1 the increase in australia's population growth over the past decade is largely due to increased immigration ; the rate of natural increase has not changed that much ( graph 2 ). over recent times, net overseas migration has, on average, added around 1 per cent to our population each year. the increase from natural sources has averaged around 0. 7 per cent per year. https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 2 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba graph 2 there has been a reasonable amount of year - to - year variation in net overseas migration. migration increased sharply at the height of the resources boom when demand for skilled labour was very strong, and then subsequently declined as the mining investment boom came to an end. in this way, migration has helped our economy adjust to large swings in the demand for labour. it has also helped address some particular skills shortages. a second factor that accounts for the step - up in the level of migration and the year - to - year variation is a marked increase in the number of overseas students studying in australia and changes in the policies around student visas. there are currently more than 500, 000 overseas students studying in australia. over recent times, it has been common for around one - sixth of foreign students to stay and live and work in australia after completing their studies. [ 1 ] this has boosted our population. it has also boosted the nation's human capital. people living in australia who were born overseas are more likely than the average australian to have a post - secondary school qualification ( graph 3 ). we also benefit from stronger overseas connections when foreign students return home after studying in australia. https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 3 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba graph 3 the effects of faster population growth on our economy and society are complex and they are widely debated. as a number of commentators have noted, population growth has put pressure on our infrastructure. as a country, we were slow to increase investment in infrastructure to meet the needs of our more rapidly growing population. investment in this area has now picked up, particularly in transport, which, in time, will help alleviate some of the pressures. we were also slow to increase the rate of home

electricity prices in some cities have declined recently after earlier large increases, and changes in government policy are likely to result in a decline in child care prices as recorded in the cpi. there have also been changes to some state government programs that are expected to lead to lower measured prices for some services. together, these changes mean that our forecast for headline inflation for 2018 is now 1¾ per cent. looking beyond these short - run dynamics, inflation is still expected to rise as the economy moves closer to full employment. the labour market is gradually tightening and it is reasonable to expect that this will lead to a lift in both wages growth and inflation. this tightening of the labour market is evident in the steady increase in job vacancies, with the number of vacancies, as a share of the labour force, at the highest level in many years ( graph 15 ). it is also evident in the increase in the number of firms reporting that it is difficult to find workers with the necessary skills. as expected, the tighter labour market is leading to higher wage outcomes in certain pockets of the labour market. over time, we expect that this will become a more general story, although this is going to take some time. graph 15 https : / / www. rba. gov. au / speeches / 2018 / sp - gov - 2018 - 08 - 08. html 16 / 18 8 / 8 / 2018 demographic change and recent monetary policy | speeches | rba in terms of the financial risks facing the economy, things have also been broadly moving in the right direction. for a number of years, risks were rising due to the nexus of high and rising levels of debt and escalating housing prices. over the past year, though, housing price declines in the largest cities have reversed a small part of the earlier gains. borrowing by investors has also slowed considerably, largely because of reduced demand by investors. there has also been a tightening of credit standards. while banks are competing strongly for customers with low credit risk, their appetite to lend to riskier borrowers has lessened a bit. some of the non - bank lenders are providing credit to these borrowers. this change in financial trends has helped reduce the build - up of risk. it is helpful that this change is taking place at a time when the world economy is growing strongly, the unemployment rate is trending lower and the economy is recording good growth. this is assisting with the adjustment and means that, notwithstanding the changes in the housing market,