A top economist has called for the number of new migrants arriving in Australia to be capped to allow the housing market to recover.
AMP chief economist Shane Oliver told the AFR Property Summit that the root cause of Australia’s housing crisis was record-high immigration.
Dr Oliver said immigration levels in Australia since 2005 have been ‘way way above’ the level of supply the country actually needs.
Therefore, immigration-driven population growth needed to mirror the market’s ability to supply enough completed housing, the economist said.
‘If you go back to the early post-1990s recession, immigration levels were about 120,000 per annum,’ Dr Oliver told the summit on Tuesday.
‘Then they jumped up to 250,000 to 260,000 per annum. So you really got 150,000 extra population through that period.
‘But if you look at the completions of dwellings, it didn’t really jump up until we had the apartment building boom briefly from 2015 to 2018.’
AMP chief economist Shane Oliver (pictured) told the AFR Property Summit on Tuesday that the root cause of Australia’s housing crisis was record-high immigration levels
Dr Oliver said immigration levels in Australia since 2005 have been ‘way way above’ the level of supply the country actually requires (pictured, Sydney’s Westfield shopping centre)
‘And that’s the real issue here. We pump people into the economy and then we all go ‘surprise, surprise’, house prices are expensive,’ he continued.
Dr Oliver said this is what had caused Australia’s housing affordability issue.
‘I think we do need to calibrate those immigration levels to the ability of the property market to supply new property and to allow each year for that cumulative undersupply to be whittled away,’ he said.
Other experts attending the summit echoed Dr Oliver’s sentiments.
Respected property analyst Louis Christopher called for a two-year cap of 90,000 new migrants while the housing market played catch-up.
The SQM Research managing director said modelling showed that if immigration was capped to historical levels, Australia’s rental crisis would come to an end by mid-2025.
Close to 1.5million migrants are expected to arrive in Australia in the next five year with the population last year growing by 1.9 per cent – among the highest in the developed world.
Dr Oliver has previously argued that immigration-driven population growth is making Australians less productive, preventing home ownership and fueling inflation.
‘Very strong population growth with an inadequate infrastructure and housing supply response has led to urban congestion and poor housing affordability which contribute to poor productivity growth,’ he said.
The economist also argued that high population growth meant investors were buying homes for capital gain, to take advantage of a housing shortage, instead of ploughing their money into new business ventures or shares.
‘Increased speculative activity around housing diverts resources from more productive uses,’ he said.
A top economist has claimed high immigration is the root cause of Australia’s housing crisis, and is preventing Australians from home ownership (pictured, an auctioneer in Sydney)
Australia’s annual net overseas migration level has consistently been in the six-figure range since 1999, excluding the Covid pandemic in 2020 and 2021, when skilled migrants and international students were included.
Dr Oliver said unless productivity growth returned to 1990s levels, inflation would stay higher for longer, but feared both major political parties were reluctant to liberalise labour laws.
‘After nearly two decades of policy drift, declining productivity growth is weighing on growth in living standards and sustainable real wages growth,’ he said.
‘The political will for the sort of economic reforms necessary (particularly around taxation and labour markets) for another 1990s style rebound in productivity growth looks unlikely.
‘This in turn makes the RBA’s job in getting inflation down a little bit harder and will constrain medium term investment returns.’
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