Australia “sleepwalking” into permanent housing crisis

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Last week’s Senate committee into Housing Australia Future Fund heard testimony from the housing industry warning of a worsening housing crisis amid mass chronic property shortages and skyrocketing costs.

Chief Executive of the Property Council of Australia, Mike Zorbas, told the committee that Australia is running “160,000 homes behind the national starting line over the next decade”.

“We’ve got a real supply cliff coming and that applies in the four capital cities which are likely to be the focus of population growth for the country for the next 40 or 50 years”, Zorbas said.

“That is a very, very worrying circumstance when we already know that right now, even before that drop off in supply we’re already experiencing pretty radical problems with affordability”.

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“As that gets worse over the next two years, and most policy and decision makers have essentially chosen to bury their heads in the sand about this looming cliff”, Zorbas said.

“We’re accidentally sleepwalking into what is going to be a critical period of time here”.

There is nothing accidental about it.

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The Albanese Government has set in train the biggest immigration program is this nation’s history by:

  • Increasing the permanent (non-humanitarian) migrant intake to a record high 195,000 people a year (up 35,000);
  • Increasing the number of hours international students can work and how long they can stay after they finish their studies: and
  • Committing 500 new staff and committing $42 million of funding to clear ‘visa backlogs’.

As a result, a record number of migrants landed in 2022, pushing Australia’s population growth to a record high of nearly 500,000 people:

Australian population change
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Australia’s immigration is already running way ahead of the Intergenerational Report’s (IGRs’) forecast of 235,000 annual net overseas migration, which itself is 15,000 higher than the 15 years of “Big Australia” immigration leading up to the pandemic:

Net overseas migration

Under the IGR’s extreme immigration projection (let alone the current higher intake), Australia’s population will grow by 13.1 million people (50%) in only 40 years, which is equivalent to adding a combined Sydney, Melbourne and Brisbane to Australia’s existing population:

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Australia's population level

The fact remains that Australia’s chronic housing shortage is entirely manufactured by the nation’s extreme immigration policy, which ensures that housing demand forever runs well ahead of supply.

Yet moderating immigration back to long-run historical levels of around 100,000 people a year is never even considered, despite the overwhelming majority of Australians wanting lower levels of immigration.

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Unless immigration is brought down to historical average levels (see above chart), the housing crisis will remain a permanent feature of Australia.

It is that simple.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.