December 20, 2016

Australian Markets Weekly: 19 December 2016

Australia’s population growth remains strong by historical and international standards at around 1.4% y/y. That is 338,000 persons in the past year – nearly equivalent to the population of Canberra being added to Australia each year.

Victoria’s population surging – Australia to return to recent highs

  • This week we focus on the latest demographic trends for Australia (full chart pack attached). Population growth remains elevated by historical and international standards, growing at 1.4% y/y (or 338,000 people) in the four quarters to June 2016. This provides a strong underpinning for GDP growth. Population growth is set to return to a 1.6% y/y pace according to the latest forecasts from the Department of Immigration and Border Protection, which would be equivalent to Australia’s population growing by 400,000 people a year by 2020.
  • Population growth is strongest in the non-mining states of Victoria (running at 2.1% a year or 123k new Victorians) and NSW (1.4% y/y or 105k New South Welshmen). Strong net overseas migration continues to underpin population growth in these states, while the number of births has also started to recover from post GFC lows. The other trend worth noting is a strengthening in net interstate migration to Victoria and Queensland. More people are leaving WA (following the mining boom bust), while the traditional flow of population from NSW to Queensland is beginning to pick up again possibly reflecting house price differentials.
  • On population ageing, ageing seems to be progressing largely as forecast by the ABS and the Treasury’s Intergenerational Reports. Stronger immigration and a pick-up in births is acting as some offset, but with ageing starting to accelerate, the dependency ratio is set to increase further.
  • In markets, attention today is tuned to the Mid-Year Economic and Fiscal Outlook (MYEFO) that was just released and any news on Australia’s sovereign credit rating that may follow MYEFO. Moody’s and Fitch reaffirmed Australia’s AAA rating, and as we go to print S&P also said MYEFO had no immediate ratings impact.
  • The past week has been dominated by reaction to the US Fed, where the FOMC raised rates at its December meeting, and members indicated three further rate hikes for 2017 was the base case, where previously only two increases were expected. Global bond yields and the US dollar rose in response, while the Australian dollar fell 2.8% to around US$0.7288 – ending the year around where it started.

Note: This is the final Australian Markets Weekly for 2016. Season’s greetings and a Happy New Year to our readers. As always, questions, feedback and comments are gratefully received. We will resume publication on Monday 16 January. 

Regards the Australian Market Economics Team

For full analysis, download report

For further FX, Interest rate and Commodities information visit