Australia: The challenges facing Australia due to a slowing population growth

Last Updated: 17 May 2011
Article by John Keating

Australia's slowing population growth revives business concerns about skilled labour shortages

PKF's latest annual Business & Population Monitor finds that Australia's population growth peaks amid an increasing need for workers as the economy picks up speed.

Australia's population growth is slowing fast at a time when the need for workers is galloping. Yet the rate at which labour supply will expand is set to tumble amid falling migrant numbers and a pick-up in the pace of retirement among baby boomers, once again raising questions about the likely future impact on Australian businesses.

This is one of the key findings to emerge from PKF Chartered Accountants & Business Advisers' third annual Business & Population Monitor, which looks at the impact of Australian demographic changes on businesses.

PKF's National Director, Enterprise Advisers, Matthew Field, said "The likely implication is that workers will become harder to find, putting pressure on wages, inflation and eventually interest rates, and smaller businesses may struggle to compete for workers with the larger employers."

According to the PKF Business & Population Monitor, not only is the coming downswing in population growth large, it is larger still for the working age population, given that many baby boomers will drop out of the workforce in the next few years, marking the start of a trend that could last for a generation.

"The imminent downswing in demographic destiny is instead the result of deliberate policy – such as reforms of the linkages between student numbers and migrant numbers," Mr Field said.

Mr Field said that despite indications the Australian economy was spared much of the impact of the global financial crisis, and that the economy was well on the road to recovery, small business confidence fell across 2010. "This decline is likely to be explained by rising interest rates and by the prevalence of small businesses in the retail and home building sectors," Mr Field said.

"Unfortunately for the retail sector higher interest rates, the surging dollar and the differential tax treatment of imported internet purchases means retail figures are unlikely to show any great improvement in the short term," he said.

The PKF report found that new housing construction starts had finally seen a significant pick-up, ending a sustained period of declining building that stretched back to 2002. However, in addition to rising interest rates, slowing population growth has dampened the outlook for construction, and a recent fall in building approvals would suggest that the pace of new housing starts will decrease in coming months.

As expected, the fall in business confidence has damaged growth in business investment, demonstrating that, particularly in the resource states, there is a critical need for a large bounce back in order for economic growth to continue in the coming year.

According to figures in PKF's Business & Population Monitor, while Australia is currently undergoing a second round of the commodity boom that drove the Australian economy strongly through 2007-2008, the supply of workers to feed that demand is in question. Apart from the drop in the population growth, the Australian participation rate is currently at its highest level ever. Mr Field said that of particular concern is that the boom is centred on the export potential of mineral resources in Queensland, Western Australia and the Northern Territory – the three regions which are also experiencing the sharpest drop in population growth in the past year. "That suggests this trend is having the largest impact precisely on the areas that need workers the most – putting at risk the ability of those states to find the required level of workers, with implications for wage inflation across the country," he said. "The concern for SMEs is that the high rates imply a scarcity of available labour for any expansion – almost everybody who would like to work is already in the labour market – and the imminent retirement of the babyboom generation will place further constraints on labour supply," he said.

"The combination of official cutbacks to immigration, the slowing down of natural population growth, as well as the coming retirement of baby boomers means that just as the demand for workers is rising rapidly, the potential new supply for them is decelerating fast. That mix will pose most challenges for SMEs, particularly those SMEs in the resource-rich states, where worker demand is strongest," Mr Field said.

State-by-state comparisons:

New South Wales: PKF's Business & Population Monitor found that while population growth in New South Wales had declined since mid-2009, the decline had been less dramatic than in a number of other states. This result is somewhat surprising, given that New South Wales remains the key point of entry of migrants into Australia. In 2008, NSW's population growth rate was only three-quarters of that seen nationally, but now NSW is up to five-sixths of the national rate. NSW also saw a significant reversal in its population outflow to other states. While more people leave NSW to move to other states than move in the opposite direction, the net loss halved in the past year and is currently at its lowest rate since 1985.

The key for the gradual improvements in NSW's relative fortunes has been a significant recovery in its housing sector, which is now growing after falling back since 2005. Retail and business investments spending are the only areas where NSW is losing ground compared to other states.

Victoria: Although Victoria's population increased by around 100,000 people in the past year, it was well below the previous year's increase. Victoria's decline has been driven by falling international migration levels, with a particular problem for the state being its sharp (and ongoing) loss in international student numbers.

Housing starts, housing investment and new motor vehicle registration have all grown relatively strongly thanks to the state's solid economic position. Also, Victoria's recent retail growth was close to its five year average and the fastest rate of growth in retail of any Australian state or territory.

Queensland: Swings in migration levels have been most notable for their impact on Queensland's population growth, whose rate of increase is at a nine-year low. While some initial easing following the global financial crisis (and the compounding woes of the State's tourism sector) was expected, the rebound in the world mining sector and the rising demand for workers in the state has not yet done anything to reverse those declines.

The outperformance on Queensland's population growth versus its Australian equivalent has been halved in the past year alone (in part, largely because as the slowdown has hit, there have been far fewer 'migrants' from the rest of Australia going north).

Looking at Queensland's economy, housing indicators are the only positive to emerge over the last 12 months. Business investment has particularly suffered, along with retail sales, which leaves output growth in the past year below the state's recent average.

Western Australia: Western Australia's population growth stalled fairly dramatically across 2009, but the labour requirements of the renewed mining boom may already be heralding a turnaround in the state's fortunes. While that may sound like some relief for SMEs, many could soon face a return to the scarce labour availability of 2007 and 2008. However, chances are that any recovery in population growth will be lagging that in employment demand, and the risk of skill shortages biting very hard in the next two years is considerable.

WA's boom is starting to fire up once more as a quarter of a trillion dollars in resource and other investment projects try to jostle their way to the front of the queue in a state where one third of businesses are already complaining that labour is 'scarce'. That means the other yawning gap WA has to deal with is that between the intent of businesses to expand capacity versus available capacity for them to achieve that increase.

Housing starts and new motor vehicle registrations are the biggest contributors to growth for the state; however, growth in housing investment is below its long-term average. This indicates that while new houses are being built, little is being spent on renovating existing homes. Business investment has also fallen away significantly after experiencing very high growth rates over the last five years due to the mining booms in the Pilbara and Kalgoorlie regions.

About PKF:

PKF is a chartered accounting and business advisory firm, with 11 offices located in metropolitan cities and major regional centres in Australia. PKF Australia forms part of the worldwide accounting network of PKF International, which has some 400 offices in 125 countries worldwide.

PKF offers a full range of accounting, business advisory and consulting services to clients across a wide range of industries and business growth phases. PKF services include Audit & Assurance, Business Risk Solutions, Corporate Recovery, Corporate Advisory, Enterprise Advisers, Financial Planning, Management Consulting, Organisation Development, Professional Practices Network, Superannuation Consulting, Taxation Consulting, Corporate Secretarial, Litigation Support, Outsourcing and Succession Planning.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.