Treasurer Jim Chalmers has suggested Australia’s record levels of immigration are worsening the cost of living crisis because fewer local people are moving abroad to live and work.
The Treasury forecasts that a record 400,000 migrants, on net terms, will have moved to Australia in the year to June 30, based on permanent and long-term arrivals minus departures.
With the return of international students to Australia, Dr Chalmers argued the effect of high immigration was being felt more acutely in areas such as the rental market because fewer Australians were leaving.
“It’s a net number, a net overseas migration – fewer Australians are going to work overseas and that’s what’s driving the numbers up temporarily,” he told Sky News business editor Ross Greenwood on Sunday.
House prices are trending
Increased immigration is now expected to drive up house prices.
Westpac on Monday forecast a double-digit rise in 2023 for Sydney despite the Reserve Bank’s 12 interest rate rises in just over a year.
Treasurer Jim Chalmers has suggested Australia’s level of immigration is high because fewer people are moving abroad to live and work, making housing more expensive.
Sydney house prices continued to rise in July, rising one per cent to an even more unaffordable $1.334 billion, CoreLogic data showed, despite 12 interest rate hikes from the Bank of the Reserve from May 2022.
Values have risen every month since February, as the RBA cash rate continued to rise to hit an 11-year high of 4.1 per cent in June.
Westpac now expects Sydney house prices to rise 10 per cent in 2023, undoing the 2.4 per cent drop over the past year following the early 2022 market peak that preceded the rate increases.
This would be followed by a six percent increase in 2024.
National real estate prices were expected to increase by seven percent in 2023, followed by a four percent increase in 2024.
Westpac senior economist Matthew Hassan said high immigration would drive the recovery in Australia’s largest housing markets.
“The boost to earnings appears to come primarily from a strong acceleration in migration flows and an associated adjustment in rental markets, all against a backdrop of low levels of ‘on-market’ supply,” he said.
“The change in price growth has been strongest in markets where population growth has seen the sharpest rebound (Sydney and Melbourne) and much more moderate in markets that have seen a less pronounced change (Adelaide, Hobart and Darwin).
Rising immigration is now expected to push up house prices, with Westpac forecasting a double-digit rise in 2023 for Sydney despite 12 Reserve Bank interest rate rises in just over a year (pictured, Wynyard train station during rush hour).
Scarce housing
The influx of international students is also making life difficult for tenants.
Sydney’s median weekly unit rents have soared 25.1 per cent in the year to June to $660.45, while Melbourne’s equivalent rent rose 20.8 per cent to $522.67, surveys showed. data from SQM Research.
Dr Chalmers acknowledged that housing supply was not keeping pace with population growth.
“Well, I think obviously throughout our history, migration has been a positive force in our communities and in our economy,” he said.
“But it needs to be managed well and we need to understand and recognize, as you asked in your question, that we need to make sure the infrastructure, including housing, stays up to date.”
Immigration will increase
The Treasury expects 1.5 million 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 largest property markets (pictured, a Melbourne auction).
Opposition immigration spokesman Dan Tehan took advantage of the fact that the Labor government issued 65,859 visas per Covid-19 pandemic event 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 great Australia is getting out of control,” he said.
“Labour has created a great Australia, but we still have labor shortages in critical sectors.”
But Dr Chalmers argued the government did not set Australia’s immigration levels.
“What is really important, and this point is sometimes overlooked, is that the migration recovery that we are waiting for at this moment – which is substantial, I do not want to pretend otherwise – is not a government lever nor a government objective or policy. government,” he said. .
“It’s demand-driven and reflects the fact that very few people came here during Covid for all the obvious reasons, but even with this big recovery in migration, we still haven’t made up the ground we lost during those two years.” . “Where the migration tap was effectively turned off, so that’s an important point, very, very important.”
In May, there were 22,050 long-term departures, a drop of 6,270 compared to April, according to data from the Australian Bureau of Statistics.
During that month, there were 54,830 long-term arrivals, a monthly increase of 2,560.
International students made up the majority, with 43,950 arriving in May, compared to 24,760 the previous year.
This marked a 77.5 per cent increase in one year as more foreigners came to Australia to undertake university, vocational education, secondary education and postgraduate research.