Shrinking Birthrates, Aging Populations
One of the big issues in Japan is the collapse in fertility rates against the background of an aging population. Obviously, in the absence of immigration, a population will remain flat if the fertility rate is 2. Anything less than that, and the population curve will head toward an aging population.
Here’s a quick link to the Word Bank’s figures.
In Japan, the fertility rate is 1.4 – and there is substantial debate about how to shore this up because of the looming problems in the pension plans of the near future. Hong Kong is at 1.0; South Korea is at 1.1; Singapore is at 1.2; Chine is at 1.6; and Australia is at 1.9.
The Japanese experience of the post-Bubble has been pretty dire, but it has to be said the bad economic climate contributed greatly to the decline in fertility rates in Japan. A sensible family won’t go into having children in a modernised economy if they can’t afford it, and it’s hard to afford things in a long term recession that kicked off with a property market bubble popping, leaving behind much negative equity in its wake.
I thought it was pertinent to bring all this up right now because the drop in fertility rates can and will affect future growth. As we speak, there’s an increasing amount of properties with negative equity in them according to this link sent in from Skarp.
“Since late 2010, the Australian housing market has been quite weak with home values falling by 5.5 per cent across the combined capital cities since the market peaked,” the report said. “Buyers who purchased a home since this time have in many instances seen the value of their home move below their contract price.”
The Reserve Bank warned last month that falling home prices tend to increase the rate of late payments on mortgages, especially in a recession with rising unemployment. The RBA also urged lenders to maintain high lending criteria to avoid a US-style housing bust.
Home prices in Australia tracked lower through 2011 as interest rate uncertainty, economic jitters and the unwillingness by many households to take on more debt sapped demand.
RP Data showed that Far North Queensland had the highest proportion of mortgages in negative equity, at 22 per cent, followed by Gold Coast, with 19.4 per cent in the quarter.
That’s pretty bad. If this trend continues, it will contribute to fertility rates dropping in Australia, even with the baby bonus. The more property prices fall, the more it eats into the Federal Government’s tax revenue on Capital Gains Tax. If the Gillard government sticks to its guns on getting back into surplus, then there will have to be some cuts made to the budget in the coming years, and that’s going to have an even more negative impact on asset prices and therefore government revenues.
The point of all this is to say, 1) how can the government be turning away anybody who wants to come live and work in Australia? and 2) What is the point of sticking to this arbitrary return-to-surplus plan when it is actually not helping the economy? Is that really good government?
The RBA is also sticking to its guns – but what worries me about the RBA is that maybe they don’t have a wider picture of the economy in context to the GFC which is still playing out.It is worth asking if Australia really is on the right course.