Australian and US economies – a comparison | articles
The final factor which we will consider, which could have a bearing on the relative policy stance of both central banks relates to population growth. In both the US and Australia, this is mainly driven by net inward migration. Recent data shows that the US birth rate is plummeting and is now down to just 1.6.
While there are reports of increased net inward migration to the US, most of these are likely to be illegal entries, and the official data on this doesn’t show much going on. In contrast, Australian migration data shows a very substantial pick up immediately following the reopening of the economy, as migration delayed by the pandemic occurred.
This looks as if it may be peaking out, but in the meantime, it will have done a number of things. Firstly, it will have put pressure on goods and services where supply is slow to respond to rising demand. The most obvious place for this to have occurred is in the housing markets, where both rents and prices will have been pushed up. Secondly, It will also have provided increased labour supply at a time when other economies were experiencing reopening shortages, and this could have helped to curb wage growth relative to other economies – one of the explanations for why wage cost price inflation has been such a slow-burn higher.
Right now, the rate of inward migration seems to be peaking out, but until it declines, there is likely to remain upward pressure on house prices and rents. Wage growth also seems to still be rising, despite the increased labour supply. It is probable that the counterfactual would have been a lot higher wage growth without the inward migration, though the net effect for now taking into account other relevant factors still seems to be positive.
