Category: Affordable Housing

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Any way you look at it, and whether you like it or not, migration is shaping up as a major issue for the 2025 election.

As Jim Chalmers did the rounds of media outlets to sell his fourth budget, the treasurer was regularly challenged about the boom in net overseas migration since Labor came to power in 2022.

While the language used in questions sometimes borders on the hysterical, don’t believe what you hear when politicians try to blame migration for the housing crisis.

Peter Fegan, a host on talkback Brisbane radio 4BC, quoted forecasts that 260,000 migrants would “flood into Australia” by the end of this financial year.

“I don’t know where 260,000 new migrants will go. I know that they’ll work. But we’re in a housing crisis. It doesn’t make sense to me,” he said on Wednesday.

With this kind of emotion, Peter Dutton is keen to capitalise on fears the recent jump in migration has pushed up house prices and rents.

“The other impact Australians are feeling from the Albanese government’s poor management of the migration program is from congestion on our roads and pressure on existing services which are stretched, like seeing a GP,” the opposition leader said at last year’s budget reply.

In a February interview with Sky News, Dutton accused the government of not doing enough to enforce visa rules.

“The Australian government, at the moment, has a sugar bag on the table and is providing incentive for people to stay, not to leave, which is part of the housing crisis that they’ve created,” he said.

What do the numbers say?

Overseas migration surged to 535,000 in 2022-23, or roughly double the average pace of the decade leading up to Covid. The figure was 435,000 in 2023-24.

Treasury’s projections are that net overseas migration – or Nom – will fall by 100,000 in this financial year to 335,000.

That’s a hefty 1.3m in just three years.

The budget predicts Nom will drop again to more usual numbers of 260,000 in 2025-26 and then settle at a lower 230,000 a year from then.

Net overseas migration (thousands of people)

There has been a sharp drop in net migration recently – as more foreign students have headed home – and Labor has tried and failed to pass legislation that would cap the number of new international student enrolments across universities and Tafes.

Some doubts remain about whether Nom will settle at the low levels predicted in Tuesday’s budgets.

Fuelling these doubts is the fact that officials have proved terrible at forecasting net migration (although few forecasters covered themselves in glory during Covid lockdowns and their aftermath – we’re looking at you, RBA).

So, any way you cut it – yes, net overseas migration has been very strong.

How much can migration be blamed for housing crisis?

Few would argue we are building enough homes to make a dent on housing affordability. Clearly we are not.

But has the recent pace of migration made the problem worse, as Dutton & Co have argued?

The chief economist at the Centre for Independent Studies, Peter Tulip, is unconvinced.

Tulip, during his time at the RBA, wrote a 2019 paper that looked at the impact of the big jump in population in the mid-to-late 2000s. He found it added about 9% to the cost of housing by 2018, or about a decade after the big lift in migration.

That certainly sounds like something. But there’s a catch: house prices are up 28% since December 2019 and rents are 18% higher (factoring in additional government support), according to the ABS.

If migration growth was a “driver” of those costs, then we should see a much larger than usual lift in the population.

But according to the latest budget estimates, the population by the middle of this year will be 27,960,700. That’s virtually the same as expected in the December 2019 midyear fiscal update.

The population is no larger than we thought it would be before the pandemic. In other words, an unusually large jump in housing costs was not matched with an unusually large jump in the population.

So much for a “big Australia policy by stealth”.

As Tulip says: “If we’ve gone back to population levels we projected prior to the pandemic, then the change in immigration numbers doesn’t explain the change in cost of housing.

“There are two separate policy questions: what should be our level of immigration, and given that, are we providing enough housing for the level of population growth we have decided on?

“The first is a value judgment, and lots of people will disagree. The second question is a technical one, and the answer to that is the housing market is failing.”

And don’t forget the benefits migrants bring

Brendan Coates, an economist at the Grattan Institute, calculates that were the Coalition to permanently cut net overseas migration to 160,000 a year, from 260,000 a year, that would reduce rents by about 6% after a decade.

But, those gains would come at a cost.

“Migrants contribute greatly to Australia’s prosperity and shape our diverse society. Skilled migrants in particular lift the productivity of local workers and boost government budgets, raising Australians’ incomes,” Coates says.

“Cutting migration, and especially permanent skilled migration, may make our housing a bit cheaper. But it would definitely make us poorer.”

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