Treasurer Jim Chalmers has suggested Australia’s record immigration levels are worsening the cost-of-living crisis because fewer locals are moving overseas to live and work.
Treasury is forecasting a record 400,000 migrants, on a net basis, to have moved to Australia in the year to June 30 – based on permanent and long-term arrivals minus departures.
With international students flooding back into Australia, Dr Chalmers argued the effect of the high immigration was being more keenly felt in areas like the rental market because fewer Australians were leaving.
‘It’s a net figure, net overseas migration – fewer Australians leaving to work overseas and so that’s what’s driving the number temporarily,’ he told Sky News business editor Ross Greenwood on Sunday.
House prices rises tipped
The immigration surge is now expected to push up house prices.
Westpac on Monday forecast a double-digit increase in 2023 for Sydney despite the Reserve Bank’s 12 interest rate rises in little more than a year.
Treasurer Jim Chalmers has suggested Australia’s immigration level is high because fewer people are moving overseas to live and work – making housing more expensive
Sydney house prices continued to climb in July, rising by one per cent to an even more unaffordable $1.334million, CoreLogic data showed, despite the Reserve Bank’s 12 interest rate rises since May 2022.
Values have been rising every month since February, as the RBA cash rate kept on climbing to hit an 11-year high of 4.1 per cent in June.
Westpac is now expecting Sydney house prices to rise by 10 per cent in 2023, undoing the 2.4 per cent decline during the past year following the market peak of early 2022 that pre-dated the rate rises.
This would be followed by a six per cent increase in 2024.
National property prices were expected to rise by seven per cent in 2023, followed by a four per cent increase in 2024.
Westpac senior economist Matthew Hassan said high immigration would drive the recovery in Australia’s biggest housing markets.
‘The impetus for gains looks to be mainly coming from a sharp acceleration in migration inflows and an associated tightening in rental markets, all against a backdrop of low levels of “on-market” supply,’ he said.
‘The turnaround in price growth has been strongest for markets where population growth has seen the sharpest pick-up (Sydney and Melbourne) and much more muted in markets that have seen a less pronounced shift (Adelaide, Hobart and Darwin).’
The immigration surge is now expected to push up house prices, with Westpac forecasting a double-digit increase in 2023 for Sydney despite the Reserve Bank’s 12 interest rate rises in little more than a year (pictured is Wynyard train station during peak hour)
Westpac tipping house price rises despite interest rate increases
SYDNEY: Up 10 per cent in 2023, up 6 per cent in 2024, up 4 per cent in 2025
MELBOURNE: Up 4 per cent in 2023, up 3 per cent in 2024, up 2 per cent in 2025
BRISBANE: Up 6 per cent in 2023, up 4 per cent in 2024, up 3 per cent in 2025
PERTH: Up 8 per cent in 2023, up 8 per cent in 2024, up 6 per cent in 2025
Housing in short supply
The influx of international students is also making life tough for tenants.
Sydney’s median weekly rent has soared by 25.1 per cent in the year to June to $660.45, as Melbourne’s equivalent rent rose by 20.8 per cent to $522.67, SQM Research data showed.
Dr Chalmers acknowledged the supply of housing was failing to keep pace with population growth.
‘Well I think obviously, throughout our history, migration has been a force for good in our communities and in our economy,’ he said.
‘But it needs to be well managed and we need to understand and recognise, as you have in your question, that we need to make sure that the infrastructure including housing keeps up.’
Immigration to surge
Treasury is expecting 1.5million migrants, on a net basis, to move to Australia in the five years to June 2027.
Westpac senior economist Matthew Hassan said high immigration would drive the recovery in Australia’s biggest housing markets (pictured is a Melbourne auction)
The Opposition’s immigration spokesman Dan Tehan has seized on the fact the Labor government issued 65,859 Covid-19 Pandemic Event Visas between June 2022 and March 2023, compared to 62,868 visas that were issued between April 2020 and November 2021 when the border was closed.
‘Labor always makes a mess of immigration. It’s obvious they are focused on other issues and their big Australia is getting out of control,’ he said.
‘Labor has created a big Australia, but we still have workforce shortages in critical sectors.’
But Dr Chalmers argued the government didn’t set Australia’s immigration levels.
‘Really importantly, and sometimes this point is missed, the recovery in migration that we’re expecting right now – which is substantial, don’t want to pretend otherwise – that’s not a government lever or a government target or policy,’ he said.
‘It’s a demand driven thing and it reflects the fact that so few people came here during Covid for all of the obvious reasons but even with this big recovery in migration, we still haven’t recovered the ground that we lost during those couple of years where the migration tap was effectively turned off, so that’s an important, very, very important point.’
In May, there were 22,050 long-term departures, a 6,270 drop compared with April, Australian Bureau of Statistics data showed.
During that month, there were 54,830 long-term arrivals, a monthly increase of 2,560.
International students made up the biggest chunk, with 43,950 arriving in May, compared with 24,760 a year earlier.
That marked a 77.5 per cent jump in a year based on more foreigners coming to Australia for university, vocational education, high school and postgraduate research.
READ MORE: House prices rise despite rate increases
SYDNEY: Up 1 per cent to $1,333,985
MELBOURNE: Up 0.3 per cent to $923,881
BRISBANE: Up 1.4 per cent to $819,832
ADELAIDE: Up 1.4 per cent to $722,793
PERTH: Up 1 per cent to $625,969
HOBART: Down 0.1 per cent to $696,570
DARWIN: Up 0.5 per cent to $583,913
CANBERRA: Down 0.3 per cent to $958,950
Source: CoreLogic data on median house prices for July 2023