‘Misery machine’: Economist Chris Richardson calls for lower student numbers as housing crisis deepens
A leading economist has branded Australian housing a “misery machine” — and pointed to a simple fix for the current crisis.
A leading economist has branded Australian housing a “misery machine” while reiterating calls for cuts to immigration until construction can catch up with demand.
Chris Richardson appeared on ABC’s QandA on Monday night where an audience member posed the question of whether migration levels should be linked to the capacity to build new homes.
Mr Richardson, independent economist and former Deloitte Access Economics partner, agreed “there is a relation” and that because Australia had “messed up” housing over four decades “we may need to react around migration”.
“Across 40 years we have turned housing into a misery machine in Australia, and this is a stunning national fail,” he said.
“Almost certainly today … we have clicked over as a nation to housing prices being a new record high. They fell for a time as interest rates went up. We had a great experiment, terrible experiment over the past year with interest rates roaring up, and yet house prices went up. I used to think interest rates would do the trick — they won’t. We have to build.”
Mr Richardson said the problem was that “for 40 years we have had, ‘not in my backyard’, council by council decision, neighbourhood by neighbourhood, and after 40 years we haven’t built and when we do build, we attach all these conditions which make it incredibly expensive.”
He added, “I would love not to touch migration, but we have screwed this up so massively as a nation that we temporarily need to look at migration as part of this equation.”
The easiest way to temporarily ease migration numbers would be to cut back on record numbers of international students coming to the country, he argued.
“So we have now 725,000 students from the rest of the world studying in Australia — a year ago, that was 555,000,” he said.
“Yes, we sell education to the world and a lot of that we do well and some of it we don’t do as well, but it is a big part of the increase in the pressure at the moment and it is a relatively concentrated bit where we can make a change.”
Universities Australia, the sector’s peak lobby group, has argued international students fuel the nation’s prosperity and were worth $40 billion to the economy in 2019.
“The federal government needs to fund universities instead of insisting that they make money from foreign students to pay for the domestic students,” Mr Richardson said. “We can do this better.”
But he warned the “problem with 40 years of ‘not in my back yard’ is if we have perfect policies tomorrow … it’s going to take more than a decade to repair this”.
“That misery machine is not going to disappear,” he said.
“The bigger lever that we’ve got to do over time is to insist that local councils say yes to more, and the government is gently starting that process. It is up more to the states, but it has got to move and unless and until we do that, we need, I would say, students as the lever, pull back for a while.”
Assistant Treasurer Stephen Jones said he agreed with Mr Richardson that “we need to look at the student stuff”.
“I agree with that, it is a job of work which needs to be done,” he said.
But asked if he wanted to see a reduction in migration, Mr Jones said “no” because migrants were needed to build the homes — echoing comments from Immigration Minister Andrew Giles earlier this month.
“In terms of students, in terms of migration, it’s a chicken and egg,” he said.
“We need more houses built. Where are we going to get the labour from? We generally import that from overseas. So a lot of these things are a feedback loop. Chris is right, though, that the big cause for the massive ramp up in immigration over the last 12 months post-Covid has been a big jump up in student numbers.”
Universities Australia chief executive Catriona Jackson said in a statement that “decades of poor planning, workforce shortages and supply issues driven by the pandemic are all factors contributing to Australia’s long-running housing problems”.
“This is not a new issue,” she said.
“We have engaged deeply with Minister O’Neil as she prepares to formally respond to the broad scale review of the migration system, and will continue to do so as we all work toward a better system that underpins a flourishing multicultural nation.”
Ms Jackson said the “quality and integrity of the migration system is fundamentally important for universities and Australia” and “any changes must be weighed carefully against the significant contribution international students make”.
“They contribute tens of billions of dollars to our economy, support thousands of jobs and strengthen our cultural fabric,” she said. “These factors benefit all Australians.”
Australia’s net overseas migration came in at a record 500,000 in 2022-23, more than double the 235,000 forecast in last October’s budget, largely driven by a surge in international students.
At the same time, the country is facing an unprecedented housing crisis — rental availability and affordability are at record lows, while soaring house prices and interest rates are pushing the dream of home ownership further out of reach for ordinary Aussies, or forcing existing borrowers to the wall.
Mr Richardson last week became the latest mainstream economist to call for a slowdown in immigration, writing in The Australian Financial Review that “two wrongs don’t make a right” but with housing and migration colliding, “one will have to give”.
AMP head of investment strategy and chief economist Shane Oliver has also previously called for lower immigration to address housing affordability, saying “the role of high immigration levels can’t be ignored”.
“On our estimates it needs to be cut back to nearer 200,000 people a year to better line up with building industry capacity and to reduce the chronic housing supply shortfall,” he said in a September note.
MacroBusiness chief economist Leith van Onselen said earlier this month that based on the latest visa data from the Department of Home Affairs, “around one-in-30 people in Australia in September were one either a student or graduate visa — an extraordinary number”.
“The massive increase in foreign students has contributed to the record tightening in the rental market, which has seen capital city rental vacancy rates collapse to just 0.9 per cent alongside strong rental inflation,” he wrote.
“Clearly, the federal government should place a cap on international student numbers, which have grown to unsustainable levels.”
The Australian’s economics commentator Judith Sloan has called for a “rigorous assessment of the benefits and costs of international education for the country”.
“A very large number of these students intend to stay in Australia permanently or for at least a decade,” she wrote earlier this month. “International students no longer are required to hide their ambition to stay in the country to obtain a visa.”
Universities Australia, by contrast, has called for the government to do more to entice graduates to stay in the country.
“Only 28 per cent of these students use their post-study work rights in Australia and just 16 per cent become permanent residents,” Ms Jackson said in a statement in October.
“Our current visa system deters rather than encourages these talented people to stay and use their Australian education in the area they have studied. The Albanese government’s new migration strategy can and should address this.”
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