Posted: 06 Apr. 2022 5 min. read

Regions leading the way

COVID has sparked a remarkable reversal of Australia’s regional population trends over the last two years.

Prior to the pandemic, our capital cities were growing at a faster pace than regional economies – an average of 1.9% per annum compared with 1.0 per annum for the regions – supported by rapid job growth in service occupations (predominantly found in capital cities) and migration (both international and from the regions) into capital cities.

However, harsher restrictions in cities, and the greater use of flexible and remote work options, has seen regions now dominate our (overall more modest) population growth.

The most recent regional population release by the ABS for 2020-21 shows that regional Australia grew by 70,900 (or 0.9%), while capital cities fell by 26,000 (or -0.1%) – a reversal of the substantial capital city population growth we’ve seen in recent years, as seen in Chart 1 below.

Chart 1: Population change: regions vs capital city

Source: ABS Regional Population.

This shift has been driven by the loss of overseas migration. Migrants typically settle in capital cities, and have been a key driver of capital city population growth over recent years. As a result, capital cities saw net overseas migration (NOM) in 2020-21 plummet to a negative NOM of -84,700 people, while regional areas saw a negative NOM of only -5,200.

The shift away from capital cities has been particularly prevalent for Melbourne, the city hit hardest by COVID restrictions over 2020 and 2021.

Greater Melbourne experienced the lowest NOM (-54,400 people) and the lowest net internal migration (-33,500 people), with greater Melbourne’s  population falling by 60,500. This is a significant turnaround from the strong population growth experienced over the ten years pre-COVID – where the average population increase was 104,300 per year.

The shift has flowed through to property prices, with regional house price growth outpacing the capital cities. CoreLogic reports that housing values across regional areas rose at more than three times the pace of capital cities through the March quarter, resisting the slowdown in the housing market. In the year to March 2022, combined regional house values rose 24.5%, while combined capital values rose by 16.3%.

This is putting significant pressure on the regional housing market, with a 22.1% fall in total advertised housing supply in the year to March 2022 (significantly higher than the 4.0% fall in capital cities). This means that, while there is significant demand for regional housing, the flow of new listings just can’t keep up. Regional rental markets also remain extremely tight, with vacancy rates at record lows.

The 2022-23 federal budget has measures which may help to consolidate this rapid regional growth, with significant dollars allocated for projects in regional Australia. $7.1 billion in transformational infrastructure has been allocated to regional Australia. The budget also included the establishment of a $2 billion regional accelerator program, to invest in skills, education infrastructure, export market development and supply chain resilience in the regions. 

More about our authors

David Rumbens

David Rumbens

Partner, Deloitte Access Economics

David is a macro economist with extensive experience in applied economic and quantitative analysis of the Australian economy, along with considerable experience in labor market analysis.  David is a regular commentator on macroeconomic trends, and prepares a weekly economic briefing newsletter.

Michelle Shi

Michelle Shi

Graduate Economist

Michelle is a graduate economist working in Deloitte Access Economics’ Macroeconomic Policy & Forecasting team. Michelle completed a Bachelor of Laws (Hons) & Bachelor of Commerce from Monash University and is interested in trade economics, competition and public policy.