How high immigration is stopping Australians from reaching their full potential

Record immigration is fueling inflation by making Australians less productive at work and preventing them from owning homes, an economist says.

The Treasury expects a record 400,000 new migrants to have arrived in Australia in the year to June, when permanent and long-term arrivals were subtracted from departures.

Nearly 1.5 million migrants, on a net basis, are expected to arrive in the five years to June 2027 with figures like the Business Council of Australia, the millionaire business leader lobby group, pushing for a high immigration.

Last year, Australia’s population grew by 1.9%, one of the highest in the developed world.

AMP chief economist Shane Oliver said immigration-driven population growth was actually making Australians less productive at work, as they often had to travel long distances to get to the office.

“Very high population growth combined with an inadequate infrastructure and housing response has led to urban congestion and poor housing affordability, which contributes to low productivity growth,” he said. he declares.

Low productivity meant businesses were more likely to pass costs on to consumers to pay higher wages, keeping inflation well above the Reserve Bank’s 2-3% target.

“If wages increase by 4% and productivity growth is zero, business costs increase by 4% and they will pass this on to their customers, which will likely drive inflation above the RBA’s target.”

Dr Oliver also argued that high population growth meant that speculative investors were buying houses for capital gain instead of investing their money in new businesses or stocks.

“Increased speculative activity around housing diverts resources from more productive uses,” he said.

Sydney’s median property price of $1.334 million is beyond the reach of an average full-time worker earning $94,000.

Indeed, a $1 million loan with a 20% mortgage deposit would give someone a debt-to-income ratio of 11 – a level well beyond the banking regulator’s “six” threshold for mortgage stress.

Australia’s wage price index rose 3.6% in June, from an annual pace of 3.7% in March, marking the first annual decline since 2020.

It fell below the 6% inflation rate and the 9.6% increase in the cost of living for employees, as calculated by the Australian Bureau of Statistics.

The Treasury expects a record 400,000 new migrants to have arrived in Australia in the year to June, when permanent and long-term arrivals were subtracted from departures. High immigration has been linked to unaffordable housing (Sydney auction pictured)

This meant that workers effectively suffered a six percent reduction in their real wages.

Productivity growth has been stuck below 1% for the past decade, well below the 2% pace of the 1990s.

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 the two main political parties were reluctant to liberalize labor laws.

“After nearly two decades of policy drift, declining productivity growth is weighing on growth in living standards and sustainable real wage growth,” he said.

“The political will for the kind of economic reforms needed (particularly around taxation and labor markets) for another 1990s-style rebound in productivity growth seems unlikely.

“This in turn makes the RBA’s job of bringing inflation down a bit more difficult and will limit medium-term investment returns.”

The Home Office revealed the number of applications finalized in the first nine months of the 2022-23 financial year, compared to the same period at the end of March in 2021-22.

The skilled migrant category saw an increase of 111.7%, with permanent admission rising to 144,040 from 68,055.

AMP chief economist Shane Oliver said immigration-driven population growth was actually making Australians less productive at work, as they often had to travel long distances to get to the office.

Student visa approvals, classified as temporary but long-term arrivals, rose 154.4% to 511,149 from 200,941.

Another dataset from the Australian Bureau of Statistics showed a net outbound migration pace of 387,000 last year, after the border reopened to migrants in December 2021.

When 109,800 births were added, minus deaths, Australia’s population increased by 496,800 to 26,268,359.

The population growth rate of 1.9% in 2022 was significantly higher than the US level of 0.4%.