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National Housing Finance and Investment Corporation expects Australia's population to shrink by 0.8%

The coronavirus pandemic is expected to cause the steepest plunge in Australia’s population since World War I.

The federal government’s National Housing Finance and Investment Corporation is forecasting a 0.8 per cent population decline over two years.

In the absence of immigration, Australia’s population was expected to fall by 214,000 between a peak in 2019 and a trough in 2021.

Half of that was attributed to the drop-off in international students, following the closure of Australia’s national border in March.

The coronavirus pandemic is expected to cause the steepest plunge in the Australian population since World War I. The federal government's National Housing Finance and Investment Corporation is forecasting Australia's population will shrunk by 0.8 per cent over two years. Pictured is an empty Wynyard station in Sydney

The coronavirus pandemic is expected to cause the steepest plunge in the Australian population since World War I. The federal government’s National Housing Finance and Investment Corporation is forecasting Australia’s population will shrunk by 0.8 per cent over two years. Pictured is an empty Wynyard station in Sydney

‘Immigration cuts have flow-on effects on population growth – temporary (international students) immigrants are the main driver of population growth,’ the NHFIC report said.

Australia’s immigration pause would spark the steepest population decrease since World War I, shortly before the Spanish flu pandemic in 1918 reached Australian shores.

Only the unwinding of the long post-war baby boom in 1971 saw a comparably steep population decline. 

In the year to June 2019, Australia had a net annual immigration rate of 239,600 when the number of people leaving was subtracted from the tally of new arrivals.

The population increase of 1.4 per cent was among the highest in the developed world and well above the OECD average of 0.8 per cent.

A declining population also has implications for property prices, with the National Housing Finance and Investment Corporation predicting a possible shortfall 232,000 shorfall in demand for new private dwellings by 2023.

The forecast population decline, as a result of coronavirus measures, has also worried the Reserve Bank of Australia which last month released a paper which said a 40 per cent plunge in house prices was an 'extreme but plausible scenario'. Pictured are houses at Kellyville in Sydney's north-west

The forecast population decline, as a result of coronavirus measures, has also worried the Reserve Bank of Australia which last month released a paper which said a 40 per cent plunge in house prices was an ‘extreme but plausible scenario’. Pictured are houses at Kellyville in Sydney’s north-west

In the year to June 2019, Australia had a net annual immigration rate of 239,600 when the number of people leaving was subtracted from the tally of new arrivals. Pictured is a crowded Wynyard train station before the COVID-19 pandemic

In the year to June 2019, Australia had a net annual immigration rate of 239,600 when the number of people leaving was subtracted from the tally of new arrivals. Pictured is a crowded Wynyard train station before the COVID-19 pandemic

The forecast population decline, as a result of coronavirus measures, has also worried the Reserve Bank of Australia which last month released a paper which said a 40 per cent plunge in house prices was an ‘extreme but plausible scenario’.

The RBA report on debt levels said Australia could experience a house price bubble similar to what occurred in United States, Spain and Ireland after the Global Financial Crisis.

The NHFIC is in charge of the government’s $500million First Home Loan Deposit Scheme, where first home buyers can secure a mortgage with a five per cent deposit with taxpayers underwriting the rest of the 20 per cent deposit.

Should new home buyers struggle to pay off their loan and be forced to sell en masse, the federal government would be left holding equity in assets worth a lot less.

A population decrease would most likely cause house prices to fall, as capital growth worried sparked a sell-off among investors.

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