Yesterday the ABS released their population projections for Australia and the states and territories for the period 2012 to 2101.  Under the medium growth scenario (Series B), Australia is projected to double the size of its population to 46 million by 2075, however, under the same medium growth scenario, Tasmania's population is projected to firstly increase slowly before leveling out by around 2046 and then decreasing marginally from 2047 onwards. 

While population projections are not intended to be predictions or forecasts (as I have explained in a previous blog), they are illustrations of growth and change in the population that would occur if assumptions made about future demographic trends were to prevail over the projection period.

Population change is a complex process, particularly in Tasmania's case, so I will use this blog to explain (as simply as I can) why Tasmania's population is likely to decline in the future. 

The two correlates for population growth are the size of the reproductive cohort[1] and economic performance, neither of which are working in Tasmania's favour at the moment (however, there are early indications that the economy is at a turning point).  Both these correlates are influenced by the age profile of inward and outward migrants from interstate and overseas.   

Size of Reproductive Cohort
Until 2012, Tasmania had the highest Total Fertility Rate (TFR) in Australia, averaging above the population replacement rate of 2.1 births per woman in her lifetime since 2005.  However, it is important to understand that a high TFR does not necessarily automatically translate into an increase in the number of births (see this previous blog).  The TFR is a synthetic measure, being the sum of the age-specific fertility rates at a point in time (calculated as the number of births per 1000 women in five year age groups).  The TFR does not take into consideration the size of the reproductive cohort (the number of women of childbearing age). 

In Tasmania, the size of the reproductive cohort has been declining both numerically and structurally (proportionately) since the largest birth cohort was born in the early 1970s.  This decline in the size of the reproductive cohort is influenced by two compounding factors.  First, a decline in the TFR (consistent with Australia and other developed nations) which until the early 2000s was persistently below the population replacement rate, and, second, persistent Net Interstate Migration (NIM) losses in the prime reproductive ages.

These factors result in a smaller proportion of women in the population of childbearing age, as reflected in the population age structure (see diagram below).  As a result the number of children being born in Tasmania is on a downward trajectory, despite a recent upturn in the early 2000s. 

Economic Performance
Popular consensus is that the rate of population growth is influenced by the economic conditions of the state at the time and that a return to positive economic performance will reverse the current downward trajectory of the rate of growth. This is partly true, however, the rate of growth is dependent on the relative economic performance of the state compared with Australia, or even other states. 

Tasmania’s greatest rates of annual population growth occurred when the state’s economic performance exceeded the national rate, most recently from 2002 to 2004.  However, as soon as Australia’s rate of economic growth surpasses that of Tasmania the state’s rate of population growth declines.  This is directly attributable to the relative perceived and actual opportunities available elsewhere and resulting NIM losses.  As such, in circumstances where Tasmania’s economic performance is not equivalent to other states and/or territories (even if positive), NIM losses in the working and reproducing ages will likely increase, creating the domino effect of decreases in the number of births, and as a result the rate of population growth will decline. 

For this reason, a reliance on a return to positive economic growth will not result in a significant reversal in the current rate of population growth in Tasmania.  In fact, without intervention, it has the potential to hasten the process to a scenario of population decline.  This is attributable to the fact that the organic growth which occurs as a result of positive economic performance is due to (net) growth in older age groups (based on historic trends).  So while in the short term, population growth occurs, over the longer term, the resulting acceleration in the rate of ageing will bring forward the point of the end of growth and population decline (as there will be more deaths than births). 

Summary
Given that the two correlates for population growth are not working in Tasmania's favour, and are further negatively impacted by the age profile trends of inward and outward migrants (both interstate and overseas), it is unlikely that Tasmania's population will increase over the longer term.  Moreover, without a level of strategic intervention, it is likely that Tasmania's population will eventually enter a state of decline. 






[1] In terms of calculating the Total Fertility Rate (TFR) the reproductive cohort includes all women aged 15 to 49 years, however when considering potential for population growth the reproductive cohort can be further defined as the ‘prime reproductive cohort’ which is those women aged 20 to 39 years.

Yesterday's release of birth data by the ABS showed a clear indication that the propensity for population growth in Tasmania is declining.

The two correlates for population growth are the size of the reproductive cohort and economic performance. In Tasmania, both of these correlates have a direct relationship with net interstate migration (NIM).

For the 2012 year, births in Tasmania decreased to 6168 (from a high in 2007 of 6775) and the Total Fertility Rate (TFR) dropped to 2.04, below replacement rate (the NT is now the highest at 2.21).  All other states and territories, apart from NSW, recorded an increase in both the number of births and the TFR. 

The drop in births is directly attributable to the declining size of the reproductive cohort as a result of NIM movements.  Furthermore, it directly impacts on Tasmania's propensity for population growth over both the short and longer term. 

Tasmania's Department of Treasury and Finance recently released their population projections for Tasmania, projecting that under the medium series, Tasmania's population will grow by 78,000 people in the next 50 years. 

Population projections are not forecasts, they are projections based on a combination of assumptions in relation to fertility rates, mortality (life expectancy) rates and migration (both interstate and international).  These assumptions are usually based on historical trends. 

The accuracy of population projections is dependent on the method employed.  This is particularly important in Tasmania's case.  The changes in Tasmania's population do not follow 'normal' patterns compared with Australia or other Australian states and therefore projections are very difficult to undertake. 

Since 1981, Tasmania's population has grown by around 85,000 people - a growth of almost 20 per cent, or 0.7 per annum (see below chart).  This growth occurred for a number of reasons.  The reasons also contribute to why this rate of growth is unlikely to continue.  The growth was primarily driven by natural increase (more births than deaths) which resulted from the large cohort of baby boomers (those born 1945 to 1965) reaching reproduction age.  Population growth was complemented by increases in interstate and international migration during periods of economic growth.

Tasmania's current and future population is highly influenced by the potential for reproduction and the age of migrants.  While fertility rates may remain around replacement level (2.1 births per woman over her lifetime), the actual number of births achieved is dependent upon the size of the reproductive cohort (i.e. those women of childbearing age).  In Tasmania, this cohort is decreasing in size; due to declining fertility rates since the baby boom and also net migration losses in the childbearing ages. 

The risk in undertaking population projections is not accounting for the size of the reproductive cohort and the migration movements which impact on the size of this cohort.  If current and historic migration trends continue,  the size of the cohort will continue to decline.  Even if the fertility rate remains constant, the actual number of births will decrease. 

In sum, using historical trends to inform future patterns is problematic for all jurisdictions, but particularly so for Tasmania.  This is exacerbated by not accounting for the age of migrants. 

The vital index, the annual number of births per 100 deaths, is a simple measure but can often be eye-opening.  In fact, the measure provides a valuable insight into population dynamics.  A population's composition and size (and growth rate) is influenced by the number of births and deaths (the difference being 'natural  increase' (or decline)) and migration.  In Tasmania's case, migration includes both international migration and interstate migration.  

Tasmania's vital index (below chart) is a result of a number of factors: the total fertility rate (TFR) and its historic downward trend (and recent increase); the proportion of the population in the older ages; the number of young people who have moved into childbearing ages; and the effect of immigration, which normally consists of workers and their families who are themselves in the childbearing ages. In Tasmania's case net interstate migration in the childbearing ages has historically been negative, while net international migration in the childbearing ages has been positive.  However, interstate and international migrants have differing fertility patterns. 

As the Tasmanian population continues to age at a faster rate than the rest of Australia (as a result of interstate migration patterns), it is likely that the state's vital index will continue it's (historic) downward trajectory.  In the event that Tasmania's 'natural increase' becomes 'natural decline', any growth in the size of the population will be dependent on net increases in migration, which also has the potential to reverse the natural decline - subject to the age profile of the migrants. 

Government and business believe that a solution to population ageing, stagnating economic growth and skill shortages is increasing immigration.  In fact, 80 per cent of the population growth projected in the 2010 Intergenerational Report will come from immigration and their yet to be born, highlighting the reliance of government on population growth to stimulate demand.  Opponents to population growth raise concerns to the carrying capacity of the nation which extend to environmental and social consequences.  However, there is another concern, that is, the economic opportunity cost of the current, and projected, high levels of immigration redirecting public monies to city-building infrastructure rather than productivity-enhancing initiatives. 

While immigrants on employment visas (as opposed to humanitarian and family visas) tend to be younger and more educated that the domestic population, there is little evidence that they are meeting the needs of employers in terms of skill shortages in regional and resource boom areas.  Most migrants flock to the metropolitan areas of Sydney and Melbourne, and given the conditions of the visa preventing access to welfare benefits in the first two years of arrival, migrants need to accept any employment offer, often crowding out domestic workers which at times also results in a dampening effect on wages, particularly in a competitive employment market as we are now experiencing.   It is estimated that migration contributes around 100,000 migrants to the workforce every year; however in 2012 only 115,000 jobs were created in Australia.  Not only are migrants not meeting skills shortage requirements, but their mass contribution to population growth not only puts pressure on existing infrastructure and pushes up costs, it creates further skill shortages in non-critical jobs to meet the demands of an increasing population, ‘justifying’ further high levels of immigration.  There is also evidence that the current high immigration and settlement in metropolitan areas is influencing domestic migration and the sea and tree change phenomena, creating similar infrastructure bottlenecks in regional and rural areas as being experienced in cities.  To cater for this increasing demand, governments (federal, state and local) are required to provide the necessary infrastructure and services to support the population (as expected from a first world country).

Given there is not a bottomless bucket of public money to spend, governments must decide how best to direct their revenue to support its population.  For a nation projected to grow from a population of 23 million in 2013 to 36 million in 2050, this spend is currently committed to city-building infrastructure.  This is despite the fact that the Commonwealth Government identifies in the 2010 Intergenerational Report that higher productivity is the key to balancing the needs of a changing demographic. 

Until the government determines the appropriate level of immigration to meet the needs of the current population, public money will be directed to supporting population growth as a result of immigration rather than to productivity-enhancing initiatives, such as information telecommunications, education and training, innovation support, research and development and regulatory reform.   As a consequence, it is likely that Australia will continue to report woeful productivity performance.