years.

In the absence of immigration, Australia’s population was expected to fall by 214,000 between a peak in 2019 and a trough in 2021, as a recession devastated the housing market.

Half of that was attributed to the drop-off in international students, following the closure of Australia’s national border in March.

The coronavirus pandemic is expected to cause the steepest plunge in Australia's population since World War I - amid fears of a 40 per cent house price plummet. Pictured is a deserted Bourke Street in Melbourne

The coronavirus pandemic is expected to cause the steepest plunge in Australia’s population since World War I – amid fears of a 40 per cent house price plummet. Pictured is a deserted Bourke Street in Melbourne

The federal government's National Housing Finance and Investment Corporation is forecasting a 0.8 per cent population decline over two years. In the absence of immigration , Australia's population was expected to fall by 214,000 between a peak in 2019 and a trough in 2021. Pictured is an empty Wynyard station in Sydney

 The federal government’s National Housing Finance and Investment Corporation is forecasting a 0.8 per cent population decline over two years. In the absence of immigration , Australia’s population was expected to fall by 214,000 between a peak in 2019 and a trough in 2021. Pictured is an empty Wynyard station in Sydney

‘Immigration cuts have flow-on effects on population growth – temporary (international students) immigrants are the main driver of population growth,’ the NHFIC report said.

Australia’s population growth over the years

Australia’s population growth

1881: 2.3 million

1918: 5 million

1959: 10 million

1981: 15 million

1991: 17.4 million

2004: 20 million

2013: 23 million

2016: 24 million

2018: 25 million

Sources: Australian Bureau of Statistics; Australian Parliament House

In July, the number of international students plunged by 100 per cent, or 143,810, compared with the same month in 2019, Australian Bureau of Statistics data showed.

This caused rental vacancy rates to surge in inner-city areas of Sydney, Melbourne and Brisbane where landlords had been particularly reliant on international students.

‘Large falls in underlying dwelling demand, particularly due to substantial falls in international students, are already putting upward pressure on vacancy rates and downward pressure on rents in inner-city suburbs,’ the NHFIC said.

‘If sustained, this could cause a contraction in construction activity that will add to the recessionary forces that are impacting the economy.’

Australia’s immigration pause would spark the steepest population decrease since World War I, shortly before the Spanish flu pandemic in 1918 reached Australian shores.

Only the unwinding of the long, post-war baby boom in 1971 saw a comparably steep population decline. 

Before the COVID-19 pandemic in 2019, Australia had a net annual immigration rate of 294,310, when the number of people leaving was subtracted from the tally of new arrivals.  

This net overseas migration made up 60 per cent of Australia’s population growth with the rest coming from births. 

In 2019, Australia had a net annual immigration rate of 294,310 when the number of people leaving was subtracted from the tally of new arrivals. The population increase of 1.4 per cent was among the highest in the developed world and well above the OECD average of 0.8 per cent, with governments from both sides of politics previously using high immigration to stave off a recession

In 2019, Australia had a net annual immigration rate of 294,310 when the number of people leaving was subtracted from the tally of new arrivals. The population increase of 1.4 per cent was among the highest in the developed world and well above the OECD average of 0.8 per cent, with governments from both sides of politics previously using high immigration to stave off a recession

Australia’s population increase of 1.4 per cent was among the highest in the developed world and well above the OECD average of 0.8 per cent, with governments from both sides of politics previously using high immigration to stave off a recession. 

Now, a declining population also has implications for property prices, with the National Housing Finance and Investment Corporation predicting a possible 232,000 shorfall in demand for new private dwellings by 2023.

The forecast population decline, as a result of coronavirus measures, has also worried the Reserve Bank of Australia which last month released a paper which said a 40 per cent plunge in house prices was an ‘extreme but plausible scenario’.

The RBA report on debt levels said Australia could experience a house price bubble similar to what occurred in United States, Spain and Ireland after the Global Financial Crisis.

The forecast population decline, as a result of coronavirus measures, has also worried the Reserve Bank of Australia which last month released a paper which said a 40 per cent plunge in house prices was an 'extreme but plausible scenario'. Pictured is a terrace for sale at Carlton North in Melbourne

The forecast population decline, as a result of coronavirus measures, has also worried the Reserve Bank of Australia which last month released a paper which said a 40 per cent plunge in house prices was an ‘extreme but plausible scenario’. Pictured is a terrace for sale at Carlton North in Melbourne

The NHFIC is in charge of the government’s $500million First Home Loan Deposit Scheme, where first home buyers can secure a mortgage with a five per cent deposit with taxpayers underwriting the rest of the 20 per cent deposit.

Should new home buyers struggle to pay off their loan and be forced to sell en masse, the federal government would be left holding equity in assets worth a lot less.

A population decrease would most likely cause house prices to fall, as capital growth worries sparked a sell-off among investors and struggling borrowers.

After the GFC, between 2012 and 2017, house prices in Australia’s two biggest cities surged with Sydney values rising by 68 per cent as Melbourne’s median price climbed by 54 per cent, official data showed.

The NHFIC is in charge of the government's $500million First Home Loan Deposit Scheme, where first home buyers can secure a mortgage with a five per cent deposit with taxpayers underwriting the rest of the 20 per cent deposit. Pictured are new houses at Kellyville in Sydney's north-west

The NHFIC is in charge of the government’s $500million First Home Loan Deposit Scheme, where first home buyers can secure a mortgage with a five per cent deposit with taxpayers underwriting the rest of the 20 per cent deposit. Pictured are new houses at Kellyville in Sydney’s north-west

That occurred after Australia’s net annual immigration rate in 2012 climbed above 200,000 for the first time, putting it well above the 20th century average of 70,000 per annum. 

Australia’s population surpassed the 25million milestone in August 2018 – 24 years earlier than predicted in the federal government’s first inter-generational report of 2002.

After World War II, high immigration levels from eastern Europe had helped Australia pay off elevated levels of gross government debt.

Immigration fell during the 1991 recession but it was ramped up a decade later and stayed consistently in the six-figures during the 21st century until the coronavirus pandemic.



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