CBA: Mass immigration will keep Australian housing unaffordable

CBA interest rate strategists, Jarrod Kerr and Adam Donaldson, claim that mass immigration is Australia’s “fountain of youth” and will prevent housing prices from falling. From The Australian:

Back in January 2017, the interest rate strategists at the Commonwealth Bank published a Global Markets Research paper called Demography is Destiny for Interest Rates, But Immigration a Fountain of Youth. Kerr and Donaldson were the authors…

Deflation, not inflation, is listed as the biggest threat ahead…

The paper does not predict Australian house prices will fall, though. So it may not be wise for millennials to sit back and wait for them to become cheaper.

The paper makes the case that, against the trends in many other countries, Australia will still experience growth. Our differentiator is immigration, “the fountain of youth”. Put simply, we are a destination of choice for China and India. The average age of our immigrant is in the mid-20s, and people at this stage in life form families and buy houses.

CBA’s claim that mass immigration will prevent Australian housing from deflating is uncontroversial.

Australia’s population is projected to balloon by another 17.5 million people over the next 48 years to around 43 million people, with all of this growth to come via net overseas migration (NOM):

Obviously, this additional 17.5 million people will massively increase demand for housing, thus placing upward pressure on values.

Where the CBA’s analysis falls short is the claim that immigration is “the fountain of youth”. This fails Demography 101.

A key driver of Australia’s current ‘baby boomer bulge’ is the mass immigration program ran in the post-war period (i.e. 1950s and 1960s):

These migrants (which include my parents) have now grown old, thus adding to Australia’s current ageing ‘problem’. Therefore, importing more migrants to solve ageing is the equivalent of ‘can-kick economics’, because today’s migrants will also grow old, thus creating further ageing problems in 40 year’s time.

Second, the ABS’ own demographic projections show that immigration is next to useless in ‘younging’ Australia’s population. That is, if we apply a more realistic definition for the working aged population of 19 to 70 (given more kids are staying in school and older Australians are working longer), then running annual net overseas migration (NOM) of 200,000 to 280,000 delivers only 3% more working-aged Australians by 2101 than zero NOM:

This tiny ‘benefit’ will only be transitory and comes at the expense of adding 150% to 200% more people to Australia’s population versus zero NOM:

Such a massive increase in population will obviously take a massive toll on Australia’s natural environment and general liveability.

Detailed counter-arguments to the CBA’s “fountain of youth” claim are articulated in the research paper Three Economic Myths about Ageing: Participation, Immigration and Infrastructure, which was authored by Dr Cameron Murray and I and commissioned by Sustainable Australia.

Unconventional Economist

Leith van Onselen is Chief Economist at the MB Fund and MB Super. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.

Latest posts by Unconventional Economist (see all)

Comments

  1. We were able to absorb migrants because we had a massive mining boom – first in raw demand which pushed the price to $140/ ton – then to capitalise on that in a capex boom which saw a trillion dollars of direct foreign investment.

    This was then leveraged into a third boom which was the apartment construction – or better phrased the offshore borrowing by our banks boom – which injected another $2 Trillion into our economy

    Both of those things are now dead.

    Migrants were able to be absorbed because we had the economy to support them and they wanted to come to booming economy.

    We no longer have any boom – in fact we have a bust. And just like any boom and bust economy the transients will stop coming and will start leaving.

    Same thing happens in every single market, in every single economy, in all of history. There are mining towns across the planet all abandoned tens of thousands of them. Empty. Dust.

    Perhaps its time for a reminder of the most common reaction to economic hardship is what was done to the Jews in the second world war. That was not an anomaly – it happened in ancient Egypt, Rome, Athens, China, and even Cronulla in Sydney.

    When the economy turns south the locals turn on cheap foreigners who turned up to capitalise on the good times and they are driven out.

    It even happened to the Chinese here in Melbourne during the Gold Rush.

    It will happen again – we can be more sure of that any economic theory ever put forward by anyone – ever.

    Migration will evaporate with the economy faster than you can say “they took our jobs” – the irony being, yes, that is exactly right.

    .

    • You are mistaken if you think any migrants will be going home, or even if the rate of migration will decrease.

      The immigrants are a more important factor than high iron ore prices in keeping the economy growing.

      Australia in a recession is still better than China or India, with free Medicare available immediately on arrival and the dole after 3 years.

      • How about you actually read what was written mate instead of just writing out your fears as though there were fact and hitting “ENTER !”.

        Its the very same thing everywhere – no ifs, no buts. The pattern is beyond question.

        And why would a Chinese person migrate to Australia for our shit health care system when theirs is free and just as good ? No – not gunna happen.

        MIgrants to migrate to a place because they have a health care system – sorry they just don’t. Its an absolutely absurd proposition put forward by the most gormless fear mongers – it really is bottom of the barrel in intellect.

        People migrate for a better life through employment and work opportunities – etc. Its that simple. The only other category are retirees.

        To say otherwise is utterly absolutely disingenuous in the highest order – its tantamount to total BS.

        So no. Absolutely not.

        • Migrants will continue coming as long as living standards are higher in Australian than China, India, Nepal, Bangladesh, [insert developing nation]. It will be decades before Australia is no longer attractive.

          Meanwhile, incumbent Australians will continue to be crush-loaded as their living standards are gradually adjusted downwards towards third world levels.

          • Agreed but it is living standards of the rich in these countries who can afford to migrate, not the living standards of anyone. The difference is narrowing in this regard perhaps?

          • PalimpsestMEMBER

            I’m afraid you have underestimated the magic of capitalism. Not wealthy enough? Don’t worry, there’s an agent that can help you out, all that’s required is that you pay them back with a small amount of interest once you get to the wonderful world of Oz. Oh well, the wages weren’t quite what you were hoping for, but after 6 months you’ll get it all. Well, actually, there’s still a bit of debt, and you can’t change jobs or you’ll lose your visa. Just hang in there. There is money in this business and the children of the wealthy aren’t at risk.

        • John Howards Bowling Coach

          Leo, I wish what you are saying was correct, however I think it is not. As others have said, Australia is a long way above almost every nation on earth in regard to living standards. While those of us born here see the country is going to the dogs and our living standards are in free fall, we’re comparing them to Australia not to China etc etc etc.

          Gordon, no you do not get Medicare on arrival you need to get a PR for that which takes a while.

          Leo your assertion that healthcare in China is free I don’t believe is correct and I based that on having been to a hospital and doctor in China several times myself and having extended family who are Chinese and work in their medical system.

          Leaving Australia is not an attractive prospect for the vast majority of the migrants we are getting now, life for them here even in a deep recession is still outrageously better than what the conditions are at home, and many also bring a lot of cash with them so have no concern if property prices (for example) are falling in Oz, just more for them to grab. The rules of the past such as the gold rush era don’t apply anymore as so many of the migrants coming here won the lottery just by getting in the door, they aren’t like the young Aussies who rushed to work in London 20 years ago for instance, they aren’t just here for a fast cash injection, they are here because it is the best life they will ever get.

          So no they are not likely to leave voluntarily.

    • Perhaps.. (the squandering of our resources boom and wealth – into an tsunami of third world migrants will see an Australia degraded by osmosis into a third world Asian pacific slum, the locals turn on the migrants & the influx levels out – the migrants even will go back..)

      Or perhaps not.
      The key difference in your logic is the type of intake.

      Whereas decades or 2 ago – it was a higher quality migrant, typically European or aspirational middle class Asian or Middle Eastern – most who could assimilate, who had or could acquire skills, and a relatively difficult & expensive effort to get into Australia..

      But it is different now.
      Our broken borders & corrupted visa system is skewed to the active selection an immoral, unskilled non assimilating third world migrant that is many levels down in quality & up in number.

      What comes in now is basically third world slum clearance, rural peasantry, misfits, aged & sick, the socially undesirable, end of life vice workers, petty criminals and whatever else the third world can actively dump into advanced western economies.

      In collaboration with the foreign criminal trafficking syndicates. The ‘product’ that they export into Australia is a already a misfit, useless or undesirable in their third world.

      Packaged up the agent procurers, in heavy loan debt, only here to repay that debt, to provide back remittance income & so that country of origin can shed that social burden by dumping it into countries like Australia.

      The Chinese or Indians in Australia are a good example.
      A decade or more ago it was mostly lower middle class or aspirational Chinese & Indians.

      Now with the Chinese it has been a decade of almost exclusively Hukuo Chinese internal illegals and Indian urban slum clearance or rurals.

      Chinese.
      We have 1.36 million Chinese mainland born communists in Australia.
      1.1 Million are non citizen Chinese sole passport holders and almost all are the Chinese Hukou underclass.
      They are Chinese internal illegals. Part of the 103 million China is cleansing from their tier 1 cities.
      9 million have been ‘exported’ overseas.
      We have over 1 million.
      How can you tell they are Hukuo Chinese internal illegals?
      Go ask them or any Chinese born person.
      Their accents, history, associations, and if we were brave enough their Chinese internal status & social credit score. But we don’t ask or check.
      Go live in China for a while.
      The Chinese Hokou underclass don’t get education, housing rights or healthcare in China in the tier 1 cities.
      The relative standard of living between say a Hukou underclass Chinese illegal in China v being a TR working illegally & then a PR in Australia ($2k or 10,000 ¥ buys an Australian PR in Guangzhou) is marked.

      That Chinese Hukou underclass internal illegal has no motivation to go back to China where he or she would earn maybe $6,000 a year at best.
      Here they can earn $47,000* working illegally. *treasury estimate average income of non citizen PR & TR/SCV combined.

      The end of life vice workers and pimp partner petty criminals as ‘students’, the broken down factory workers, the aged, sick or ‘new identity’ criminals or escaping China on family or business sponsor visas – thats our main Chinese intake.

      The Indian slum clearance & Punjabi rurals that now dominate the Indian intake are also the same.

      Yes it was more lower middle class Indians a long time ago ($20 a day in India is middle class btw) but now it’s the Indian gutter scrapings & rural poor.
      In India they can earn at best $2,000 a year v $47k here.
      Bangladeshi – again the same.
      Not the rich family elite/ they all have the PR / dual passports or overseas citizenship – it’s tens of millions of dirt poor urban or rural useless.

      Nepal same. Whole villages conveyed in on the foreign
      student racket when they ran out of Indians.

      Malaysia the same – its the KL gutter people & peasants from the villages coming in to work illegally, claim protection visas etc.

      Thailand the same. A decade ago maybe the Bangkok middle class sending their young off to be a PR anchor – now its exclusively Isaan & Chiangmai abandoned mother’s as prostitutes & their cousins or pimps as partners or full work rights no English in a factory here cash in hand.

      Singaporean’s – you don’t see them anymore, they either have the PR / dual citizenship or they go to countries that have real education.

      The Middle East – the bottom of the barrel in exploiting their large criminal underworld colony here.

      Vietnam, Taiwan, Korea, even Japan – their lowlife & unemployable.

      Or take a very small group – the Brazilians – almost exclusively the offspring of the San Paulo criminal class.

      My point is this.

      Our intake now is the bottom layer gutter level strata of the third world. Tens of millions stacked up.

      We see that with the foreign students but it’s across every visa category that is racketeered & frauded.

      696,000 NZ SCV – but one third are now non NZ born Asians & Indians who would never get into Australia or got kicked out.
      When was the last time you saw a genuine NZ born young couple newly arrived with matching mullet haircuts & flared jeans, or heard their dulcet mangled tones?

      Now it’s a Fiji Indian, Chinese criminal on a fake ID & pacific island passport or an African war criminal who bribes the UNHCR to be at the front of the queue.
      Unskilled, non English speaking- get the NZ passport stamp – allowed into Australia on full work rights for life.

      Same with the backpackers. Once it was Pom’s or Europeans here for genuine life experience.
      Now it’s Turks, Armenians, Indians & Asians – only here to work illegally, pay the farmer bribes for the extensions as part of a circuit of visa churn & illegal work.

      Tourist visitors also are a notable change.
      8.8 million a year.
      Now dominated by Chinese & Indians ‘Staying with family or friends’.
      Long stay & repeat stay.
      No health checks. No funds checks.
      Our genuine tourist industry in decline, hotel and motel beds massively reduced.
      They are not here to do any tourist activity or spend money. Here for Medicare tourism – buy the blood type matched Medicare card in Lakemba or Burwood for $150 & then stockpile the PBS drugs to post back to China or India that funded their trip.
      Or here to work illegally.
      Be the nanny / cook / slave / work as a labourer or on the farm, or in the factory or shop.
      5% of these 8.8 million tourist visitors work illegally.
      (440,000) mostly Chinese north & south Asian, Indian & Middle Eastern. ABF parliamentary submission.

      All the migrant intake numbers on a rise.
      As the quality drops and visa fraud expands.

      Tens of millions of the bottom of the barrel third world are lined up. Australia one of the easiest places to get into. Self funding.
      Get lucky – snag a PR & their agent procurer loan debt is paid off in return for being an anchor and sponsor for more like them.

      As our economy degrades under the shock of the migrant influx – we keep going down & down in the layers, quality and types of visas in what’s allowed in.

      1.9 million PR – record levels of non nationals.
      90% third world. 80% unskilled, 70% dependents.

      2.561 million TR / SCV up 8-14% year to year.
      83% third world (incl non Nz scv loophole) and over 95% adult unskilled.

      440,000 illegally working tourist visitors
      Almost all third world unskilled.

      And 65,000 Overstayers.
      5 million non Australian foreign nationals predominantly third world unskilled.
      Up 1 million in 5 years.
      The numbers are accelerating, not reducing.

      “The Locals will backlash”.

      Do you live in Sydney?
      Have you ever been to the western suburbs?
      Have you stood on Granville station or gone to Blacktown and been the only European?
      The only person that can even speak English?

      There is no ‘local backlash’.

      47% or 2.4 million of Sydney pop 5.2 million are non Australian foreign nationals.

      Over 40% or 2 million of Melbourne pop 5 million non Australian foreign nationals.

      Whole swathes of Sydney – from the south to way out west, 800 or 900 sq km are now migrant guestworkers slums.

      The only ‘backlash’ is from the older more established migrant (who arrived as TR & are now PR) against the new and even lower bottom of the barrel scrapings waves of TR now coming in.

      There are some little pockets of Australian enclaves left like say the northern beaches, but Sydney is lost.

      There is no local backlash.

  2. Jumping jack flash

    Yes, but not as is expected.
    Many of the migrants that are arriving these days are enslaved by the “rich” and used to allow these “rich” (read: hopelessly indebted) to increase the amount of debt they have, through the magic of wage theft. This debt is then used to increase house prices.

    Rising house prices from extra debt equates to productivity! The economy is saved!
    Coupled with lower interest rates, its a sure thing.

    But most of these new migrants aren’t going to be paid enough to be able to afford the debt that is required to afford the properties. Besides, the properties need to keep rising constantly in order to constantly generate more debt in order to keep the economy constantly growing, and the incomes that are paid to these bottom-rung employees aren’t going anywhere close to rising, for the next 30 years or more.

    28 years without a recession or something? That’s a lot of debt, but more is always required