Population increase has underpinned the state’s economic growth, a thriving housing market, a rapidly expanding Melbourne, and healthy budget surpluses. In turn, the Andrews government has been able to roll out major infrastructure projects. The city’s population has grown by about 50 per cent since the turn of the century and was set to overtake Sydney’s sometime in the 2020s. Greater Melbourne's estimated population is 5,078,193, according to the latest Australian Bureau of Statistics data, while Greater Sydney's estimated population is 5,312,163. “Victoria will inevitably be hit the hardest by this crisis,” said Abul Rizvi, who was immigration department deputy secretary in the Howard government and continues to research immigration and population issues. “Negative net immigration all of a sudden pulls the rug out from under Victoria,” he said. In 2019, the state budget forecast growth in real gross state product of 2.75 per cent for the financial years 2020 and 2021, driven by population growth of about 2 per cent each year.

Those budget forecasts have been shattered and SGS estimates the economy will shrink by between 6 per cent and 10 per cent in 2020, with net immigration plummeting to zero. Any growth in Victoria’s population will come from the natural increase of births over deaths. Population growth would collapse from around 140,000 people in 2018 to somewhere between 40,000 to 60,000 in 2021 according to SGS modelling. Mr Rawnsley said people had flocked to Melbourne from overseas and interstate because of higher education and jobs. “With both of those looking shaky, it's much less likely people come to Victoria.”. Population growth was likely to be subdued for some years, reducing housing demand and slashing the number of construction jobs by between 30,000 to 70,000 jobs.

He said a key issue was how deep and prolonged the recession would be. He urged governments to ensure the recovery was as “V shaped” as possible. “A deeper and longer recession could compound the problem by resulting in much-lower population growth.” Mr Rawnsley said it was unclear how the education sector - Victoria’s largest service export - would fare. Much would depend on the extent of the pandemic's impact in Australia compared with rival destinations for international students like Europe and the US. The weak Australian dollar could also help. Longer term options for Victoria's post-crisis recovery included encouraging even higher levels of immigration like the national building years post World War 2 years to help stimulate growth, pay off massive debt and cover the cost of infrastructure. Another option for Melbourne and Victoria was to to accept a lower growth economy, something akin to that in Adelaide and South Australia. Grattan Institute chief executive officer John Daley said Victoria’s growth in recent years had depended on increases in population and student numbers in particular. “International students need to live somewhere after all.”

Grattan Institute chief executive John Daley. Credit:Photo: James Davies He said there was no doubt population growth would fall away dramatically, hitting the Victorian economy especially hard. “Population growth will be much lower, whether it’s negative or positive doesn’t matter.” But Mr Daley said that in the medium term, the construction industry could be boosted by the “pent up demand” for housing among the many young people kept out of the market because of lack of affordability. “There is an overhang of demand. Young people have stayed at home and in large households longer than they otherwise would have," (because of affordability issues). Mr Daley also said the coronavirus may lead to the Victorian government rethinking both its economic and budget strategy including the government reliance on taxes like stamp duty.

Mr Rizvi said he expected the decline in migration to be so dramatic it could more than cancel out any natural population increase through births. He said Australia faced the possibility of negative population growth for two years. He called on the government and national cabinet to rethink their approach to the 1.2 million workers and students in Australia on temporary visas who are not currently eligible for government support including the emergency JobSeeker and JobKeeper programs. Earlier this month Mr Morrison urged those on temporary visas unable to support themselves - including students - to “go home”. International education is Victoria’s biggest service industry. “If the government persists with this ‘go home’ line they will be trashing our reputation and people and families and countries will resent how we treated their students,” said Mr Rizvi.

A Victorian government spokeswoman told The Age on Sunday that the state, like the rest of the country, was dealing with an unprecedented situation. "Our immediate focus is on keeping Victorians safe and helping Victorian businesses survive to the other side of this crisis," she said. The Victorian division of developer lobby group the Urban Development Institute of Australia called for a supportive approach to international students and workers. "A large portion of demand for housing is from immigration and students," said UDIA Victorian president, Ashley Williams. “They’re an important part of the community and the economy.”

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