We need immigration… the balance just needs to be right

- May 31, 2024 3 MIN READ
Immigration is needed for Australian economy

To keep our economy ticking along, we need to attract the right type of migrants, support their arrival with infrastructure and welcome them with opportunities.

I’ll be honest, I hate the politics of immigration and the hate it can create. Apart from our First Nations peoples we are a country built on migrants. Mine arrived in South Australia in 1843 from Germany and from Wales in the 1920s.

First up, just a reminder of why we’re the most multicultural country in the world.

Economies (and therefore our lifestyles) are driven by population growth and age. Just look at Japan, and now China, as their population ages, they run out of workers and taxpayers and their economies slump.

Just a couple of years ago everyone was forecasting when the Chinese economy would overtake the US economy in size. Not anymore. The collapse of their property industry and the lack of new workers means China is unlikely to ever have a bigger economy than the US.

Labour shortages in any economy are driven by the age of the workforce and new workers emerging. Just a look at our natural population growth.

It’s interesting that the first of the 2005 Baby Bonus babies start coming into the workforce around now. The bonus provided a short-term bump to the birth rate, but it’s been on the slide ever since.

We currently have the lowest birth rate since I was born… and let me tell you that’s a long time ago. If we depended solely on our birth rate the eventual outcome is that we’d run out of workers, like Japan and China are doing.

We need migrants, but they need opportunities

The solution is bringing in migrant workers to fill jobs, lower our average population age and provide future taxpayers. But you have to bring in the right type of migrants, plan for their arrival in terms of infrastructure and then welcome them with opportunities.

As you can see, despite all the political debate, our immigration levels have rebounded to pre-pandemic levels but certainly haven’t made up for the losses during the pandemic. The issue isn’t that we have too many migrants coming to this country – we need them.

The issue is that governments haven’t planned for them and built the housing or infrastructure needed to cope with their arrival.

The effect of migration on housing

Earlier this year, CoreLogic’s Head of Research, Eliza Owen, released a fascinating report on the effect of overseas migration on the Australian housing market. I think in light of the current discussions around migration, five key insights in the report need revisiting.

1. Migrant housing demand skews toward the rental market

Around 60 per cent of permanent migrants and 70 per cent of temporary migrants are renters in the short term. Home ownership for permanent migrants is higher the longer they are in the country. Home ownership rates are over 70 per cent for permanent migrants who arrived in Australia before 2012.

2. Net overseas migration is at record highs, but partly because it was temporarily restricted

Without the temporary migration restrictions between March 2020 and July 2022, net overseas migration would be much lower over the latest reporting period. Part of the reason net overseas migration is so high right now, is because departures are low (because fewer temporary migrants arrived through COVID), and arrivals represent new and postponed moves to Australia. If it weren’t for COVID, we still would have had more overseas arrivals in the past few years than what we’ve seen since March 2020.

3. Temporary migration ban made the rental market volatile

COVID taught us that temporary caps on migration are not a good idea. They create extreme fluctuations in overseas migration, which in turn has put a lot of pressure on some rental markets. Investor interest may also drop off in these markets when the migration tap is turned off, worsening the demand shock when temporary caps are lifted.

4. Migration is not the only demand-side factor pushing up housing costs

Lower household sizes, an ageing population and lower rates of marriage have meant that even if there was no change in Australia’s population, demand for housing is going to rise. Rental market pressures have also increased from a long-term decline in social housing as a part of Australian dwelling stock. Even though international border restrictions were in play between March 2020 and July 2022, rents rose 16.4 per cent nationally.

5. Reducing the migration intake would have trade-offs

Creating a net overseas migration target can help Australia plan out housing supply, but overseas migration also helps to grow the economy, and grow economic capacity. Migration is also being looked at to help with the housing crisis, by targeting migrants skilled in construction.

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