Albanese government is in denial as migration fuels housing crisis
Record migration numbers have sent rents skyrocketing by almost 25 per cent in three years, yet the government refuses to acknowledge the connection.
I have long advocated for a more sensible approach to migration in Australia. An ill-fitting migration policy is the cause of many of Australia’s ills, from teacher shortages resulting in lower-quality education, to worker exploitation, despicable racism and anti-Australia hatred, through to overburdened healthcare, childcare and aged-care industries.
Immigration is also a significant, if not major, contributor to housing unaffordability.
In a candid speech delivered in February 2023, Labor MP and then home affairs minister Clare O’Neil didn’t mince words when she said: “Australia’s migration system is broken.”
She added: “It is unstrategic. It is complex, expensive, and slow. It is not delivering for business, for migrants, or for our population.”
Migration, she argued, should be part of the solution. But it’s not. Instead, O’Neil noted the system has drifted aimlessly for more than a decade, failing to match migrants’ skills with Australia’s needs.
Mass immigration, particularly at record levels under recent governments, has been criticised at both the federal and state levels for overwhelming infrastructure, suppressing wages, exacerbating housing shortages, and contributing to social fragmentation.
As my friend from Narrow Road Capital, Jonathan Rochford, who has been offering solutions to housing affordability for nine years, recently pointed out, for nearly six decades after World War II Australia’s net migration averaged 100,000 people annually. This figure doubled to more than 200,000 a year in the final Howard years, continuing until Covid-related border closures.
Since the Albanese government took office, net migration has surged to an average of 471,289 a year (that’s 1291 a day). And the majority – 974,543 since June 30, 2022 – are temporary visa holders.
One cannot click one’s fingers and create houses. Even if we reduce red tape, ease planning restrictions, release land, change zoning and implement all suggested improvements to boost supply, we will end up with nothing more than a backlog of approved developments. We won’t have many more homes. It takes years to build apartments. In the meantime, hundreds of thousands of new arrivals will need somewhere to live. The balancing factor is price, which must rise.
Since Anthony Albanese was elected, the ABS Rent Price Index has risen from 100.6 to 122.3. In other words, average rents have risen by almost a quarter in a little more than three years. More importantly, according to ABS data, since the Labor Party was elected, larger annual rent increases have become more common.
And yet, despite the obvious link between migration and housing affordability, nobody in government wants to acknowledge it.
The Albanese government’s two housing ministers – the current one being O’Neil – have consistently denied excessive migration is responsible for the housing shortage.
It’s true that we have a housing crisis because supply is a problem. It’s also true that we have a supply problem because there is a demand problem. And we have a demand problem due to excessive migration.
For Australia to remain an attractive destination for liveability and investment, we need solutions. As Rochford notes, some argue we need more construction workers. The first problem is that unemployment is low, so workers must come from other sectors. They won’t. And then we’d have to deal with the loss of workers elsewhere. Second, importing construction workers might help in the long term, but it exacerbates the problem in the short term, as they need somewhere to live when they arrive.
We know net migration boosts overall economic demand, spurring the need for more goods, services and, consequently, workers to meet it. However, relying on a steady influx of low-wage, less-skilled immigrants to fill these roles is a shortsighted and lazy approach, propping up employers unwilling to invest in proper training or properly pay the existing workforce.
If, instead, we demanded migrants have high-paying jobs secured before arriving, we would largely eliminate the issue of importing migrants who have skills and qualifications unacceptable to Australian employers. We already have more than enough international graduates delivering meals for Uber Eats.
And when it comes to students, a quick internet search reveals multiple websites advertising the cheapest courses for migrants to minimally satisfy visa requirements. I agree with Rochford that it’s bizarre that most of the attention has been focused on university enrolments while less scrupulous operators are free to grow theirs rapidly.
According to Rochford, a drop of 500,000 temporary visa holders would be 17.2 per cent of the 2.9 million holders. This could be comfortably attainable by reducing the number of low-wage workers and students undertaking low-cost courses, as their current visas expire.
Affordable housing means the average family can afford to purchase the average house. And once that’s accomplished, they can invest to maintain their purchasing power and grow their wealth. Sadly, stagnant productivity and wage growth mean affordable housing could be decades away, even if house prices remained static. Just like ignoring productivity and tax reforms, this appears to be the government shirking its responsibility to act in the national interest.
Roger Montgomery is founder and CIO at Montgomery Investment Management.
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As investors, we have a particular interest in Australia’s desirability as a destination for living and its quality as a destination for investing. For some time now, I have feared better destinations exist elsewhere. Whether deliberate or unwitting, the government is not prioritising the betterment of the nation.