Australia’s future population – where are we going? Patrick Corr Director, Demography Program Australian Bureau of Statistics 3 March 2011 Introductory remarks Today I’ll be focusing on one key area of the ABS demography program – population projections.

What are population projections? Projections are not forecasts or predictions Simply illustrations of the growth and change in population IF: certain assumptions about the levels of fertility, mortality, internal and overseas migration were to prevail over the projection period. Firstly I want to make it clear that demographers (and also economists) are not able to predict the future. None of us are. The future is unknowable. So given that starting point, demographers typically make an IF statement when working with future demographic trends. Projections are simply illustrations of the growth and change that may occur in a population IF certain assumptions about the levels of fertility, mortality, internal and overseas migration were to prevail over the projection period. Forecasts or predictions, on the other hand, are essentially an assessment of what will happen in the future. While making the distinction between forecasts or predictions and projections may appear to be a case of hair-splitting, the two concepts are not one in the same. An advantage of projections over forecasts is their flexibility; by using a range of assumptions any changes in demographic trends over the projection period can (hopefully) be accommodated.

The role of the ABS National statistical agency Impartial and objective History of ABS projections: ABS has been producing projections since Sept 1950 Census data is used in the development of ABS population projections ABS is not legally required to produce population projections, however, ABS is in the best position to do so. I’d like to give a bit of context about the role ABS plays. There are a few different agencies (players) who do projections so I just want to talk about our role for a moment. The ABS is one of the key agencies who do population projections. As the national statistical agency, we provide impartial and objective statistical analysis and commentary. We have a long history of producing population projections, starting in September 1950 and we started publishing these in the 1960’s. Since then, ABS has produced many series of projections at both the national and state level. Population projections use the census to derive the base population including the age-sex structure and geographical distribution. The ABS is in the best position to produce population projections because we disseminate fertility, mortality and migration data. This data helps us develop the assumptions for our population projections.

Assumptions: 2008 release Life expectancy at birth (years) Total fertility rate (babies per woman) Net overseas migration (persons) Males Females Series A 2.0 220,000 93.9 96.1 Series B 1.8 180,000 85.0 88.0 Series C 1.6 140,000 And here are the assumptions from our 2008 projections. The columns show assumed levels of fertility, migration and mortality (indicated by life expectancy on this table) over the projection period. There are 3 levels of fertility considered, three levels of net overseas migration and 2 levels of mortality. An extra level of net overseas migration set to zero is included for analytical comparison. For states and territories, there are 3 internal migration assumptions. These are NOT shown in this slide. These assumptions are combined to produce 72 scenarios for the states and territories and 24 national scenarios. Of the 24 national sets of assumptions, 3 become known as Series A, B and C. [talk through the table and the assumptions]

Projection outcomes Series A: 35.0 Series B: 31.4 Series C: 28.7 Lets look to the bottom line – the outcomes of the 3 scenarios, A, B, and C; going out to 2040, the results range from a low of just under 29 million [C] up to 35 million [A]. So this graph sets the scene on the LEVEL of projected population. But as we know, where the growth occurs can be more important than the actual level.

Population distribution High population growth in the capital cities Perth and Brisbane are projected to grow at the highest rate (average annual growth of 1.6%) over the period to 2056, closely followed by Darwin (1.5%). According to Series A, Melbourne will overtake Sydney as the most populous city in Australia in 2039. Our projections are compiled at Capital City/Balance of State level. This enables us to conceptualise potential changes in the distribution of our population across Australia. It is projected that there will be higher population growth in capital cities than in the balance of states. Perth and Brisbane are projected to grow at the highest rate over the period to 2056, with an average annual growth rate of 1.6%. This is closely followed by Darwin, which is projected to grow at 1.5% per annum over the projection period. Interestingly, Sydney may not be Australia’s most populous city in the medium- to long-term. According in Series A, Melbourne will overtake Sydney as the most populous city in Australia in 2039.

An ageing population Series B 2010 2030 Median age: 37.5 years This is the familiar population pyramid used to show the age-sex structure of the population. A well informed discussion on population futures must look at projected changes in the age-sex composition. Because it’s here that we can see some important issues like ageing. We’re looking at Series B here, and over the 20 years from 2010 to 2030 we can see some big changes ahead. I want to point out 3 key reference points in the 2010 age-structure. They represent key events in our demographic history which has shaped and will continue to shape our population destiny. 1) Those aged 63 represent the first wave of baby boomers born around 1946-47. 2) The late 40’s agegroup (born in the late 1960’s) corresponds to the tail end of the baby boomers. 3) And the sharp peak at the late 30’s are the baby-boom ‘echo’ group – the children of the baby boomers. [click once]. Median age: 37.5 years Median age: 41.1 years

An ageing population Series B 2010 2030 Median age: 37.5 years Just look at the proportionate increase in the 65 and over age group from 2010 to 2030 [click once]. Median age: 37.5 years Median age: 41.1 years

An ageing population Series B 2010 2030 Median age: 37.5 years This growth is not matched in the 0 to 15 age group. You can see the concave shape of the very young cohorts in 2010 [point] contrasting with the successively smaller cohorts projected in 2030. [2010: successive cohorts increasing; 2030: successive cohorts decreasing]. This shift in the relative numbers of young to old (over time) is how demographers think of ageing. This is a reflection of increased life expectancy and fertility below replacement level. Median age: 37.5 years Median age: 41.1 years

Projected working age population (persons aged 15 to 64 years), 2010 - 2040 Persons (millions) A subgroup of the population that is important for future planning is the ‘working-aged population’, which is the population aged between 15 and 64 years (the population that is most likely to be employed). It is interesting to note the role of net overseas migration on the working age population. In the scenario where net overseas migration was equal to zero (the purple line), the working age population actually declines over the 30 year period from 2010 to 2040. This highlights the important role that migration plays in this particular age group. 30 June

Growth rates, working age population (persons aged 15 to 64 years), 2010 - 2040 Whilst the aggregate numbers indicate an increase in the size of the working age population, it is important to also look at growth rates. In all but Series A (which is relatively steady), the growth of the working aged population is projected to decline over the 30 years to 2040. Again, the effect of migration is apparent when looking at the purple line. Whilst growth rates may stagnate and decline in Series A, B and C, the only projection series that assumes net migration levels equal to zero indicate negative growth of the working aged population. You can start to see the impact of the those 3 reference points I spoke about earlier. 1) The first boomers will turn 65 in 2012-13, 2) The last boomers will turn 65 in 2025-2030, 3) The first ‘echo’ of the boomers will turn 65 in 2036-37. Year ending 30 June

Projected population, persons aged 15 and 65 years, Series B, 2010 - 2040 Still on the working age population, but focussing in on just 2 ages: those aged 15 in blue those aged 65 in red. These 2 groups can be examined to approximate entrants to and exits from the working aged population. Both entrants and exits are projected to increase, but we see a changing relationship. This gap [point to 2010] of around 90,000 which is a surplus of entrants to exits, is projected to narrow across the projection period. [Point out the 3 key reference points (first wave boomers, tail end boomers, 1st echo)] These figures don’t take account of people’s participation in the labour force, but they do reflect the demographic underpinnings of the potential labour force. 30 June

Key projection series Medium- to long-term projections ABS: Population Projections, Australia, 2006-2101 (cat. no. 3222.0) Treasury: Intergenerational Report (IGR) 2010 Short-term projections ABS: Treasury Budget projections (found in Budget Paper 3) ABS: AEC Enrolment projections The ABS population projections are not the only key set of projections available. Treasury produce a series of medium- to long-term population projections which are published in the Intergenerational Report. The ABS also produce a number of short-term projection series for Treasury for use in the budget as well as short-term projections for the Australian Electoral Commission.

Key users of Projections State and territory planning agencies - Regional projections Treasury - Intergenerational Report - Budget Health planning and reporting Sustainable Population Strategy These are some key users and uses of population projections.

Long-term projections Population at 2050 ABS (Series B) IGR 2010 Total fertility rate 1.8 babies per woman 1.9 babies per woman (from 2013) Life expectancy - males 85.0 years 87.7 years Life expectancy - females 88.0 years 90.5 years NOM 180,000 180,000 (from 2012) Population 33.9 million 35.9 million Average Annual Growth rate (2010-50) 1.4% 1.2% Looking at a comparison of the two key sets of long-term projections, they both indicate that a projected population of above 30 million by 2050. The IGR 2010 projections have a more recent (2010) jump off point than the ABS projections and indicate a higher population in 2050.This is largely due to the higher life expectancy and fertility assumption used in the IGR projection series. Given that the IGR projections are more recent, the fertility assumption used in this series of projections reflects the recent increase from an historic low of 1.73 births per women aged between 15 and 49 in 2001 to 1.9 births in 2009.

Short-term projections Population at 2013 ABS (Series B) Budget paper 3 Total fertility rate 1.8 babies per woman 1.9 babies per woman Life expectancy - males 85.0 years Life expectancy - females 88.0 years NOM 180,000 222,000 (180,000 by 2013) Population 23.0 million 23.6 million Average Annual Growth rate (2010-13) 1.5% 1.9% The ABS produces short-term projections for other agencies. Recent increases in fertility and net overseas migration are factored into the assumptions producing higher growth rates. Such an approach is sensible when projecting over five-year periods.

Limitations of population projections Projections can not predict the future; assumptions are often based on past trends. No method of calculating projections can account for the recent dramatic changes in NOM. Dealing with uncertainty. Although projections are much more flexible than forecasts or predictions, they still have limitations. It is important to understand that projections are not designed to accurately predict the future. The assumptions used in creating projections are often based on past trends in fertility, mortality and migration and project what the base population would look like if trends observed in the past continued into the future. Obviously, this means that projections generally don’t address or deal with uncertainty. Whilst having a larger number of projection series means that the data covers a wider range of possible outcomes, no one method of projecting can account for any dramatic changes in fertility, mortality or migration (like the recent significant increases followed by rapid decreases in net overseas migration).

Using projections in a informed way Obtain regular updates Understand the assumptions used to create the projections Understand what you are using the data for Use recent estimated resident population (ERP) data to see where the population is tracking and make comparisons to the projected population Currently, ERP is higher than Series A (2008 series) Using projections in an informed way means that the data that you use will be better suited to your purposes. [ Read slide ]

See you at Connect with Census… [Assess time for questions. Take 1 or 2 and leave rest for Connect with Census]