Victoria is expecting overseas migration and international student numbers to remain below pre-pandemic levels until the middle of 2025.
Thursday’s state budget predicted overseas students, previously worth almost $14 billion a year to the Victorian economy, would begin “slowly” returning to Victoria from the start of 2022.
Treasury also warned that further delays to the reopening of borders and the global vaccine rollout presented a “key downside risk” for the budget.
Victorians are also forecast to flock overseas once international borders reopen, with outbound tourism to outweigh inbound tourism once border restrictions ease.
The state hopes the federal government will agree to pay for its proposed village-style quarantine accommodation in Melbourne’s north, with no money set aside beyond the $15 million already spent on planning.
Treasurer Tim Pallas said conversations with the Morrison government about the proposed facility at Mickleham had been “incredibly positive”.
Thursday’s budget also did not disclose how much Victoria would spend on hotel quarantine in the coming months. To the end of March 31, the program had cost $442 million since last July.
Despite hotel quarantine remaining in place until at least the end of 2021, when the alternative quarantine site would be built, there was no accounting for how much the government would spend on hotels until then.
The budget identifies delays in the global rollout of the coronavirus vaccine, and in turn the sustained closure of Australia’s borders, as a “key downside risk” to the path back to surplus.
Net overseas migration was the largest driver of Victoria’s population growth for more than a decade until last year when the block on incoming migrants was compounded by foreigners and international students returning home.
The budget expects Victoria’s population will grow by 0.3 per cent in 2021-22, 1.2 per cent in 2022-23 and 1.7 per cent in each of the two years after that.
Mr Pallas said that while the forecasts on migration and students were dependent on many variables, he had a “high degree of confidence in our capacity to project where we’re likely to be”.
“These numbers are, for example, much more conservative in terms of the numbers than the federal government have put in place,” the Treasurer said on Thursday.
“And I think they therefore put us in the solid position to have a lot more confidence about the projections that we’ve plotted and the way out of the economic event that has affected this state.”
Equity Economics lead economist Angela Jackson said governments faced a difficult task forecasting population growth during the pandemic but Victoria had made a “strong assumption” on migration bouncing back.
“The question is how realistic can it be? Are people going to be willing or able to move at the same levels as before?” Dr Jackson said.
“In Victoria particularly, economic growth is more linked to people than states with iron ore supplies. So migration and international education are critical, presenting an even more significant risk compared to the rest of the country if the state’s assumptions turn out to be overly ambitious.”
If the vaccine rollout and economic recovery is slower than expected overseas, the state government expects domestic business confidence will also suffer as Victorian companies put off investment decisions.