Politicians, the property lobby and the media incessantly argue that the solution to Australia’s housing (rental) crisis is to increase housing supply.
If they were genuine about fixing the issue, they would instead focus on the demand side; namely reducing Australia’s net overseas migration back to historical (pre-2005) norms of less than 100,000 people a year, which served the nation well in the 60 years following the Second World War:
Over the weekend, independent economist Tarric Brooker posted the below chart on Twitter highlighting why focussing on supply without addressing extreme levels of immigration is “stupid”:
“Australia builds over 50% more new homes per capita than the United States”, Brooker Tweeted.
“It builds almost double the OECD average”.
“Building more quality homes is good, but not looking at the immigration driven demand side of the things is just stupid”, Brooker said.
Truer words have never been written.
As shown in the next chart, Australia massively ramped up its rate of dwelling construction last decade:
The problem is, this increase in construction was insufficient against the huge lift in Australia’s population growth after the federal government opened the immigration floodgates in the mid-2000s.
Australia’s net overseas migration (NOM) jumped from an average of 90,500 between 1991 and 2004 to an average of 219,000 between 2005 and 2019 – representing an annual average increase in immigration of 140%.
The latest Intergenerational Report (IGR) projected that net overseas migration would average 235,000 people a year for the next 40 years. That’s around 15,000 higher than the extreme immigration experienced in the 15 years leading up to the pandemic.
In turn, the IGR projected that Australia’s population would soar by 13.1 million (50%) people by 2061, which is the equivalent of adding a combined Sydney, Melbourne and Brisbane to nation’s existing population.
Already, net overseas migration has rebounded faster than the IGR projected, with nearly 400,000 net overseas migrants landing in 2022, which drove record population growth of 482,000.
The lessons from the above are obvious:
- Australia’s housing supply problem has primarily been caused by the massive increase in immigration-driven population growth from 2005.
- The first best solution to Australia’s housing supply problem is to reduce immigration back to the historical norm of below 100,000.
Policy makers, developers and the media can wax lyrical about increasing housing supply, but Australia will never build enough homes so long as it grows its population like a science experiment via extreme immigration.
Australia’s housing supply problem is first and foremost an excessive immigration problem.
The evidence is irrefutable.
