For year’s the Grattan Institute has vigorously supported the ‘Big Australia’ mass immigration policy, claiming it delivers huge benefits for the economy and society.
At the same time, Grattan continuously blames a ‘lack of supply’ – caused by said mass immigration – for driving Australia’s housing affordability woes and entrenching intergenerational inequality.
The latest example comes from the weekend’s SMH, where the Grattan Institute’s Brendan Coates – who also heads-up the Institute’s immigration propaganda unit – bemoaned that Australia would become a less equal society if it doesn’t build more homes:
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“Either people accept greater density in their suburb, or their children will not be able to buy a home, and seniors will not be able to downsize in the suburb where they live,” he said. “Economic growth will be constrained. And Australia will become a less equal society – both economically and socially.”
The article also cites research from the NSW Productivity Commission, released last year, which estimated a shortfall of 170,000 dwellings – about 5% of the NSW housing stock – by 2038, which CIS economist Peter Tulip said would add 12.5% to the cost of housing. According to Tulip:
Repeatedly falling short of targets to deliver new homes was adding to the housing affordability crisis.
“As a rough rule of thumb, every 1 per cent increase in the housing stock, holding other things unchanged, is estimated to reduce the cost of housing (both rents and prices) by about 2.5 per cent,” he said.
The notion that Australia’s housing affordability woes are caused by a ‘lack of supply’ is utterly ridiculous.
Take a look at the below charts, which show the change in Sydney’s and Melbourne’s populations versus the change in the number of dwellings, as reported in the 2016 Census:




As you can see, the primary reason why housing construction did not keep up with demand is because their population growth ramped-up massively following the doubling of immigration from 2006, not because less dwellings were built.

Australia’s immigration intake more than doubled after 2005.
Moreover, over the five years following the 2016 Census, dwelling construction levels accelerated, suggesting a ‘lack of supply’ is not the problem:

Australia’s dwelling construction has boomed. Does this look like Australia hasn’t built enough homes?
Why is Grattan so focused on the supply-side of the housing market rather than the obvious solution of ensuring that immigration stays at sensible and sustainable levels?
Obviously, jamming 235,000 migrants into Australia every year, as projected by the Intergenerational Report (chart below), will make the supply problem intractable. And yet Grattan wholeheartedly supports this ‘Big Australia’ policy.

Back to ‘Big Australia’
The Grattan Institute should be honest and admit that the single biggest driver of any Australian housing shortage is extreme immigration. Accordingly, the single best thing policy makers can do to ‘solve’ Australia’s housing supply problem is to ensure that immigration does not return to its manic pre-COVID level.
Curiously, Peter Tulip’s submission to the House of Representatives Standing Committee on Tax and Revenue’s inquiry into Housing Affordability and Supply came to a similar conclusion as me about immigration, yet is completely absent from his statements to the SMH article:
Arguably the largest way in which the federal government affects the housing market is through its immigration policy.
In the mid 2000’s, Australia’s immigration intake accelerated quickly. This resulted in large increases in the demand for housing and hence large increases in housing prices and rents…
Actual population growth, shown in the red line in the top left panel, rose from 1.5% in 2005 to 2.4% in 2008. The blue line shows a counterfactual in which this surge did not occur, with population growth remaining at its 2005 rate. As shown in the top right panel, the surge in immigration boosts the adult population by 650,000 or 3.3% by 2018…
The result was that demand outstripped short-run supply, with the rental vacancy rate falling to a near-record low of 1½% in 2008. This boosted real rents (the bottom left panel) to be 9% higher than they would have been otherwise. The increase in rents gradually flows on to a similar increase in dwelling prices (bottom right)…
They raise two important issues for housing policy.
1) Immigration policy does not seem to be co-ordinated with other arms of policy. In particular, the recent increase in immigration was not matched by a commensurate increase in housing supply.
2) There is an imbalance in government incentives. The federal government decides immigration rates. However it is the states and local governments that largely have to pay for the extra infrastructure this requires…
Immigration boosts housing prices and needs to be better co-ordinated with housing supply…
The NSW Productivity Commission’s paper, cited by The SMH above, also explicitly stated that Sydney’s housing shortage was caused by an unexpected boom in Sydney’s population when the federal government threw open the immigration floodgates in 2005:
Much evidence suggests that our State, and Sydney in particular, has not delivered enough housing over many years.
Of many possible contributing factors, two stand out. First, population growth has exceeded expectations. Forecasts made in 2005 predicted that Sydney’s population would reach 5.2 million by 2031. More recent projections are for a population of around 6.2 million by this time (NSW Department of Planning, Industry and Environment, 2019).
Second, housing supply policy has not achieved the desired results… Since 2006, NSW housing supply has not kept pace with demand or State targets. That has created an accumulated underlying shortage of dwellings.
Shortly afterwards, the NSW Budget revealed that the state’s housing shortage had all but evaporated thanks to the collapse in immigration:
Residential construction is expected to remain strong in the very near term, fuelled by higher house prices, ongoing policy support and low interest rates…
Building approvals are now running well ahead of the change in population, which is depressed due to the lack of inward migration. This suggests a potential oversupply in the near-term relative to the underlying demand for housing (Chart 2.13).
However, rebooting the ‘Big Australia’ mass immigration program would create renewed ‘housing shortages’, according to NSW Intergenerational Report. Specifically, the NSW IGR states that “net overseas migration is expected to return to positive levels in 2023, before returning to pre-COVID-19 levels towards the end of this decade”. Accordingly, “net migration is projected to contribute 2.0 million people to the NSW population” over the projection period to 2061, which “will need 1.7 million additional homes for a growing population, equivalent to one new home for every two existing homes”.
Let’s get back to basics here. Sydney’s, and indeed Australia’s, ‘housing shortage’ could be permanently solved with the stroke of a pen by the federal government. All it needs to do is reduce immigration back to historical pre-2005 levels. This would also negate the need to bulldoze our suburbs into high density.
Why won’t the gaslighters at the Grattan Institute acknowledge these basic facts instead of continuously pumping ‘Big Australia’ mass immigration and then complaining about the consequences.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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