WA Tomorrow Population Forecast - Methodology

DPLH uses a Cohort Component Model (CCM) to produce the age by sex population forecasts for WA Tomorrow. The CCM is the most widely used approach by demographers for preparing population projections and is internationally recognised as best practice. 

The forecast is based on a series of assumptions regarding future trends in the demographic components of births, deaths and migration. The assumptions for the population forecasts are informed by a detailed analysis of recent trends in these demographic components. The assumptions are then applied to the base population, by age and sex, to derive the forecast population, age-sex structure and estimated future number of births, deaths and migrants. The CCM uses the following demographic equation:

New population =

Base population + births – deaths + in-migration – out-migration

The main processes are:

• taking the base population of an area, disaggregated by age and sex to form cohorts (age groups) - using the fertility rate to calculate the number of births
• using the mortality rate to calculate the number of deaths
• using the migration rate to calculate the number of migrants (overseas and interstate)
• calculating the new population for the following year by ageing the population, adding the number of births to the cohort aged 0, removing deaths from the appropriate cohorts and adding and subtracting the number of migrants.

This process is repeated for each year in the forecast.

This method has the advantage of providing age-sex distributions in addition to total population numbers.

A Technical Working Group of key government stakeholders peer reviewed the methodology and assumptions.

The base population for the WA Tomorrow population forecast is the Australian Bureau of Statistics’ (ABS) Estimated Resident Population (ERP) at 30 June 2022, which takes into account the 2021 Census of Population and Housing.

The ERP is the official measure of Australia’ population. It includes all people who usually live in Australia, with the exception of foreign diplomats.

For population measures, ERP is more reliable than the five yearly Census of Population and Housing. This is because it is more frequently available than the Census, and it improves on Census based counts by:

•  adjusting for estimated net Census undercount, including Australian residents temporarily overseas on Census night;
• Updating the population with quarterly estimates of births, deaths, overseas and interstate migration.

For more information regarding ERP, please visit the ABS website: National, state and territory population methodology

Consistent with the ABS’ ERP, the WA Tomorrow forecasts refer to the population as at 30 June for each stated year.

The WA Tomorrow assumptions are informed by an analysis of a range of demographic datasets. They are based on the best available data at the time.

• Fertility rates are based on historical ABS births data, by year of occurrence (of the birth), from 2006 to 2019. There is usually an interval between the occurrence and registration of a birth (referred to as a registration ‘lag’). This lag in the registration of births can cause data reported by occurrence to be incomplete for the most recent data – 2020 and 2021. For this reason, analysis of past trends excludes data for 2020 and 2021.
• Mortality rates are based on historical ABS deaths data, by year of occurrence (of the death), from 2006 to 2019.
• Future levels of Net Overseas Migration (NOM) and Net Interstate Migration (NIM) have been developed in consultation with the WA Department of Treasury. Migration assumptions are informed by ABS data on Overseas and Interstate arrivals and departures, Commonwealth Budget NOM forecasts (National and WA), and leading economic indicators. 

The WA Tomorrow population forecast reflects assumptions made about future fertility, mortality and migration. These assumptions are applied to the population for each year over the projection period, underpinning the future size, structure and growth of the population.

Assumptions are informed by historical trends. The COVID 19 pandemic added uncertainty to recent estimates, specifically overseas migration, which has made recent historical data less reliable for forecasting. The effects of the pandemic on recent demographic trends were considered and addressed during the assumption setting process.

Fertility

Future trends in fertility are important in shaping future population size, structure and growth. The WA Tomorrow model applies age-specific fertility rates (ASFR) and sex ratio at birth for each year of the projection period to determine the number of babies born. The ASFR measures the number of births occurring to mothers of a given age per 1,000 women of the same age in the same year. WA Tomorrow No. 12 proposes a relatively stable ASFR across the forecast period.

The Total Fertility Rate (TFR), which is the sum of ASFR per thousand women, is forecast to decrease from 1.65 births per woman in 2023 to 1.63 births in 2024, remaining constant thereafter. Based on ABS births by year of occurrence data, this assumption reflects the medium-term trend which shows a steadily declining TFR from 2.00 births per woman in 2008 to 1.69 in 2019. The trend towards older mothers is assumed to continue to 2024, after which the fertility rates will remain constant.  For all years, sex ratio at birth is assumed to be 105.8 male births per 100 female births based on current data.

Mortality

WA Tomorrow applies age-specific mortality rates (ASMR) to determine the number of deaths that will occur for each year of the projection period.  WA Tomorrow 12 assumes mortality improvement across all ages, except for persons aged 100 years and over, for both males and females over the forecast period. The ASMR for males and females aged 100 years and over is held constant from 2023.

For each age, mortality rates for females are assumed to be lower than for males, except for females aged 99 years and over. This aligns with the higher life expectancy for females.

While ASMR are assumed to continue to improve over the forecast period, the total number of deaths is expected to grow as the population ages. This is reflected by the Crude Death Rate (CDR). The CDR is derived from the total number of deaths occurring over a given period per 1,000 of the population. Derived from the WA Tomorrow forecast, the CDR is expected to increase from 5.67 deaths per 1,000 people in 2023 to 6.21 in 2036, due to the ageing demographic.

Migration

The WA Tomorrow assumptions on future levels of Net Overseas Migration (NOM) and Net Interstate Migration (NIM) have been developed in consultation with the WA Department of Treasury. Migration assumptions are informed by ABS data on Overseas and Interstate arrivals and departures, Commonwealth Budget NOM forecasts (National and WA), and leading economic indicators.

NOM is the most volatile component of population change. This volatility has been heightened by the loss of overseas migration due to the pandemic, and its subsequent recovery. Therefore, WA Tomorrow 12 has considered these recent trends, and long-term averages from before the pandemic.

NOM has recently been boosted by a sharp recovery in migrant arrivals, particularly students, and slow recovery in migrant departures. WA Tomorrow assumes that NOM will peak in 2022-23 and return close to the long-term historic average from 2024-25 as migration flows normalise. This will include migrant departures increasing as recently arrived students complete their studies. Any potential future impacts from the Commonwealth Government’s Migration Strategy released in December 2023 have not been incorporated.

NIM is expected to remain elevated to 2023-24, before gradually returning to long term average by 2026-27, and remaining stable thereafter.

Table 1: Summary of assumptions used in WA Tomorrow No.12.

All forecasts comprise uncertainty across the base data, assumptions and model. Statistical techniques are used to overcome some uncertainty and are also used to forecast uncertainty.

Traditionally, population projections based on the CCM approach are deterministic in that the population future presented is specified as a scenario with no possibility of variation[1] To provide a more realistic outlook of potential future population outcomes, WA Tomorrow uses probabilistic methods to produce a forecast range that will better inform decision making and planning processes. This range is presented as five forecast bands indicating five probable futures. Bands A and B represent the lower forecasts, Band C is the median forecast and Bands D and E represent the higher forecasts.

To derive the WA Tomorrow bands, a single, deterministic forecast model based on a single set of assumptions (rather than a set of different scenarios) is first created to form Band C. The forecast range provided by the bands is then generated from 100,000 possible variations of this single model, which are equally divided into the five bands or population forecasts. Conceptually, the bands represent one-fifth of the 100,000 variations which denote probability levels of 10%, 30%, 70% and 90%. Band C represents the median (50%).

This means ‘Band A’ represents a 10% probability that the population will be less than or equal to Band A, and a 90% probability that it will be higher. Conversely, ‘Band E’ represents a 10% chance that the population will be higher or equal to Band E, and a 90% chance of it being lower. The same applies for Bands B and D, representing 30% and 70% probability respectively.

It is important to understand the differences between the Bands and to choose the Band most suitable for the user’s needs. For the user who requires the best estimate of future population size based on past trends, Band C should be used.  The other Bands should be used if they are required for other decision-making purposes.