As migrants flood cities, Morrison pushes youth to regions

By Leith van Onselen

In scenes reminiscent of when former treasurer Joe Hockey told those looking to buy their first home to “get a good job that pays good money… [so] you can go to the bank and you can borrow money”, Australia’s real estate treasurer, Scott Morrison, has echoed Barnaby Joyce’s recent call for young Australians locked-out of the housing market to move to regional Australia. From The Australian:

Treasurer Scott Morrison has talked up Barnaby Joyce’s decentralisation strategy as one of several means of addressing housing affordability…

Mr Morrison visited Tamworth in Mr Joyce’s northern NSW electorate over the weekend, meeting with developers, builders and other businesses…

“For young people who are thinking about, ‘can I buy a house in Sydney or can I buy a house in Melbourne or Brisbane?’ or things like that, there is an option if people want to take it in places like Tamworth.

“That doesn’t mean they have to, but it’s important these towns can say to people ‘you can have a future here,’ and there’s a great future in Tamworth”…

There are several problems with Scott Morrison’s suggestion that young Aussies locked-out of housing should simply move to the regions.

First, Australia’s regions – while certainly cheaper than the big cities of Sydney and Melbourne – are also hideously expensive. The below chart, which comes from Gerard Minack, shows median house price/median income ratios for Anglo cities:

ScreenHunter_15729 Oct. 27 11.41

As you can see, housing in Australia is incredibly expensive even outside the major capitals. In fact, there are no cities with less than 100,000 people where house prices are over 7 times income – aside from Australian cities.

Second, while housing might be a bit cheaper in the regions, are there jobs to match? For example, Tamworth’s unemployment rate is 7.5% – way above Australia’s large capitals.

Third, does Morrison appreciate that moving from the cities to the regions requires one to become detached from their families and support networks, making it a very difficult and often impractical solution?

Finally, it would be nice if Morrison acknowledged the deleterious impacts of the Coalition’s ‘Big Australia’ mass immigration agenda on housing affordability in the major cities.

The Productivity Commission’s (PC) recent Migrant Intake into Australia report revealed that immigrants are far more likely to settle in urban areas than people born in Australia. As shown in the next chart, 86% of immigrants lived in the major cities of Australia in 2011, whereas only 65% of the Australian-born population did:

ScreenHunter_17913 Mar. 13 16.00
Moreover, “of the immigrants living in capital cities in 2011, most lived in either Sydney or Melbourne, with 1.5 million residents of Sydney and 1.3 million residents of Melbourne born overseas”.

The PC also explicitly noted that:

  • “High rates of immigration put upward pressure on land and housing prices in Australia’s largest cities…”, and
  • “Immigration, as a major source of population growth in Australia, contributes to congestion in the major cities…”

Under this mass immigration agenda, Sydney’s population is projected to rise by 87,000 people per year (1,650 people each week) to 6.4 million over the next 20-years – effectively adding another Perth to the city’s population:

ScreenHunter_15562 Oct. 18 15.29

Melbourne’s population is projected to balloon by 97,000 people per year (1,870 people each week) over the next 35 years to more than 8 million people – effectively adding 2.5 Adelaide’s to the city’s population over this time period:

ScreenHunter_15632 Oct. 23 12.16

Why does Scott Morrison think it’s reasonable for incumbent young Australians to be forced to move from where they grew up just so they can make way for tens-of-thousands of migrants arriving into Sydney and Melbourne each and every year?

If Morrison was serious about addressing housing affordability for young Australians, he would slash Australia’s mass immigration program to sensible and sustainable levels.

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Unconventional Economist
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  1. Our big cities are like a digestive system. They need people with some money – which is absorbed. After that, the waste products are excreted to the remote regions. Young people with no money are waste products. That is what Scott is telling us.

  2. Totally ridiculous. The political class in OZ cannot be bothered they’re not going to deal with population & migration. So what do you do with an overpriced property in the regions when unemployment rises more & you find you have no job. And neither does the next person?

  3. Interesting that the unemployment rate in Tamworth is so high and yet bogans voted for Barnaby Joyce yet again.

    I note that Barnaby does not say much about immigration – if at all. In the US presidential election nobody was talking about immigration either – until Trump came along and said what most voters were thinking.

  4. proofreadersMEMBER

    “If Morrison was serious about addressing housing affordability for young Australians, he would slash Australia’s mass immigration program to sensible and sustainable levels.”

    Seemingly, the only thing ScoMo is serious about is preserving his title as Australia’s real estate Treasurer?

  5. “Why does Scott Morrison think it’s reasonable for incumbent young Australians to be forced to move from where they grew up just so they can make way for tens-of-thousands of migrants arriving into Sydney and Melbourne each and every year?”

    No he doesn’t. He wants them to stay at home, to keep that upward pressure on prices. Pressure cookers cook faster.

  6. That plot of house prices versus metro population is brilliant. Interestingly the correlation in Australia’s case is higher than other countries, i.e. In other countries house prices are less dependent on the metro population. I wonder why that is?

    I think as a country we ought to encourage housing and jobs in regional centres, but without a good way to commute there, this will likely be a difficult proposition for any young person growing up in a capital city. The regional centres may have huge potential, but are really disconnected.

    • Decentralise

      Move more govt departments to regions

      Why do we all need to commute to cities

      Does everyone in france commute to paris?

      • Yes some regional policy wouldn’t go astray. The reason house prices are so expensive in the regions is mainly because for some people the hours of commuting to and from a capital city are worth the savings and quality of life. But its a chicken and egg thing to revive regional centers as job creating economies in their own right.

    • drsmithyMEMBER

      People shouldn’t be commuting from regional centres. They should be working in local businesses, or working remotely.

  7. The problem is if you opt out of the biggest cities then you will have an even bigger sweet f##k all chance of getting back into their housing markets down the track should you need to return. Good luck in finding jobs even in some of the biggest country towns.

    The problem was the decentralization focus should have occured in the 50s 60s and 70s when most australian cities offered little in way of lifestyles and we still had an opportunity to disperse our manufacturing base. The problem now is everyone has no other chance but to gravitate to either Sydney and Melbourne which are fast becoming over rated shitholes.

    • I think the problem stems from insufficient tax on capital and land, with the renter subsidised by the worker and the entrepreneur.

      • The problem stems from an over-valued A$ ovr a period of 60 years that necessitated the Keating so-called ‘reforms’ The result is a GROSS redistribution of income and oppurtunity from regions to cities. Thus the whole economy could be financialised centred on Sydney and melbourne and to a lesser extent other capital cities.

    • That assumes you want to live in the city

      After moving out of Melb there is no way I’d move back

      City life , sh$tty life

  8. Suggestions like Morrison’s are for me amongst the most pertinent in this whole housing debate. By proposing that young families should move away from:
    – family and friends;
    – general availability of jobs;
    – the companies and industries that offer worthwhile careers; and
    – the social and cultural offerings of urban centres;

    he is basically saying the situation is unresolvably f*cked and he therefore has no means to unf*ck it. To hear him admint this is both satisfying and extremely disheartening at the same time.

    We are one of those young families he speaks of and we’re sitting on a sizable house deposit. I’d dearly love to invest a chunk of it in a small business or perhaps start my own, but due to the (probably futile) dream of one day owning a house and the size of the deposit required, that money will sit relatively idle.

    Not My Treasurer.

  9. Stephen Morris

    Morrison’s analysis is wrong for the same reason that so much economic analysis in Australia is wrong: it fails to account for the effects of constitutional political economy.

    The question one should ask is not, “Why is land so expensive in and around the State and Territory capital cities?”

    The questions one should ask are:

    a) “Why is an increasing proportion of Australia’s population squeezed into the State and Territory capital cities?”

    b) “Why are cities like Newcastle or Mackay or Townsville not vast metropolises?” and

    c) “Why does the proportion of the population in and around the capitals increase even as the population increases (contrary to the ‘critical mass’ hypothesis of city formation)?”

    The answer lies in Australia’s system of “elective dictatorship”.

    Under the Westminster system – with its generally supine Legislature – the Cabinet has vast discretion to disburse economic rents to the Ministers’ favourites. Combined with the psychological phenomenon of “presenteeism” (he tendency of human beings to look more favourably upon – and to reward – those who are physically present) this creates a powerful centripetal force drawing people in towards the “Fountainhead of Rents”, the Cabinet. Proximity to Cabinet is a “positional good”. You simply cannot increase its supply, even in principle.

    This phenomenon has been known to historians (but apparently not economists) for centuries. It is the reason that Courtiers had to remain at Court. Absence from Court was a death sentence.

    With the evolution of Absolute Monarchy into the Elective Dictatorship of the modern Westminster system, this effect has not gone away. Court has simply been replaced by Cabinet. Ministers reward those modern-day courtiers – the “primary rent-seekers” – who are physically proximate. The elevated incomes of the primary rent-seekers draws in a second circle of “secondary rent-seekers”, who in turn draw in further circles, the ripple of rents radiating outwards from the “fountainhead”.

    At some distance from the centre there is a circle of equilibrium (like the Heliopause around the Sun with the flow of rents corresponding to the solar wind) at which the costs of approaching the fountainhead exceed the benefits. This is the capital city urban boundary. Beyond it lies the geographic equivalent of inter-stellar space.

    Reducing costs at this boundary may push the “Metropause” outward slightly, but only by drawing in more people from smaller towns far beyond it. (In addition, any relaxation in pressure will encourage the Rulers at the centre to import more people from beyond the borders of the country.)

    Increasing supply at the Metropause may provide some temporary relief. But don’t expect it to last.

  10. Well in the case of Sydney it kind of happened.
    With Sydney getting priced out, many people moved to the Central Coast and the Gong. As is the way of all big cities, they’ve become dormitory suburbs for Sydney. And the prices have gotten ridiculous there too.

    The issue is that people want to live on the coast. That’s partly for lifestyle reasons (it’s nice to be close to the beach) and partly for more fundamental reasons (it’s nice to have running water). People don’t want to move to drought afflicted dustbowls and thanks to global warming (hello the other elephant in the room!) that’s not going to change. A couple of summers where the weather map shows the big red blob over the regions with +40 degree temperatures for weeks on end and you can forget people moving to the regions.

    The regions have been affected by the same godawful money grabbing development that has afflicted the cities. Go to the edge of, say, Port Macquarie and you’ll see poorly built houses on tiny blocks for overinflated prices. With inadequate parkland and facilities (they’re probably hoping that because these developments are surrounded by bush no-one will notice the lack of open space).

    • Good comment. Moving to the regions is something to consider, but it is fraught with risk and needs to be considered extremely carefully. At a bare minimum factors are: employment (can you get it or will you have to create your own? even if jobs exist, as a non-local you might not be given work as it could go to a local instead of you), climate change, current and expected future local economic conditions, housing (quality, price, ability to be self-sufficient etc) and can you fit in socially?

    • Please refer to my post above re over-valuation of A$
      So, given the current situation is unsustainable (totally) the “solution” is to redistribute even more income and wealth from those who do live and work in these harsher climates just so that everyone who so desires can park their arses at the beach and work in air-conditioned offices creating laws governing the lives of others?
      What’s the end game when all the mines and factories and farms are all sold to foreigners? Where do we then get income from for everone at the beach to live in the manner to which they have become accustomed? How do the cities get supported then?

      ajotsu We have to start facing the reality here. I think we all agree that as per UE this stupid damned immigration thing has to stop immediately. It is unsustainable environmentally and financially However even after that is achieved we require some major attitude changes around our entitlements.

      Just a wee anecdote. The regions have been drained of people. The result is that there is a real shortage of people with the necessary skills and attitudes to do rural jobs. Currently many of these jobs are being filled by unskilled backpackers and this is badly affecting efficiency, productivity and the livelihoods of people in rural areas.
      I know modern economics says we don’t need no damned exports however it is that belief that is now at the core of all the problems we have created.

    • Making the Regions viable should be possible. A lot of problems have gone away. Remote power, internet and communications, techniques for building cheap good houses – all these are solved, or solved in principle. The problem is that our society is run by the financial system via their political puppets, and the financial system does not understand anything except cities.

      A program to help build an alternate, viable, regional economy outside the megacity model is anathema to the FIRE sector. It makes as much sense to them as a slave owner giving all the slaves a cut lunch and bus fare so they can run off. Until we find a way to collectively understand what we as a society are doing wrong, nothing will work. It will just be debt, big cities, funny money and Scott explaining how great it all is.

      • “Making the Regions viable should be possible.”

        In theory. In practice, the political system (the highly centralised Westminster system) ensures that population will move to within “Lunching Distance” of the Cabinet which is the Fountainhead of Economic Rents.

        As with so many apparently economic problems, the real problem is constitutional. The “rules of the game” guarantee that there will be a few winners and almost everyone else will be worse off [relative to what they might have been under a different set of rules].

      • Well, I suppose that means there is no way forward. The people who would be required to implement change can’t see a problem. If you are Scott Morrison or one of his cohort, everything is great, so why change?

        Perhaps the next generation will see the problem after getting kicked in the teeth?

    • Unplanned urban sprawl and citizens moving to regional areas are not comparable. One requires thought, planning and consultation. The other is a consequence of not doing so.

      Both illustrate that a rising population base brings growth. The better managed it is, the better for all involved.

  11. Good greif! So what message are they sending to those youth and people who are in regional centres like Tamworth and who need to move to the city. ‘You are fucked!’

  12. So they’re expecting our youth to step aside to give immigrants a jobs & location advantage over our own youth now?
    Sounds like a good way to inflame tensions……. We gotta get rid of these glib gastropods!

    • Plenty of jobs for those wishing to move to the far south coast of NSW Nudge ? Maybe they can re-open the Greenseas Tuna cannery in Eden – that should do it.

      And what do young people do who are living in these regional areas where job opportunities are scarce or non-existent ?

      Move to the city ?

      Our politicians are only capable of squeezing off brain farts that require a level of IQ that can be counted by the fingers of both hands……and that is being generous to the b*stards.

      • Cannery, Chip mill, being told how to run your farm into the ground….. it’s absurd! Jobs tight as always Bob, still gotta wait for someone to retire or die to get a good one & then you’ll have to put up with shit because they know you can’t just go next door. No towns for young goers. The number of parents paying for their kids uni or rent just so they can get a start in the smoke is breathtaking – & breaking them……. & then you hear this garbage FFS!

        You here yet?

    • G’day Nudge….

      Seems the only opportunities down our way are if you have the relevant medical qualifications to pull off a job at Bega Hospital. And even then how many of those better paying jobs go to 451 visa holders or newly arrived immigrants ?

      Wife and I are still in Canberra Nudge, my mum passed away last year and still settling her estate, but should be ready to make the long awaited sea change by the end of this year or very early next year.

      We will have to get together for a beer or two or whatever floats your boat in due time. Broke my femur coming off my bike in January and only just back at work. Should be in fine fettle to throw my leg back over once we have moved down to Merimbula. But the fishing and the golf will also beckon.

      Can’t wait !

      • Sorry to hear about your travails, it’s Never a good time.

        It’s still all good if you’re in the PS or a builder down here, but that’s about it. The hospital is still understaffed & under equipped I’m told – budgetary – we’ve had doctors leave over it.

        I’ll be able to show you a few good spots 🙂

  13. TailorTrashMEMBER

    Looks like a good smirk is a prerequisite to be treasurer of Straya ……that Scomo smirk makes Costello look positively humble …….

  14. Sydney is crazy expensive.

    The premier spots in say, Coffs are too, but unlike Sydney, you can find cheap housing. I don’t think the median in idyllic coastal towns, where the premier houses are bought with Sydney money anyway reflect the entire town.

    $350k on Coffs wages is expensive but it’s nothing even close to Sydney’s ratios.

    i.e. nothing in Sydney is affordable, but there’s plenty in Coffs and Tamworth even on their lower wages.

  15. Reposting

    Remember “The Corridor Plan for Perth”? First drafted in 1968 and endorsed by Parliament in 1973.

    The government pushed hard to build or revitalise 5 satellite cities around Perth: Joondalup, Midland, Armadale, Fremantle and Rockingham. Three big components of the push were:

    A) the establishment of large shopping precincts meaning that residents would not have to travel to Perth so much
    B) the establishment of satellite government services (eg hospitals) with all the jobs that would bring
    C) the establishment of rail and highway linkages with the CBD

    Plenty of jobs were created by top-down decree which, in turn, attracted lots of bottom-up businesses with the jobs they brought. The policy worked well. Today, these regions are well developed and, as intended, the corridors between Perth and the satellite cities have developed extensively as well.

    Fast forward and this is now all criticised as “sprawl” and we’re told to build up not out. Supply of new land and development opportunity is severely curtailed and prices have soared.

    Satellite cities do work if people with deep pockets are prepared to back them, build infrastructure and move decent jobs out there in advance of the people (who will follow). The private sector typically doesn’t have deep enough pockets to do this, so it’s up to the government, as demonstrated by the Corridor Plan for Perth.

    The ball’s in your court ScoMo, put up or shut up!